Forex Trading 2022, forex trading platforms: The Reserve Bank of India (RBI) has noticed misleading advertisements of unauthorised Electronic Trading Platforms (ETPs) offering forex trading facilities to Indian residents, including on social media platforms, search engines, Over The Top (OTT) platforms, gaming apps and the like. There have also been reports of such ETPs engaging agents who personally contact gullible people to undertake forex trading/investment schemes and entice them with promises of disproportionate/exorbitant returns. Further, there have been reports of frauds committed by such unauthorised ETPs / portals and many residents losing money through such trading / schemes.
Forex Trading 2022, forex trading platforms: It is clarified that resident persons can undertake forex transactions only with authorised persons and for permitted purposes, in terms of the Foreign Exchange Management Act, 1999 (FEMA). While permitted forex transactions can be executed electronically, they should be undertaken only on ETPs authorised for the purpose by the RBI or on recognised stock exchanges (National Stock Exchange of India Ltd., BSE Ltd. and Metropolitan Stock Exchange of India Ltd.) as per the terms and conditions specified by the RBI from time to time. It is also clarified that remittances for margins to overseas exchanges / overseas counterparties are not permitted under the Liberalised Remittance Scheme (LRS) framed under the FEMA.
A list of authorised persons and authorised ETPs is available on the RBI website. A set of frequently asked questions (FAQs) on forex transactions has also been placed on the website for the general guidance of the public.
Forex Trading 2022, forex trading platforms:The RBI cautions the public not to undertake forex transactions on unauthorised ETPs or remit/deposit money for such unauthorised transactions. Resident persons undertaking forex transactions for purposes other than those permitted under the FEMA or on ETPs not authorised by the RBI shall render themselves liable for penal action under the FEMA.
Liberalised Remittance Scheme
Forex Trading 2022, forex trading platforms:The captioned Scheme was introduced on February 4, 2004, vide A.P. (DIR Series) Circular No. 64 dated February 4, 2004 read with GoI Notification G.S.R. No.207(E) dated March 23, 2004, as a liberalization measure to facilitate resident individuals to remit funds abroad for permitted current or capital account transactions or combination of both. These Regulations are amended from time to time to incorporate the changes in the regulatory framework and published through amendment notifications.
2. Within the contours of the Regulations, Reserve Bank of India also issues directions to Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), 1999. These directions lay down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/constituents with a view to implementing the regulations framed.
3. This Master Direction consolidates the existing instructions on the “Liberalised Remittance Scheme” at one place. Reporting instructions can be found in Master Direction on Reporting (Master Direction No. 18 dated January 1, 2016)
4. It may be noted that, whenever necessary, Reserve Bank shall issue directions to Authorised Persons through A.P. (DIR Series) Circulars in regard to any change in the Regulations or the manner in which relative transactions are to be conducted by the Authorised Persons with their customers/ constituents. The Master Direction issued herewith shall be amended suitably simultaneously.
A. Liberalised Remittance Scheme (LRS) of USD 2,50,000 for resident individuals
1. Under the Liberalised Remittance Scheme, Authorised Dealers may freely allow remittances by resident individuals up to USD 2,50,000 per Financial Year (April-March) for any permitted current or capital account transaction or a combination of both. The Scheme is not available to corporates, partnership firms, HUF, Trusts, etc.
2. The LRS limit has been revised in stages consistent with prevailing macro and micro economic conditions. During the period from February 4, 2004 till date, the LRS limit has been revised as under:
|(Amount in USD3)|
|Date||Feb 4, 2004||Dec 20, 2006||May 8, 2007||Sep 26, 2007||Aug 14, 2013||Jun 3, 2014||May 26, 2015|
|LRS limit (USD)||25,000||50,000||1,00,000||2,00,000||75,000||1,25,000||2,50,000|
3. The Scheme is available to all resident individuals including minors. In case of remitter being a minor, the Form A2 must be countersigned by the minor’s natural guardian.
