FEMA

After five years of stay in USA, Mr. Umesh came to India at his paternal place in New Delhi on October 25, 2021, for the purpose of conducting business with his two younger brothers Rajesh and Somesh and contributed a sum of 10,00,000 as his capital. Simultaneously, Mr. Umesh also started a proprietary business of selling artistic brass ware, jewelry, etc. procured directly from the manufacturers based at Moradabad. Within a period of two months after his arrival from USA, Mr. Umesh established a branch of his proprietary business at Minnesota, USA. You are required choose the appropriate option with respect to residential status of Mr. Umesh and his branch for the financial year 2022-23 after considering the applicable provisions of the Foreign Exchange Management Act, 1999:

• For the financial year 2022-23, Mr. Umesh and his branch established at Minnesota, USA, are both persons resident outside India.

• For the financial year 2022-23, Mr. Umesh is a resident in India but his branch established at Minnesota, USA, is a person resident outside India.

• For the financial year 2022-23, Mr. Umesh and his branch established at Minnesota, USA, are both persons resident in India.

• For the financial year 2022-23, Mr. Umesh is a person resident outside India but his branch established at Minnesota, USA, is a person resident in India.

Answer explanation

Branch or office outside India owned or controlled by a person resident in India is considered as a person resident in India. In this case, the branch is owned by Umesh (PRI).

Which among the following transaction is not prohibited:

• Remittance out of lottery winnings

• Remittance of income from racing

• Availment of foreign exchange of USD 250000 for private visit to Europe

• Remittance of dividend by any company to which the requirement of dividend balancing is applicable

Mr. V, brother of Mr. R, is a resident of Singapore and he owns an immovable property in Chennai which he inherited from his father, who was a resident of India, Can Mr. V continue to hold the property?

• No, he cannot hold transfer or invest In India, since he is resident outside India.

• Yes, he can continue to hold in India, since he is person of India Origin and the property is located In India

• Yes, he can continue to hold the property, since his brother (Mr. R) uses the property whenever he travels to Chennai.

• Yes, he can continue to hold the property, since this was inherited from a person who was resident in India.

Answer explanation

As per Section 6, a person resident outside India may hold immovable property in India acquired from a person resident in India by way of inheritance.

Making any payment to, or for the credit of any person, or receiving any payment for, by order or on behalf of any person, or drawing, issuing or negotiating any bill of exchange or promissory note, or transferring any security or acknowledging any debt, is called as:

• Financial Commitment

• Financial Transaction

• Financial Instruments

• Financial Promises

M/s. Kedhar Sports Academy, a private coaching club, provides coaching for cricket, football and other similar sports. It coaches sports aspirants pan India. It also conducts various sports events and campaigns, across the country. In 2022, to mark the 25th year of its operation, a cricket tournament (akin to the format of T-20) is being organized by M/s. Kedhar Sports Academy in Lancashire, England, in the first half of April. The prize money for the ‘winning team’ is fixed at USD 40,000 whereas in case of ‘runner-up’, it is pegged at USD 11,000. You are required to choose the correct option from the four given below which signifies the steps to be taken by M/s. Kedhar Sports Academy for remittance of the prize money of USD 51,000 (i.e., USD 40,000+USD 11,000) to England keeping in view the relevant provisions of Foreign Exchange Management Act, 1999:

• For remittance of the prize money of USD 51,000, M/s Kedhar Sports Academy is required to obtain prior permission from the Ministry of Human Resource Development (Department of Youth Affairs and Sports).

• For remittance of the prize money of USD 51,000, M/s Kedhar Sports Academy is required to obtain prior permission from the Reserve Bank of India.

• For remittance of the prize money of USD 51,000, M/s Kedhar Sports Academy is not required to obtain any prior permission from any authority, whatsoever, and it can proceed to make the remittance.

• For remittance of the prize money of USD 51,000, M/s Kedhar Sports Academy is required to obtain prior permission from the Ministry of Finance (Department of Economic Affairs).

Answer explanation

As per Sch II (transactions that require approval of CG), Remittance of prize money / sponsorship of sports activity abroad by a person other than International/National/State Level sports bodies, if the amt. involved > US$ 100,000 – Ministry of Human Resource Development.

No person shall draw foreign exchange for a transaction included in the Schedule II of the FEM (Current Account Transactions) Rules, 2000 without prior approval of:

• The Government of India

• The Reserve Bank of India

• The Authorised Person

• The Foreign Exchange Dealers Association of India

Which among the following transaction is not termed as Current Account Transaction:

• Payments due in connection with foreign trade, other current business, services, and short-term banking and credit facilities in the ordinary course of business

• Payments due as interest on loans and as net income from investments

• Expenses in connection with foreign travel, education and medical care of parents, spouse and children

• Changes in alteration of contingent liabilities outside India of persons resident in India

Every drawal of foreign exchange for transactions included in Schedule III of the FEM (Current Account Transactions) Rules, 2000 shall require prior approval of RBI. Which among the following transaction no approval of RBI is required:

• Where the payment is made out of funds held in Resident Foreign Currency (RFC) Account of the remitter.

• Where the remittance of USD 275000 is made for maintenance of close relatives abroad

• Where the drawal of foreign currency of USD 400000 is for studies abroad

• Drawal of USD 260000 for private visit to USA

Which among the following is not prohibited under the FEM (Current Account Transactions) Rules, 2000:

• Remittance for purchase of lottery tickets, banned / proscribed magazines, football pools, sweepstakes etc.

• Expenses of USD 2,00,000 in connection with medical treatment abroad

• Payment related to “Call Back Services” of telephones

• Remittance of interest income on funds held in Non-Resident Special Rupee Account Scheme

No person shall draw foreign exchange for a transaction included in ______ of the FEM (Current Account Transactions) Rules, 2000 without the prior approval of Government of India:

• Schedule I

• Schedule II

• Schedule III

• Schedule IV