Presentationonfemabyca Sudhag Bhushanbalancesheetandfema 110523142630 Phpapp02

By Sudha G.
Bhushan
BALANCE SHEET AND FEMA

REGULATIONS
Presentation on FEMA by CA. Sudha G. Bhushan

Companies Act, 1956
Section 211 of the companies Act says

Every balance sheet of a company shall give a
true and fair view of the state of affairs of the
company as at the end of the financial year
and shall, subject to the provisions of this
section, be in the form set out in Part I of
Schedule VI, or as near thereto as
circumstances admit

Every profit and loss account of a company
shall give a true and fair view of the profit or
loss of the company for the financial year and
shall, subject as aforesaid, comply with the
requirements of Part II of Schedule VI, so far
as they are applicable thereto

Income Tax Act
Section 92 :- Computation of Income from

International Transaction
Section 92 A :- Associated enterprise
Section 92B:- Meaning of International
transaction
Section 92E :- Report from Accountant

1. List of associated enterprises with which the company has entered in to
International transaction?
2. Has the assessee entered into any international transaction(s) in respect of
purchase/sale of raw material, consumables or any other supplies for
assembling / processing /manufacturing of goods/articles from/to associated
enterprises
purchase/sale of any other tangible moveable/immovable property or lease of
such property?
purchase/sale/use of intangible property such as know-how, patents,
copyrights, licenses
services such as financial, administrative, technical, commercial services
granting/receiving loans/ advances to or from associated enterprise.

Foreign Exchange Management
Act, 1999
Save as otherwise provided in this Act, rules or regulations made
thereunder, or with the general or special permission of the Reserve
Bank, no person shall
(a) deal in or transfer any foreign exchange or foreign

security to any person not being an authorised person;
(b) make any payment to or for the credit of any person
resident outside India in any manner;
(c) receive otherwise (than) through an authorised person,
any payment by order or on behalf of any person resident outside India
in any manner;
(d) enter into any financial transaction in India as

consideration for or in association with acquisition or creation or transfer
of a right to acquire, any asset outside India by any person.

Transactions
Current Account Transactions

Capital Account Transactions

Items relating to
BALANCE SHEET

Items at liability side
Share capital
Reserve and Surplus
Secured Loans
Unsecured Loans
Current Liabilities and provisions

Items at asset Side
Fixed Assets
Investments
Current Assets, Loans and Advances
Misc Expenditure
Profit and loss account [Cr. Balance]

Share capital
LIABILITY SIDE

Share capital
Equity Share capital

Authorised share capital
Paid up share capital
Preference Share capital

Routes
Foreign Direct Investment is freely permitted

in almost all sectors.
Automatic Route - The foreign investor or the
Indian company does not require any
approval from the Reserve Bank or
Government of India for the investment.
Government Route - Prior approval of the
Government of India, Ministry of Finance,
Foreign Investment Promotion Board (FIPB)
is required.
Intimation of Share Capital
Particulars Time Frame Forms With whom

Authorised dealer category -I bank,
with the regional office of the Reserve
Bank under whose jurisdiction the
registered office of the company is
situated
Intimation to RBI about the amount of

consideration received (in the Form of within 30 days from the date of
Inward remittance or in the form of receipt of the amount of
debit to NRE/FCNR account consideration Annexure II and Annexure III
Within 180 days from the date of

Shares to be allotted receipt of consideration
Within 30 days from the date of issue

Reporting of issue of shares of shares Form FC- GPR (part A) along with
A certificate from the Company

Secretary
A certificate
Presentation on FEMA fromG.Auditors
by CA. Sudha Bhushan of the
company
FC GPR Form
Signed by Managing Director/Director/Secretary of the Company

and submitted to the Authorised Dealer of the company, who will
forward it to the Reserve Bank.
The following documents have to be submitted along with Part

A:
(i) A certificate from the Company Secretary of the company certifying that :
a) all the requirements of the Companies Act, 1956 have been complied with;
b) terms and conditions of the Governments approval, if any, have been complied
with;
c) the company is eligible to issue shares under these Regulations; and
d) the company has all original certificates issued by authorised dealers in India
evidencing receipt of amount of consideration.
(ii) A certificate from Statutory Auditor or Chartered Accountant indicating

the manner of arriving at the price of the shares issued to the persons
resident outside India.