4. Remittances under the Scheme can be consolidated in respect of family members subject to individual family members complying with its terms and conditions. However, clubbing is not permitted by other family members for capital account transactions such as opening a bank account/investment/purchase of property, if they are not the co-owners/co-partners of the overseas bank account/ investment/property. Further, a resident cannot gift to another resident, in foreign currency, for the credit of the latter’s foreign currency account held abroad under LRS.
5. All other transactions which are otherwise not permissible under FEMA and those in the nature of remittance for margins or margin calls to overseas exchanges/ overseas counterparty are not allowed under the Scheme.
6. The permissible capital account transactions by an individual under LRS are:
- opening of foreign currency account abroad with a bank;
- purchase of property abroad;
- making investments abroad- acquisition and holding shares of both listed and unlisted overseas company or debt instruments; acquisition of qualification shares of an overseas company for holding the post of Director; acquisition of shares of a foreign company towards professional services rendered or in lieu of Director’s remuneration; investment in units of Mutual Funds, Venture Capital Funds, unrated debt securities, promissory notes;
- setting up Wholly Owned Subsidiaries and Joint Ventures (with effect from August 05, 2013) outside India for bonafide business subject to the terms & conditions stipulated in Notification No FEMA.263/ RB-2013 dated March 5, 2013;
- extending loans including loans in Indian Rupees to Non-resident Indians (NRIs) who are relatives as defined in Companies Act, 2013 .
7. The limit of USD 2,50,000 per Financial Year (FY) under the Scheme also includes/subsumes remittances for current account transactions (viz. private visit; gift/donation; going abroad on employment; emigration; maintenance of close relatives abroad; business trip; medical treatment abroad; studies abroad) available to resident individuals under Para 1 of Schedule III to Foreign Exchange Management (Current Account Transactions) Amendment Rules, 2015 dated May 26, 2015. Release of foreign exchange exceeding USD 2,50,000 requires prior permission from the Reserve Bank of India.
a. Private visits
Forex Trading 2022, forex trading platforms: For private visits abroad, other than to Nepal and Bhutan, any resident individual can obtain foreign exchange up to an aggregate amount of USD 2,50,000 from an Authorised Dealer or FFMC, in any one financial year, irrespective of the number of visits undertaken during the year.
Forex Trading 2022, forex trading platforms:Further, all tour related expenses including cost of rail/road/water transportation; cost of Euro Rail; passes/tickets, etc. outside India; and overseas hotel/lodging expenses shall be subsumed under the LRS limit. The tour operator can collect this amount either in Indian rupees or in foreign currency from the resident traveller.
Forex Trading 2022, forex trading platforms:Any resident individual may remit up-to USD 2,50,000 in one FY as gift to a person residing outside India or as donation to an organization outside India.
c. Going abroad on employment
Forex Trading 2022, forex trading platforms:A person going abroad for employment can draw foreign exchange up to USD 2,50,000 per FY from any Authorised Dealer in India.
Forex Trading 2022, forex trading platforms: A person wanting to emigrate can draw foreign exchange from AD Category I bank and AD Category II up to the amount prescribed by the country of emigration or USD 250,000. Remittance of any amount of foreign exchange outside India in excess of this limit may be allowed only towards meeting incidental expenses in the country of immigration and not for earning points or credits to become eligible for immigration by way of overseas investments in government bonds; land; commercial enterprise; etc.
e. Maintenance of close relatives abroad
A resident individual can remit up-to USD 2,50,000 per FY towards maintenance of close relatives [‘relative’ as defined in Section 2(77) of the Companies Act, 20137] abroad.
f. Business trip
Forex Trading 2022, forex trading platforms: Visits by individuals in connection with attending of an international conference, seminar, specialised training, apprentice training, etc., are treated as business visits. For business trips to foreign countries, resident individuals can avail of foreign exchange up to USD 2,50,000 in a FY irrespective of the number of visits undertaken during the year.
