I. GUIDELINES ON TRAVEL RELATED MATTERS

Q.1.         Who is authorized by the Reserve Bank to sell foreign exchange for travel purposes?

Ans.        Foreign exchange can be purchased from any authorized person, such as an Authorized Dealer (AD) Category-I bank, and AD Category II. Full-Fledged Money Changers (FFMCs) are also permitted to release foreign exchange for business and private visits.

Q.2.         Who is an Authorized Dealer?

Ans.        An Authorized Dealer is normally a bank specifically authorized by the Reserve Bank under Section 10(1) of FEMA, 1999, to deal in foreign exchange or foreign securities (the list of ADs is available on www.rbi.org.in ).

Q.3.         How much foreign exchange can one buy when traveling abroad on private visits to a country outside India?

Ans.        For private visits abroad (other than to Nepal and Bhutan) for tourism purposes etc., any resident can obtain foreign exchange up to an aggregate amount of USD 10,000 from an Authorized Dealer, in any one financial year, on a self-declaration basis, irrespective of the number of visits undertaken during the year. This limit of USD 10,000 or its equivalent per financial year for private visits is also applicable to a person who is availing of foreign exchange for travel abroad for any purpose such as for employment or immigration or studies.

No foreign exchange is available for visit to Nepal and/or Bhutan for any purpose.

A resident Indian is allowed to take INR in denominations of Rs.100 or lesser to Nepal and/or Bhutan without any limit.

Q. 4.        How much foreign exchange is available for a business trip?

Ans.        For business trips abroad to countries other than to Nepal and Bhutan, a person can avail of foreign exchange up to USD 25,000 per visit.  Visits in connection with attending of an international conference, seminar, specialized training, study tour, apprentice training etc., are treated as business visits. Release of foreign exchange exceeding USD 25,000 for business travel abroad (other than to Nepal and Bhutan), irrespective of the period of stay, requires prior permission from the Reserve Bank of India.

No release of foreign exchange is admissible for any kind of travel to Nepal and Bhutan or for any transaction with persons resident in Nepal.

Investments in Bhutan are permitted in Indian Rupees as well as in freely convertible currencies. If investment is made in freely convertible currency / currencies, sale/winding up proceeds are required to be repatriated to India in freely convertible currencies.

Q. 5.        Can one pay by cash the full rupee equivalent of foreign exchange being purchased for travel abroad?

Ans.        Foreign exchange for travel abroad can be purchased from an authorized person against rupee payment in cash only up to Rs. 50,000. However, if the Rupee equivalent exceeds         Rs. 50,000, the entire payment should be made by way of a crossed cheque/ banker’s cheque/ pay order/ demand draft/ debit card / credit card / prepaid card only.

Q.6.         Is there any time-frame for a traveller who has returned to India to surrender foreign exchange?

Ans.        On return from a foreign trip, travellers are required to surrender unspent foreign exchange held in the form of currency notes and travellers’ cheques within 180 days of their return. However, they are free to retain foreign exchange up to USD 2,000, in the form of foreign currency notes or TCs for future use or credit to their Resident Foreign Currency (Domestic) [RFC (Domestic)] Accounts.

Q.7.         Should foreign coins be surrendered to an Authorized Dealer on return from abroad?

Ans.        The residents can hold foreign coins without any limit.

Q.8.         Is it permitted to use International Credit Card (ICC)/ATM/Debit card for undertaking foreign exchange transactions?

Ans.        Use of International Credit Cards (ICCs) / ATMs/ Debit Cards can be made for travel abroad in connection with various purposes and for making personal payments like subscription to foreign journals, internet subscriptions etc. The entitlement of foreign exchange on International Credit Cards (ICCs) is limited by the credit limit fixed by the card issuing authority only. With ICCs one can (i) meet expenses/make purchases while abroad (ii) make payments in foreign exchange for purchase of books and other items through internet in India. If the person has a foreign currency account in India or with a bank overseas, he/she can even obtain ICCs of overseas banks and reputed agencies.

