Realisation and Repatriation of Foreign Exchange under FEMA

Prabhat Nigam

31 Mar, 2022

Any person who is resident in India to whom any amount of foreign exchange is due or has accrued shall, except according to the extent of specific provisions made under Foreign Exchange Management Act, 1999 (FEMA), Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2015 or any rules or with specific permission of the Reserve Bank of India (RBI^[1]), take all reasonable steps in realisation and repatriation of foreign exchange to India. That person shall in no case do or refrain from doing any or take or refrain from taking any action which has the effect of securing-

1. That the receipt by him or part of such foreign exchange gets delayed; or
2. That such foreign exchange ceases in whole or in part to be receivable by him   

What is meant by Repatriation of foreign exchange?

A person is deemed to have repatriated all the realised foreign exchange to Indian when the person has received payment in India in Rupees from the account of a bank or an exchange house in any country that is situated outside India and which is maintained with an authorised dealer.

Section 8 of the FEMA provides that where any amount of foreign exchange is due or is accrued to any person resident in India, then it is the responsibility of that person to make all reasonable efforts to realise and repatriate to India such foreign exchange within a specific time period and in such manner as has been specified by the RBI.

Regulation 3 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2015 further provide that e person resident in India should refrain from taking any action which results in delay in receipt of foreign exchange in whole or in part or stops in whole or in part the foreign exchange to be received by him.

For example if a person resident in India exports develops a software product and sells the same to a company resident outside India. If the person to whom he sold the product is untraceable, then it becomes the responsibility of the seller to make all reasonable efforts to recover from resident outside Indian or otherwise report about the same to RBI.  

What is the manner of repatriation of foreign exchange  

Once a person has realised an amount of foreign exchange which is due, it shall be his duty to repatriate such foreign exchange in India i.e. bring into or receive in India and –

1. Sell such foreign exchange to an authorised person in exchange of Indian currency i.e. rupees; or
2. Retain or hold such amount in an account with a foreign dealer in India up to the ceiling limit specified by the Reserve Bank of India; or
3. Use such foreign exchange to discharge a debt or any liability denominated in foreign exchange to the extent and manner prescribed by the Reserve Bank of India.

It must be noted that the due foreign exchange amount means an amount which a person has a right to claim or right to receive in foreign exchange. 

Exemptions from Realisation and Repatriation of Foreign Exchange 

Section 9 of FEMA talks about the provisions related to the exemptions related to realisation and repatriation of foreign exchange in certain cases. Following are the cases where there is no need to repatriate the foreign exchange fund to India:

1. Where a person is in possession of foreign exchange in the form of foreign currency or foreign currency up to such limit as has been specified by RBI with respect to this;
2. Where a person or class of persons hold foreign currency account or operate such foreign currency account within the limit specified by RBI with respect to this;
3. Where any foreign exchange  has been received or acquired before the date of 8^th July, 1947 or there is any other income which is arising and accruing from such foreign exchange which is held outside India  by any person with the general or special permission granted by RBI;
4. Where a person resident in India holds foreign exchange up to the limit set by RBI and if such foreign exchange has been acquired by way of gift of inheritance from a person referred to in clause (c) or any income arising from such income;
5. Where foreign exchange has been acquired from business, employment, vocation, trade, services, gifts, honorarium, inheritance or any other legitimate means up to the limit specified by RBI; and
6. Such other receipts which the RBI may specify from time to time.    

Conclusions 

India has always suffered from lack of foreign exchange and in response to that RBI has framed rules which mandate that any person whose amount in foreign exchange is due or accrued, then it should make all the efforts to for realisation and repatriation of foreign exchange and make all reasonable efforts that such amount is not delayed or stopped in any manner. This amount is subject to the limits and exemptions provided by RBI in FEMA.

Read our Article:A Detailed Review of Foreign Exchange Management Act 1999