Forex Trading 2022, forex trading platforms:However, if an employee is being deputed by an entity for any of the above and the expenses are borne by the latter, such expenses shall be treated as residual current account transactions outside LRS and may be permitted by the AD without any limit, subject to verifying the bonafides of the transaction.
g. Medical treatment abroad
Forex Trading 2022, forex trading platforms: Authorised Dealers may release foreign exchange up to an amount of USD 2,50,000 or its equivalent per FY without insisting on any estimate from a hospital/doctor. For amount exceeding the above limit, Authorised Dealers may release foreign exchange under general permission based on the estimate from the doctor in India or hospital/ doctor abroad. A person who has fallen sick after proceeding abroad may also be released foreign exchange by an Authorised Dealer (without seeking prior approval of the Reserve Bank of India) for medical treatment outside India.
In addition to the above, an amount up to USD 250,000 per financial year is allowed to a person for accompanying as attendant to a patient going abroad for medical treatment/check-up.
h. Facilities available to students for pursuing their studies abroad.
Forex Trading 2022, forex trading platforms: AD Category I banks and AD Category II, may release foreign exchange up to USD 2,50,000 or its equivalent to resident individuals for studies abroad without insisting on any estimate from the foreign University. However, AD Category I bank and AD Category II may allow remittances (without seeking prior approval of the Reserve Bank of India) exceeding USD 2,50,000 based on the estimate received from the institution abroad.
8. Remittances under the Scheme can be used for purchasing objects of art subject to the provisions of other applicable laws such as the extant Foreign Trade Policy of the Government of India.
9. The Scheme can be used for outward remittance in the form of a DD either in the resident individual’s own name or in the name of beneficiary with whom he intends putting through the permissible transactions at the time of private visit abroad, against self-declaration of the remitter in the format prescribed.
10. Individuals can also open, maintain and hold foreign currency accounts with a bank outside India for making remittances under the Scheme without prior approval of the Reserve Bank. The foreign currency accounts may be used for putting through all transactions connected with or arising from remittances eligible under this Scheme.
11. Banks should not extend any kind of credit facilities to resident individuals to facilitate capital account remittances under the Scheme.
12. The Scheme is not available for remittances for any purpose specifically prohibited under Schedule I or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transaction) Rules, 2000, dated May 3, 2000, as amended from time to time.
13. The Scheme is not available for capital account remittances to countries identified by Financial Action Task Force (FATF) as non-co-operative countries and territories as available on FATF website www.fatf-gafi.org or as notified by the Reserve Bank. 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 is also not permitted.
14. Documentation by the remitter
Forex Trading 2022, forex trading platforms: The individual will have to designate a branch of an AD through which all the remittances under the Scheme will be made.The resident individual seeking to make the remittance should furnish 8Form A2 as at Annex for purchase of foreign exchange under LRS.
15. It is mandatory for the resident individual to provide his/her Permanent Account Number (PAN) to make remittance under the Scheme.9
16. Investor, who has remitted funds under LRS can retain, reinvest the income earned on the investments. At present, the resident individual is not required to repatriate the funds or income generated out of investments made under the Scheme. However, a resident individual who has made overseas direct investment in the equity shares; compulsorily convertible preference shares of a JV/WoS outside India10, within the LRS limit, shall have to comply with the terms and conditions prescribed by the overseas investment guidelines under Notification No. FEMA 263/RB-2013 dated March 5, 2013.
17. Facility to grant loan in rupees to NRI/ PIO close relative under the Scheme
Resident individual is permitted to lend to a Non-resident Indian (NRI)/ Person of Indian Origin (PIO) close relative [‘relative’ as defined in Section 2(77) of the Companies Act, 201311 ] by way of crossed cheque/ electronic transfer subject to the following conditions:
(i) the loan is free of interest and the minimum maturity of the loan is one year;
(ii) Forex Trading 2022, forex trading platforms:the loan amount should be within the overall limit under the Liberalised Remittance Scheme of USD 2,50,000 per financial year available for a resident individual. It would be the responsibility of the resident individual to ensure that the amount of loan granted by him is within the LRS limit and all the remittances made by the resident individual during a given financial year including the loan together have not exceeded the limit prescribed under LRS;
(iii) Forex Trading 2022, forex trading platforms:the loan shall be utilized for meeting the borrower’s personal requirements or for his own business purposes in India.