Annual Return
Part B of Form FC GPR

To be submitted by 31st of July every year.
All investments by way of direct/portfolio
investments/re-invested earnings/others in
the Indian company made during the
previous year.

Issue price
Listed Companies :- on the basis of SEBI

guidelines.
Unlisted companies :- Valuation of shares has

to be done by a Chartered Accountant in
accordance with the guidelines issued by the
erstwhile Controller of Capital Issues (CCI).

Preference Share
Preference shares to be considered as debt.

Accordingly, all the norms applicable for
ECBs, viz. eligible borrowers, recognized
lenders, amount and maturity, end- use
stipulations, etc. shall apply.

Convertible Debentures
At par with Equity share

RESERVE AND SURPLUS

Reserves and Surplus
Share Premium account

Profit and loss account
Direct Income
Indirect Income

Share Premium Account
Section 78 of the Act reads as follows:
(1) Where a company issues shares at a premium, whether for

cash or otherwise, a sum equal to the aggregate amount or value
of the premiums on those shares shall be transferred to an
account, to be called the security premium account' ;
(2) The security premium account may, notwithstanding
anything in sub-section (1), be applied by the company---
(a) in paying up unissued shares of the company to be issued to members
of the company as fully paid bonus shares ;
(b) in writing off the preliminary expenses of the company ;
(c) in writing off the expenses of, or the commission paid or discount
allowed on, any issue of shares or debentures of the company ; or
(d) in providing for the premium payable on the redemption of any
redeemable preference shares or of any debentures of the company.

Profit and loss account
Nature of Business
Commission income
Trading of commodities
Manufacturing of product

LOANS
External Commercial Borrowings

Trade Credit
Share application money/ Advances

from Customers

External Commercial Borrowings
External Commercial Borrowings (ECB) refer

to commercial loans in the form of bank
loans, buyers credit, suppliers credit,
securitized instruments (e.g. floating rate
notes and fixed rate bonds) availed of from
non-resident lenders with minimum average
maturity of 3 years.

Monthly Return
Borrowers are required to submit ECB-2

Return certified by the designated AD bank
on monthly basis so as to reach DSIM,
Reserve Bank within seven working days from
the close of month to which it relates.

Trade Credits
Trade Credits (TC) refer to credits extended for imports
directly by the overseas supplier, bank and financial
institution for maturity of less than three years.
Depending on the source of finance, such trade credits
include suppliers credit or buyers credit.
Suppliers credit relates to credit for imports into India extended
by the overseas supplier.
Buyers credit refers to loans for payment of imports in to India
arranged by the importer from a bank or financial institution
outside India for maturity of less than three years.
It may be noted that buyers credit and suppliers credit for
three years and above come under the category of External
Commercial Borrowings (ECB) which are governed by ECB
guidelines.

AD banks are permitted to approve trade credits for
imports into India up to USD 20 million per import
transaction for imports permissible under the current
Foreign Trade Policy of the DGFT with a maturity period up
to one year from the date of shipment. For import of capital
goods as classified by DGFT, AD banks may approve trade
credits up to USD 20 million per import transaction with a
maturity period of more than one year and less than three
years from the date of shipment. No roll-over/extension will
be permitted beyond the permissible period.
AD banks shall not approve trade credit exceeding USD 20

million per import transaction.

Fixed Assets
ASSET SIDE

Fixed Asset
From above we can see that foreign investment is not allowed in real
estate only if the company proposes to engage in the business of real
estate.
Therefore the inference can be drawn that the prohibition is with

relation to investment in the business of real estate and not in the
immovable property[ residential /commercial] for carrying out the
business activities.
The sale and purchase of immovable property in India by a person

resident outside India is regulated by the provisions Foreign Exchange
Management (Acquisition and Transfer of Immovable Property in India)
Regulations, 2000. As per FOREIGN EXCHANGE MANAGEMENT
(ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY IN
INDIA) REGULATIONS, 2000

Investments
Direct Investment Outside India

The Indian Party submits Form ODI, duly completed,
to the designated branch of an authorized dealer. In
this connection the following must be noted:
(a) The Form ODI must be submitted in duplicate to
the AD for the purpose of making remittance
towards investment in overseas JV/WOS.
(b) The form should be complete in all respects and
accompanied by:
(i) a certificate from the statutory auditors in the format
given in the form, and
(ii) a certified copy of the resolution of the Board of Directors
approving the investment.

