FEMA_Practical problems_4

Mr. Patel, who was resident of USA for many years, now permanently returns to India. He continues to hold some immovable property, foreign security and other foreign exchange assets in USA. Can he hold such assets outside India?

Yes, section 6(4) of the Act gives general permissions to Residents to hold such immovable property, foreign security and foreign exchange outside India if they were acquired when he was Resident outside India. No special permission is required from the RBI but the current income on such assets say, rent, dividend or interest etc., shall have to be repatriated to India within the prescribed time limit as specified in regulation 5(i) of Notification No.9 viz: FEM (Realisation, Repretation & Surrender of Foreign Exchange), 2000.

FEMA_Practical problems_3

Can Mr. Pandya, a resident of Canada, instruct his brother staying in Mumbai to make a payment of Rs.5,000 to Mr. Joshi, his close friend?

No, as such payment is not permitted under clause (b) of section 3 of the Act.

Clause (c) prohibits every person for receiving any payment from or on behalf of a person resident outside India without an Inward remittance from a place outside India through an authorized person.

Clause (d) prohibits a person to enter into any financial transaction in India as consideration for acquisition, creation or transfer of a right to acquire any asset outside India by any person. The clause would affect a transaction in the nature of “Hawala Transaction”.

FEMA_Practical problems_2

Mr. Bharat, born and brought up in India, goes to USA on 10.4.2004 to look after his son, Amit, who is suffering from chronic disease, with the intention to stay over there till his son, Amit recovers completely. Determine his residential status under the Act for the financial year 2004-2005 and 2005-2006.

Mr. Bharat is going to USA neither for employment nor for business nor for any purposes which indicate his intention to stay there for an uncertain period. Thus, his physical presence in India during the preceding F.Y., i.e., 2003-2004 shall have to be considered and as he was in India for 365 days during the F.Y. 2003-2004 he would be treated Residential of India for the financial year 2003-2004.

If he continues to stay in USA, say, till 31-3-2005, his stay in India during the preceding financial year; i.e., 2004-2005 shall be less than 183 days and hence he would be treated Non-Residential for the financial year 2005-2006.

FEMA_Practical problems_1

Mr. Ashok, born and brought up in India, goes to USA for taking up an employment on 15.5.2004. Determine, his residential status under the Act for the F.Y. 2004-2005.

Mr. Ashok shall be treated as Resident of India till 14-5-2004. But, w.e.f. 15-5-2004, he shall be treated Non-Resident as he is covered by one of the exceptions listed in sub-clause (A) to section 2(v).