(iv) Forex Trading 2022, forex trading platforms:the loan shall not be utilized, either singly or in association with other person for any of the activities in which investment by persons resident outside India is prohibited, namely:
- The business of chit fund, or
- Nidhi Company, or
- Agricultural or plantation activities or in real estate business, or construction of farm houses, or
- Trading in Transferable Development Rights (TDRs).
Forex Trading 2022, forex trading platforms:Explanation: For the purpose of item (c) above, real estate business shall not include development of townships, construction of residential/ commercial premises, roads or bridges.
(v) the loan amount should be credited to the NRO a/c of the NRI / PIO. Credit of such loan amount may be treated as an eligible credit to NRO a/c;
(vi) the loan amount shall not be remitted outside India; and
(vii) repayment of loan shall be made by way of inward remittances through normal banking channels or by debit to the Non-resident Ordinary (NRO) / Non-resident External (NRE) / Foreign Currency Non-resident (FCNR) account of the borrower or out of the sale proceeds of the shares or securities or immovable property against which such loan was granted.
18.Forex Trading 2022, forex trading platforms:A resident individual can make a rupee gift to a NRI/PIO who is a relative of the resident individual [‘relative’ as defined in Section 2(77) of the Companies Act, 201312 ] by way of crossed cheque /electronic transfer.
The amount should be credited to the Non-Resident (Ordinary) Rupee Account (NRO) a/c of the NRI / PIO and credit of such gift amount may be treated as an eligible credit to NRO a/c. The gift amount would be within the overall limit of USD 250,000 per FY as permitted under the LRS for a resident individual. It would be the responsibility of the resident donor to ensure that the gift amount is within the LRS limit and all the remittances made by the donor during the financial year including the gift amount have not exceeded the limit prescribed under the LRS.
1. Authorized Persons may carefully study the provisions of the Act / Regulations / Notifications issued under Foreign Exchange Management Act, 1999.
2. Forex Trading 2022, forex trading platforms:The Reserve Bank will not, generally, prescribe the documents which should be verified by the Authorised Persons while releasing foreign exchange for current account transactions. In this connection, attention of authorized persons is drawn to sub-section (5) of Section 10 of the FEMA, 1999 which provides that an authorised person shall require any person desiring to transact in foreign exchange to make such a declaration and to give such information as will reasonably satisfy him that the transaction will not involve and is not designed for the purpose of any contravention or evasion of the provisions of the FEMA or any rule, regulation, notification, direction or order issued there under.
3. With a view to maintaining uniform practices, Authorized Dealers may consider requirements or documents to be obtained by their branches to ensure compliance with provisions of sub-section (5) of section 10 of the Act.
4. Authorised Dealers are also required to keep on record any information / documentation, on the basis of which the transaction was undertaken for verification by the Reserve Bank. In case the applicant refuses to comply with any such requirement or makes unsatisfactory compliance therewith, the Authorised Dealer shall refuse, in writing, to undertake the transaction and shall, if he has reasons to believe that any contravention / evasion is contemplated by the person, report the matter to the Reserve Bank.
5. Reserve Bank of India will not issue any instructions under the FEMA, regarding the procedure to be followed in respect of deduction of tax at source while allowing remittances to the non-residents. It shall be mandatory on the part of Authorised Dealers to comply with the requirement of the tax laws, as applicable.
6. While allowing the facility to resident individuals, Authorised Dealers are required to ensure that “Know Your Customer” guidelines have been implemented in respect of bank accounts. They should also comply with the Anti-Money Laundering Rules in force while allowing the facility.