Unique Identification Number
On receipt of the form ODI from the AD Category I bank,
Reserve Bank will allot a Unique Identification Number for each
JV/WOS outside India and the Indian Party must quote such
number in all its communications and reports to the Reserve
Bank and the authorized dealer.
An Indian Party is required to:

(i) receive share certificates or any other document as an
evidence of investment in the foreign entity to the satisfaction of the
Reserve Bank within six months, or such further period as Reserve Bank
may permit, from the date of effecting remittance
(ii) repatriate to India, all dues receivable from the foreign
entity, like dividend, royalty, technical fees etc., within 60 days of its
falling due, or such further period as the Reserve Bank may permit.

Items relating to
PROFIT AND LOSS ACCOUNT

Export
As per Section 7 of the FEMA,19999 - It is

obligatory on the part of the exporter to
realize and repatriate the amount
representing the full value of goods or
software exported to India within twelve
months from the date of Export

Every exporter of goods or software in physical form or through any
other form, either directly or indirectly, to any place outside India,
shall furnish to the specified authority, a declaration in one of the
forms set out in the Schedule and supported by such evidence as may
be specified, containing true and correct material particulars
including the amount representing
(i) the full export value of the goods or software; or
(ii) if the full export value is not ascertainable at the time of export,
the value which the exporter, having regard to the prevailing market
conditions expects to receive on the sale of the goods or the software
in overseas market, and affirms in the said declaration that the full
export value of goods (whether ascertainable at the time of export or
not) or the software has been or will within the specified period be,
paid in the specified manner

Various Forms
Form GR :To be completed in duplicate for export otherwise than
by Post including export of software in physical form i.e.,
magnetic tapes/discs and paper media.
Form SDF: To be completed in duplicate and appended to the

shipping bill, for exports declared to Customs Offices notified by
the Central Government which have introduced Electronic Data
Interchange (EDI) system for processing shipping bills notified by
the Central Government.
Form PP : To be completed in duplicate for export by Post.
Form SOFTEX: To be completed in triplicate for declaration of

export of software otherwise than in physical form, i.e., magnetic
tapes/discs, and paper media.

Pre incorporation expenses:- Exceeding USD
1,00,000 shall require prior approval of RBI as
per schedule III of the FOREIGN EXCHANGE
MANAGEMENT (CURRENT ACCOUNT
TRANSACTIONS) RULES, 2000.

Payment made abroad
Advertisement in foreign magazine

Consultancy Fees :- US 1,000,000, per
project, for any consultancy service procured
from outside India
Royalty Fees :- Remittances under technical
collaboration agreements where payment of
royalty exceeds 5% on local sales and 8% on
exports and lump sum payment exceeds US $
2 million : Approval from Central Government
Import
Regulated by the Directorate General of

Foreign Trade (DGFT) under the Ministry of
Commerce & Industry, Department of
Commerce, Government of India.
Applications by persons, firms and companies
for making payments, exceeding USD 500 or
its equivalent, towards imports into India
must be made in Form A-1

In terms of the extant regulations, remittances against
imports should be completed not later than six months
from the date of shipment, except in cases where amounts
are withheld towards guarantee of performance, etc.
AD Category - I banks may permit settlement of import
dues delayed due to disputes, financial difficulties, etc.
Interest in respect of such delayed payments may be
permitted in terms of the directions.
Deferred payment arrangements, including suppliers and
buyers credit, providing for payments beyond a period of
six months from date of shipment up to a period of less
than three years, are treated as trade credits for which the
procedural guidelines laid down in the Master Circular for
External Commercial Borrowings and Trade Credits may be
followed
Documentation
In case of imports, where value of foreign exchange
remitted/paid for import into India exceeds USD 100,000 or
its equivalent, the AD through whom the relative
remittance was made, shall ensure that the importer
submits :-
The Exchange Control copy of the Bill of Entry for home
consumption, or
The Exchange Control copy of the Bill of Entry for
warehousing, in case of 100% Export Oriented Units or
Customs Assessment Certificate or Postal Appraisal Form,
as declared by the importer to the Customs Authorities,
where import has been made by post, as evidence that the
goods for which the payment was made have actually been
imported into India