Use of these instruments for payment in foreign exchange in Nepal and Bhutan is not permitted.

Q.9.         How much Indian currency can a person carry while going abroad?

Ans.        Residents are free to take outside India (other than to Nepal and Bhutan) currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs. 7,500 per person. They may take or send outside India (other than to Nepal and Bhutan) commemorative coins not exceeding two coins each.

Explanation: 'Commemorative Coin' includes a coin issued by Government of India Mint to commemorate any specific occasion or event and expressed in Indian currency.

Q.10.      How much jewellery can be carried while going abroad?

Ans.        Taking personal jewellery out of India is as per the Baggage Rules, governed and administered by Customs Department, Government of India. While no approval of the Reserve Bank is required in this case, approvals, if any, required from Customs Authorities may be obtained.

Q.11.      Can a resident extend local hospitality to a non-resident?

Ans.        A person resident in India is free to make any payment in Indian Rupees towards meeting expenses, on account of boarding, lodging and services related thereto or travel to and from and within India, of a person resident outside India, who is on a visit to India.

Q. 12.     Can residents purchase air tickets in India for their travel not touching India?

Ans.        Residents may book their tickets in India for their visit to any third country. For instance, residents can book their tickets for travel from London to New York, through domestic/foreign airlines in India itself.

Q. 13.     Can a resident open a foreign currency denominated account in India?

Ans.        Persons resident in India are permitted to maintain foreign currency accounts in India under the following three Schemes:

a. Exchange Earners Foreign Currency Accounts

All categories of resident foreign exchange earners can credit up to 100 per cent of their foreign exchange earnings, as specified in the paragraph 1 (A) of the Schedule to Notification No. FEMA 10/2000-RB dated 3rd May, 2000 and as amended from time to time, to their EEFC Account with an Authorized Dealer in India. Funds held in EEFC account can be utilized for all permissible current account transactions and also for approved capital account transactions as specified by the extant Rules/Regulations/ Notifications/ Directives issued by the Government/RBI from time to time. The account is maintained in the form of a non-interest bearing current account.

b. Resident Foreign Currency Accounts

A person resident in India may open, hold and maintain with an Authorized Dealer in India, a Resident Foreign Currency (RFC) Account to keep their foreign currency assets which were held outside India @ at the time of return can be credited to such accounts. The foreign exchange received as (i) pension or any other superannuation or other monetary benefits from the employer outside India; (ii) received or acquired as gift or inheritance from a person referred to sub-section (4) of section 6 of FEMA, 1999 or (iii) referred to in clause (c) of section 9 of the Act or acquired as gift or inheritance therefrom or (iv) received as the proceeds of life insurance policy claims/maturity/ surrender values settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the Insurance Regulatory and Development Authority, may also be credited to this account.  

RFC account can be maintained in the form of current or savings or term deposit accounts.

The funds in RFC account are free from all restrictions regarding utilization of foreign currency balances including any restriction on investment outside India.

c. Resident Foreign Currency (Domestic) Account

A resident Individual may open, hold and maintain with an Authorized Dealer in India, a Resident Foreign Currency (Domestic) Account out of foreign exchange acquired, in the form of currency notes, Bank notes and travellers’ cheques, from any of the sources like payment for services rendered abroad, as an honorarium, a gift, services rendered, or in settlement of any lawful obligation from any person not resident in India. The account may also be credited with/opened out of foreign exchange earned abroad like proceeds of export of goods and/or services, royalty, honorarium etc. and/or gifts received from close relatives (as defined in the Companies Act) and repatriated to India through normal banking channels. The account shall be maintained in the form of Current Account and shall not bear any interest. There is no ceiling on the balances in the account. The account may be debited for payments made towards permissible current and capital account transactions.

Q.14.      Can a person resident in India hold assets outside India?

Ans.        In terms of sub-section 4, of Section (6) of the Foreign Exchange Management Act, 1999, a person resident in India is free to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India. (Please also refer to the Liberalised Remittance Scheme of USD 200,000 discussed below).