7. The applicants should have maintained the bank account with the bank for a minimum period of one year prior to the remittances for capital account transactions. If the applicant seeking to make the remittances 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 Authorised Dealers 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.
8. The Authorised Dealer should ensure that the payment is received out of funds belonging to the person seeking to make the remittances, by a cheque drawn on the applicant’s bank account or by debit to his account or by Demand Draft / Pay Order. Authorised Dealer may also accept the payment through credit /debit/prepaid card of the card holder.
9. The 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.
10. AD bank should not extend any kind of credit facilities to resident individuals to facilitate remittances for capital account transactions under the Scheme.
11. Authorised Dealer may keep a record of the countries identified by FATF as non-co-operative countries and territories and accordingly update the list from time to time for necessary action by their branches handling the transactions under the Liberalised Remittance Scheme. For this purpose, they may access the website www.fatf-gafi.org to obtain the latest list of non-co-operative countries notified by FATF.
12. The remittances made under this Scheme will be reported in FETERS13 in the normal course. The Authorised Dealers may also prepare and keep on record dummy Form A2, in respect of remittances less than USD 25,000. In addition, AD banks may be guided by FED Master Direction No. 18/2015-16 dated January 01, 2016 (as updated from time to time) on Reporting under FEMA, 1999 for reporting related instructions under the Scheme.
13. A number of foreign banks operating in India as well as Indian banks have been soliciting (through advertisements) foreign currency deposits (from residents under LRS) [on behalf of overseas mutual funds] or for placing at their overseas branches. These advertisements may not always contain appropriate disclosures to guide potential depositors giving rise to concerns from the point of view of protecting the interest of the resident individuals.
Forex Trading 2022, forex trading platforms: Further, marketing in India of schemes soliciting foreign currency deposits by foreign entities, not having operational presence in India, also raises supervisory concerns. Therefore, all banks, both Indian and foreign, including those not having an operational presence in India, should seek prior approval from RBI for the schemes being marketed by them in India to residents either for soliciting foreign currency deposits for their foreign/overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company. The applications in this regard may be addressed to the Chief General Manager-in-Charge, Department of Banking Regulations, Reserve Bank of India, Central Office, 12th Floor, Fort, Mumbai -400001.
2Omitted as “Application cum Declaration for purchase of foreign exchange under the Liberalised Remittance Scheme of USD 2,50, 000” has since been discontinued vide AP (Dir) Series Circular 50 dated 11.02.16.
7Replaced “Section 6 of the Indian Companies Act, 1956” with “Section 2 (77) of the Companies Act 2013” to align the definition of ‘relative’ with the Companies Act, 2013 as indicated vide AP (DIR) Series Circular No. 32 dated June 19, 2018.
8Inserted vide AP (Dir Series) Circular 50 dated February 11, 2016. Prior to insertion it read as “Form A-2 as at Annex-1 and Application-cum-Declaration for purchase of foreign exchange under LRS as per Annex-2”
9Modified with effect from June 19, 2018 as indicated vide AP (DIR) Series Circular No. 32 dated June 19, 2018. Prior to modification it read as “It is mandatory to have PAN card to make remittances under the Scheme for capital account transactions. However, PAN card need not be insisted upon for remittances made towards permissible current account transactions up to USD 25,000”.
11Replaced “Section 6 of the Indian Companies Act, 1956” with “Section 2 (77) of the Companies Act 2013” to align the definition of ‘relative’ with the Companies Act, 2013 as indicated vide AP (DIR) Series Circular No. 32 dated June 19, 2018.
12Replaced “Section 6 of the Indian Companies Act, 1956” with “Section 2 (77) of the Companies Act 2013” to align the definition of ‘relative’ with the Companies Act, 2013 as indicated vide AP (DIR) Series Circular No. 32 dated June 19, 2018.