Realization of Foreign Exchange
A person shall sell the realised foreign exchange to an

authorised person under clause , within the period of ninety
days from the date of its receipt.
Any person who has acquired or purchased foreign

exchange for any purpose mentioned in the declaration
made by him to an authorised person does not use it for
such purpose or for any other purpose for which purchase
or acquisition of foreign exchange is permissible under the
provisions of the Act or the rules or regulations or direction
or order made thereunder, shall surrender such foreign
exchange or the unused portion thereof to an authorised
person within a period of sixty days from the date of its
acquisition or purchase by him.

sudhag999@gmail.com
CA. Sudha G. Bhushan

FEMA Presentation
09769033172

Capital Account Transactions
Current Account Transactions

Current Account
current account transaction means a transaction other
than a capital account transaction and without prejudice to
the generality of the foregoing such transaction includes,
(i) payments due in connection with foreign trade,
other current business, services, and short-term banking
and credit facilities in the ordinary course of business,
(ii) payments due as interest on loans and as net
income from investments,
(iii) remittances for living expenses of parents,
spouse and children residing abroad, and
(iv) expenses in connection with foreign travel,
education and medical care of parents, spouse and children

Capital Account
Capital account transaction means a

transaction which alters the assets or
liabilities, including contingent liabilities,
outside India of persons resident in India or
assets or liabilities in India of persons resident
outside India, and includes transactions
referred to in sub-section (3) of section 6

Any person may sell or draw foreign
exchange to or from an authorised person if
such sale or drawls is a current account
transaction:
Provided that the Central Government may,
in public interest and in consultation with the
Reserve Bank, impose such reasonable
restrictions for current account transactions
as may be prescribed

Capital account transactions.
6. (1) Subject to the provisions of sub-section (2), any person may sell or draw foreign exchange to or from an
authorised person for a capital account transaction.
(2) The Reserve Bank may, in consultation with the Central Government, specify
(a) any class or classes of capital account transactions which are permissible;
(b) the limit up to which foreign exchange shall be admissible for such transactions:
Provided that the Reserve Bank shall not impose any restriction on the drawal of foreign exchange for payments
due on account of amortization of loans or for depreciation of direct investments in the ordinary course of
business.
(3) Without prejudice to the generality of the provisions of sub-section (2), the Reserve Bank may, by regulations,
prohibit, restrict or regulate the following
(a) transfer or issue of any foreign security by a person resident in India;
(b) transfer or issue of any security by a person resident outside India;
(c) transfer or issue of any security or foreign security by any branch, office or agency in India of a person
resident outside India;
(d) any borrowing or lending in foreign exchange in whatever form or by whatever name called;
(e) any borrowing or lending in rupees in whatever form or by whatever name called between a person
resident in India and a person resident

outside India;
(f)deposits between persons resident in India and persons resident outside India;
(g)export, import or holding of currency or currency notes;
h)transfer of immovable property outside India, other than a lease not exceeding five years, by a person
resident in India;
(i)acquisition or transfer of immovable property in India, other than a lease not exceeding five years, by a
person resident outside India;
(j)giving of a guarantee or surety in respect of any debt, obligation or other liability incurred
(i)by a person resident in India and owed to a person resident outside India; or
(ii)by a person resident outside India.
(4) A person resident in India may 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.
(5) A person resident outside India may hold, own, transfer or invest in Indian currency, security or any immovable
property situated in India if such currency, security or property was acquired, held or owned by such person when
he was resident in India or inherited from a person who was resident in India.

Section 92
Any income arising from an international

transaction shall be computed having
regard to the arms length price.
Explanation.For the removal of doubts, it is
hereby clarified that the allowance for any
expense or interest arising from an
international transaction shall also be
determined having regard to the arms length
price.