II. LIBERALISED REMITTANCE SCHEME (LRS) OF USD 200,000

Q.15.      What is the Liberalised Remittance Scheme of USD 200,000?

Ans.        Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to USD 200,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.

Q.16.      Please provide an illustrative list of capital account transactions permitted under the scheme.

Ans.        Please refer to Q. 29. Under the Scheme, resident individuals can acquire and hold immovable property or shares or debt instruments or any other assets outside India, without prior approval of the Reserve Bank. Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the Scheme.

Q. 17.     What are the prohibited items under the Scheme?

Ans.        The remittance facility under the Scheme is not available for the following:

i) Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery tickets/sweep stakes, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000;

ii) Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty;

iii) Remittances for purchase of FCCBs issued by Indian companies in the overseas secondary market;

iv) Remittance for trading in foreign exchange abroad;

v) Remittance by a resident individual for setting up a company abroad;

vi) Remittances directly or indirectly to Bhutan, Nepal, Mauritius and Pakistan;

vii) Remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non co-operative countries and territories”, from time to time; and

viii) Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.

Q.18.      Whether LRS facility is in addition to existing facilities detailed in Schedule III under remittances?

Ans.        The facility under the Scheme is in addition to those already available for private travel, business travel, studies, medical treatment etc., as described in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000. The Scheme can also be used for these purposes.

However, gift and donation remittances cannot be made separately and have to be made under the Scheme only. Accordingly, resident individuals can remit gifts and donations up to USD 200,000 per financial year under the Scheme.

Q. 19.     Are resident individuals under this Scheme required to repatriate the accrued interest/dividend on deposits/investments abroad, over and above the principal amount?

Ans.        The investor can retain and reinvest the income earned on investments made under the Scheme. At present, the residents are not required to repatriate the funds or income generated out of investments made under the Scheme.

Q.20.      Are remittances under the Scheme on gross basis or net basis (net of repatriation from abroad)?

Ans.        Remittance under this scheme is on a gross basis.

Q.21.      Can remittances under the facility be consolidated in respect of family members?  

Ans.        Remittances under the facility can be consolidated in respect of family members subject to the individual family members complying with the terms and conditions of the Scheme.

Q.22.      Can one use the Scheme for purchase of objects of art (paintings etc.) either directly or through auction house?

Ans.        Remittances under the Scheme can be used for purchasing objects of art subject to the provisions of other applicable laws such as the extant Foreign Trade Policy of the Government of India.

Q.23.      Is the AD required to check permissibility of remittances based on nature of transaction or allow the same based on remitters declaration?

Ans.        AD will be guided by the nature of transaction as declared by the remitter and will certify that the remittance is in conformity with the instructions issued by the Reserve Bank.

Q.24.      Can remittance be made under this Scheme for acquisition of ESOPs?

Ans.        The Scheme can also be used for remittance of funds for acquisition of ESOPs.

Q.25.      Is this scheme in addition to acquisition of ESOPs linked to ADR/GDR (i.e. USD 50,000 for a block of 5 calendar years)?

Ans.        The remittance under the Scheme is in addition to acquisition of ESOPs linked to ADR/GDR.

Q.26.      Is this Scheme is in addition to acquisition of qualification shares (i.e. USD 20,000 or 1% of paid up capital of overseas company, whichever is lower)?

Ans.        The remittance under the Scheme is in addition to acquisition of qualification shares.

Q.27.      Can a resident individual invest in units of Mutual Funds, Venture Funds, unrated debt securities, promissory notes, etc., under this scheme?

Ans.        A resident individual can invest in units of Mutual Funds, Venture Funds, unrated debt securities, promissory notes, etc. under this Scheme. Further, the resident can invest in such securities out of the bank account opened abroad under the Scheme.

Q.28.      Can an individual who has availed of a loan abroad as a non-resident Indian, repay the same as a resident on return to India, under this Scheme?

Ans.        This is permissible.

