Reserve Bank of India, Foreign Exchange Division, has informed all Authorised Dealers in Foreign Exchange, further liberalizations in Forex Remittance Scheme for Resident Individuals
The RBI notification can be accessed here
Vide A.P.(DIR Series) Circular No.16 dated September 12, 2002, Authorised Dealers were advised to release amounts up to USD 500 or its equivalent for all permissible transactions on the basis of a simple letter from the applicant containing the basic information, viz., names and the addresses of the applicant and the beneficiary, amount to be remitted and the purpose of remittance.
It was clarified in the circular that Authorised Dealers need not insist upon submission of A2 Forms in such cases.
Vide A.P.(DIR Series) Circular No.55 dated December 23, 2003, the limit was subsequently enhanced to USD 5000
Vide A. P. (DIR Series) Circular No.118 dated May 7, 2012, the limit for foreign exchange remittance for miscellaneous purposes without documentation formalities, has been raised from USD 5000 to USD 25000 with immediate effect.
RBI has also clarified that Authorised Dealers need not obtain any document, including Form A-2, except a simple letter as stated above as long as the foreign exchange is being purchased for a current account transaction (not included in the Schedules I and II of Government Notification on Current Account Transactions), and the amount does not exceed USD 25000 or its equivalent and the payment is made by a cheque drawn on the applicant’s bank account or by a Demand Draft.
As the transactions have to reported, AD banks can prepare dummy A-2 so as to enable them to provide purpose of remittance for statistical inputs for Balance of Payment.
The process flow is as under:
01) Maximum Remittance amount: USD 25,000 per calendar year for any purpose
02) Eligibility: All resident individuals are eligible to avail of the facility under the scheme. The facility will not be available to Corporates, partnership firms, HUF, Trusts, etc.
3a) This facility is available for making remittance up to USD 25,000 per calendar year for any current or capital account transactions or a combination of both.
3b) Under this facility, resident individuals will be free to acquire and hold immovable property or shares or any other asset outside India without prior approval of the Reserve Bank. Individuals will also be able to open, maintain and hold foreign currency accounts with a bank outside India for making remittances under the scheme without prior approval of Reserve Bank. The foreign currency account may be used for putting through all transactions connected with or arising from remittances eligible under this scheme.
3c) It is further clarified that the facility under the scheme is in addition to those already available for private travel, business travel, gift remittances, donations, studies, medical treatment etc as described in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000.
3D) 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/sweep stakes, tickets proscribed magazines etc) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000. (Annexure B).
ii) Remittances made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan.
iii) Remittances made directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non co-operative countries and territories” viz Cook Islands, Egypt, Guatemala, Indonesia, Myanmar, Nauru, Nigeria, Philippines and Ukraine.
iv) 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.
04) Remittance Procedure
The remittance procedure can be sub-divided into two parts a) to be complied by the remitter b) to be complied by the AD
4a) Requirements to be complied with by the remitter
i) To avail of this facility, the individual will have to designate a branch of an AD through which all the remittances under the scheme will be made.
ii) The resident individual seeking to make the remittance should furnish an application letter cum declaration in the format as indicated in Annexure–A regarding the purpose of the remittance and declaration that the funds belong to the remitter and will not be used for the purposes as detailed above.
4b) Requirements to be complied with by the Authorised Dealers
i) While allowing the facility to resident individuals, Authorized Dealers are required to ensure that the “Know Your Customer” Guidelines have been implemented in respect of these accounts. They should also comply with the Anti-Money Laundering Rules in force while allowing the facility.
ii) 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, Authorised 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 applicant 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.
iii) The AD should ensure that the payment is received out of funds belonging to the person seeking to make the remittance, by a cheque drawn on the applicant’s bank account or by debit to his account or by Demand Draft / Pay Order.
iv) Authorised dealer should certify that the remittance is not being made directly or indirectly by /or to ineligible entities and that the remittances are made in accordance with the instructions contained herein.
05) Reporting of the transactions: The remittances made under this Scheme will be reported in the R-Return in the normal course.
The ADs may also prepare and keep on record dummy Form A2, in respect of remittances exceeding USD 5000. Authorised Dealers may arrange to furnish on a quarterly basis, information on the number of applicants and total amount remitted to the Chief General Manager, External Payment Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai-400001.