Section 92E
Every person who has entered into an

international transaction during a previous
year shall obtain a report from an accountant
and furnish such report on or before the
specified date in the prescribed form duly
signed and verified in the prescribed manner
by such accountant and setting forth such
particulars as may be prescribed

International Transaction
For the purposes of this section and sections 92, 92C, 92D and 92E,
international transaction means a transaction between two or more
associated enterprises, either or both of whom are non-residents, in the
nature of purchase, sale or lease of tangible or intangible property, or
provision of services, or lending or borrowing money, or any other
transaction having a bearing on the profits, income, losses or assets of
such enterprises, and shall include a mutual agreement or arrangement
between two or more associated enterprises for the allocation or
apportionment of, or any contribution to, any cost or expense incurred
or to be incurred in connection with a benefit, service or facility provided
or to be provided to any one or more of such enterprises.
(2) A transaction entered into by an enterprise with a person other than
an associated enterprise shall, for the purposes of sub-section (1), be
deemed to be a transaction entered into between two associated
enterprises, if there exists a prior agreement in relation to the relevant
transaction between such other person and the associated enterprise, or
the terms of the relevant transaction are determined in substance
between such other person and the associated enterprise

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By Sudha G.

BALANCE SHEET AND FEMA

Presentation on FEMA by CA. Sudha G. Bhushan

Section 211 of the companies Act says

Presentation on FEMA by CA. Sudha G. Bhushan

Presentation on FEMA by CA. Sudha G. Bhushan

Section 92 :- Computation of Income from

Presentation on FEMA by CA. Sudha G. Bhushan

Presentation on FEMA by CA. Sudha G. Bhushan

(a) deal in or transfer any foreign exchange or foreign

(d) enter into any financial transaction in India as

Presentation on FEMA by CA. Sudha G. Bhushan

Current Account Transactions

Presentation on FEMA by CA. Sudha G. Bhushan

Presentation on FEMA by CA. Sudha G. Bhushan

Presentation on FEMA by CA. Sudha G. Bhushan

Presentation on FEMA by CA. Sudha G. Bhushan

Presentation on FEMA by CA. Sudha G. Bhushan

Equity Share capital

Presentation on FEMA by CA. Sudha G. Bhushan

Foreign Direct Investment is freely permitted

Particulars Time Frame Forms With whom

Intimation to RBI about the amount of

Within 180 days from the date of

Within 30 days from the date of issue

A certificate from the Company

Signed by Managing Director/Director/Secretary of the Company

The following documents have to be submitted along with Part

(ii) A certificate from Statutory Auditor or Chartered Accountant indicating

Presentation on FEMA by CA. Sudha G. Bhushan

Part B of Form FC GPR

Presentation on FEMA by CA. Sudha G. Bhushan

Listed Companies :- on the basis of SEBI

Unlisted companies :- Valuation of shares has

Presentation on FEMA by CA. Sudha G. Bhushan

Preference shares to be considered as debt.

Presentation on FEMA by CA. Sudha G. Bhushan

At par with Equity share

Presentation on FEMA by CA. Sudha G. Bhushan

Presentation on FEMA by CA. Sudha G. Bhushan

Share Premium account

Presentation on FEMA by CA. Sudha G. Bhushan

(1) Where a company issues shares at a premium, whether for

Presentation on FEMA by CA. Sudha G. Bhushan

Presentation on FEMA by CA. Sudha G. Bhushan

External Commercial Borrowings

Share application money/ Advances

Presentation on FEMA by CA. Sudha G. Bhushan

External Commercial Borrowings (ECB) refer

Presentation on FEMA by CA. Sudha G. Bhushan

Borrowers are required to submit ECB-2

Presentation on FEMA by CA. Sudha G. Bhushan

Presentation on FEMA by CA. Sudha G. Bhushan

AD banks shall not approve trade credit exceeding USD 20

Presentation on FEMA by CA. Sudha G. Bhushan

Presentation on FEMA by CA. Sudha G. Bhushan

Therefore the inference can be drawn that the prohibition is with

The sale and purchase of immovable property in India by a person

Presentation on FEMA by CA. Sudha G. Bhushan

Direct Investment Outside India

Presentation on FEMA by CA. Sudha G. Bhushan

An Indian Party is required to:

Presentation on FEMA by CA. Sudha G. Bhushan

PROFIT AND LOSS ACCOUNT