Q. 29.     Is it mandatory for resident individuals to have PAN number for sending outward remittances under the Scheme?

Ans.        It is mandatory to have PAN number to make remittances under the Scheme.

Q. 30.     In case a resident individual requests for an outward remittance by way of issuance of a demand draft (either in his own name or in the name of the beneficiary with whom he intends putting through the permissible transactions) at the time of his private visit abroad, whether the remitter can effect such an outward remittance against self declaration?

Ans.        Such outward remittance in the form of a DD can be effected against the declaration by the resident individual in the format prescribed under the Scheme.

Q. 31.     Are there any restrictions on the frequency of the remittance?

Ans.        There is no restriction on the frequency. However, the total amount of foreign exchange purchased from or remitted through, all sources in India during a financial year should be within the cumulative limit of USD 200,000.

Q.32.      What are the requirements to be complied with by the remitter?

Ans.        The individual will have to designate a branch of an AD through which all the remittances under the Scheme will be made. The applicants should have maintained the bank account with the bank for a minimum period of one year prior to the remittance. If the applicant seeking to make the remittance is a new customer of the bank, Authorized Dealers should carry out due diligence on the opening, operation and maintenance of the account. Further, the AD should obtain bank statement for the previous year from the applicants to satisfy themselves regarding the source of funds. If such a bank statement is not available, copies of the latest Income Tax Assessment Order or Return filed by the applicant may be obtained. He has to furnish an application-cum-declaration in the specified format regarding the purpose of the remittance and declare that the funds belong to him and will not be used for purposes prohibited or regulated under the Scheme.

Q. 33.     Can an individual, who has repatriated the amount remitted during the financial year, avail of the facility once again?

Ans.        Once a remittance is made for an amount up to USD 200,000 during the financial year, he would not be eligible to make any further remittances under this scheme, even if the proceeds of the investments have been brought back into the country.

Q. 34.     Can remittances be made only in US Dollars?

Ans.        The remittances can be made in any freely convertible foreign currency equivalent to USD 200,000 in a financial year.

Q. 35.     In the past, resident individuals could invest in overseas companies listed on a recognized stock exchange abroad and which has the shareholding of at least 10 per cent in an Indian company listed on a recognized stock exchange in India. Does this condition still exist?

Ans.        Investment by resident individual in overseas companies is subsumed under the Scheme of USD 200,000. The requirement of 10 per cent reciprocal shareholding in the listed Indian companies by such overseas companies has since been dispensed with.

III.            GUIDELINES FOR FINANCIAL INTERMEDIARIES OFFERING SPECIAL SCHEMES, PROTECTION UNDER THE SCHEME

Q. 36.     Are intermediaries expected to seek specific approval for making overseas investments available to clients?

Ans.        Banks including those not having operational presence in India are required to obtain prior approval from Reserve Bank for soliciting deposits for their foreign/overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company.

Q.37.      Are there any restrictions on the kind/quality of debt or equity instruments an individual can invest in?

Ans.        No ratings or guidelines have been prescribed under the Liberalised Remittance Scheme of USD 200,000 on the quality of the investment an individual can make. However, the individual investor is expected to exercise due diligence while taking a decision regarding the investments which he or she proposes to make.

Q.38.      Whether credit facilities in Indian Rupees or foreign currency would be permissible against security of such deposits?

Ans.        No. The Scheme does not envisage extension of credit facility against the security of the deposits. Further, the banks should not extend any kind of credit facilities to resident individuals to facilitate remittances under the Scheme.

Q. 39.     Can bankers open foreign currency accounts in India for residents under the Scheme?

Ans.        No. Banks in India cannot open foreign currency accounts in India for residents under the Scheme.

Q. 40.     Can an Offshore Banking Unit (OBU) in India be treated on par with a branch of the bank outside India, for the purpose of opening of foreign currency accounts by residents under the Scheme?

Ans.        No. For the purpose of the Scheme, an OBU in India is not treated as an overseas branch of a bank in India.