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Overseas Investment by Person Resident in India(PRII) [Section 6(4)] - FEMA Ready Reckoner - FEMAExtract Overseas Investment by Person Resident in India(PRII) General permission to resident to hold, own, transfer or invest in foreign currency, foreign security or any immovable property abroad: A person resident in India (PRII), [Section 6(4)] 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. Analysis of [Section 6(4)] In general terms of this general permission, a person resident in India is allowed to - hold; own; transfer; invest in; foreign currency [defined in section 2(m) ] foreign security [defined in section 2(o) ] immovable property 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.. Reserve Bank has clarified that the following transaction are covered under section 6(4) of FEMA Act,1999 [ A.P. (DIR Series) Circular No. 90, dated 09-01-2014 ] Foreign currency accounts opened and maintained by such a person when he was resident outside India; Income earned through employment or business or vocation outside India taken up or commenced while such person was resident outside India, or from investments made while such person was resident outside India, or from gift or inheritance received while such a person was resident outside India; Foreign exchange including any income arising therefrom, and conversion or replacement or accrual to the same, held outside India by a person resident in India acquired by way of inheritance from a person resident outside India. A person resident in India may freely utilise all their eligible assets abroad as well as income on such assets or sale proceeds thereof received after their return to India for making any payments or to make any fresh investments abroad without approval of Reserve Bank, provided the cost of such investments and/ or any subsequent payments received therefor are met exclusively out of funds forming part of eligible assets held by them and the transaction is not in contravention to extant FEMA provisions. in case of Issue of Rights issue and bonus shares by any foreign entity [ Rule 7 of FEM (Overseas Investment) Rules, 2022 ] Any person resident in India (PRII) who has acquired and continues to hold equity capital of any foreign entity in accordance with the provisions of the Act or the rules or regulations made thereunder May invest in the equity capital issued by such entity as a rights issue; or may be granted bonus shares subject to the terms and conditions under these rules. The person resident in India acquiring the rights issue may renounce to in favour of a person resident in India (PRII) or a person resident outside India (PROI). Prohibition on investment outside India [As per Rule 8 of FEM (Overseas Investment) Rules, 2022 ] No person resident in India (PRII) shall make or transfer any investment or financial commitment outside India. Overseas Investment by Person Resident in India [ Rule 9 of FEM (Overseas Investment) Rules, 2022 ] Any investment made outside India by a person resident in India shall be made in a foreign entity engaged in a bona fide business activity , directly or through step down subsidiary or the special-purpose vehicle, subject to the limits and the conditions laid down in these rules and the said regulations. bonafide business activity shall mean any business activity permissible under any law in force in India and the host country or host jurisdiction, as the case may be. Structure of subsidiary Foreign Entity the structure of such subsidiary or step down subsidiary of the foreign entity shall comply with the structural requirements of a foreign entity. Prior approval from Central Government Overseas Investment or transfer of such investment including swap of securities in a foreign entity formed, registered or incorporated in Pakistan or in any other jurisdiction as may be advised by the Central Government from time to time shall require prior approval of the Central Government. Exception:- Notwithstanding anything contained in these rules or Foreign Exchange Management (Overseas Investment) Regulations 2022 Special approval by the Central government :- the Central Government may, on an application made to it through the Reserve Bank, permit financial commitment in strategic sectors or geographies, above the limits laid down in these rules and subject to such terms and conditions as it considers necessary. Special approval by RBI :- the Reserve Bank may, on an application made to it through the designated AD bank and for sufficient reasons, permit a person resident in India to make or transfer any investment or financial commitment outside India subject to such conditions as may be laid down by it. Exception:- Overseas Investment by a person resident in India (PRII) shall not be made in a foreign entity located in a country or jurisdiction as may be decided by the Central Government from time to time. Consultation With central Government :- The Reserve Bank, if it considers necessary may, in consultation with the Central Government, Stipulate the ceiling for the aggregate outflows during a financial year on account of financial commitment or Overseas Portfolio Investment; Stipulate the ceiling beyond which the amount of financial commitment by a person resident in India in a financial year shall require its prior approval. Requirement of No Objection Certificate [ Rule 10 of FEM (Overseas Investment) Rules, 2022 ] Any person resident in India (PRII) who , has an account appearing as a non-performing asset ; or is classified as a wilful defaulter by any bank ; or is under investigation by a financial service regulator or by investigative agencies in India, namely, the Central Bureau of Investigation or Directorate of Enforcement or Serious Frauds Investigation Office, shall, before making any financial commitment or undertaking disinvestment under these rules or the Foreign Exchange Management (Overseas Investment) Regulations, 2022, obtain a No Objection Certificate from the lender bank or regulatory body or investigative agency by making an application in writing to such bank or regulatory body or investigative agency concerned Fails to issue no objection certificate where the lender bank or regulatory body or investigative agency concerned fails to furnish the certificate within sixty days from the date of receipt of such application, it may be presumed that there was no objection to the proposed transaction. Addressing to no objection Certificate No objection Certificate Addressing :- The No Objection Certificate issued under sub-rule (1) shall be addressed by the lender bank or regulatory body or investigative agency concerned to the designated AD bank with an endorsement to the applicant.
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