9911796707
TMI BlogGuidelines for Compounding of Contraventions under FEMA, 1999”, based on the latest updates (Compounding Rules, 2024)X X X X Extracts X X X X X X X X Extracts X X X X ..... Guidelines for Compounding of Contraventions under FEMA, 1999”, based on the latest updates (Compounding Rules, 2024) X X X X Extracts X X X X X X X X Extracts X X X X ..... amount), and settle the matter without undergoing lengthy legal proceedings. 🔹 Legal Authority * Governed by Section 15 of FEMA, 1999. * Detailed in the Foreign Exchange (Compounding Proceedings) Rules, 2024. 🔹 Who can compound? The Reserve Bank of India (RBI) is empowered to compound certain types of FEMA violations-especially related to: * Foreign Direct Investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t (FDI) * Overseas Direct Investment (ODI) * External Commercial Borrowings (ECBs) * Liaison/Branch Offices 🔹 What kinds of violations can be compounded? Only violations that are: * Not involving money laundering, terror financing, or national security * Not under Section 3(a) of FEMA (dealing with illegal forex dealings) * Not already adjudicated or penalized * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Not repeated within 3 years of a similar past contravention 🔹 How to Apply for Compounding? * Submit application physically or via PRAVAAH portal * Pay a fee of Rs.10,000 + GST * Provide required documents like: * Details of the transaction (Annexure II) * Undertaking regarding investigation status (Annexure III) * Proof of fee payment * Applications go to: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * RBI Regional Office (based on company location) * FED Cell, New Delhi (for LO/BO/PO, immovable property cases) * CEFA Cell, Mumbai (other cases) 🔹 When Compounding is Not Allowed * Similar contravention already compounded in last 3 years * Investigation/adjudication not completed * Serious offenses (money laundering, terror links, sovereignty issues) * Amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s involved are not quantifiable * Violations under Section 3(a) 🔹 Compounding Process * RBI reviews the application and documents. * May call for further info or a personal hearing (optional). * Factors considered for penalty: * Unfair gains made * Government losses * Nature of the violation * Intent and history of the violator * Penalty = Fixed + Varia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble depending on type, amount, and duration of violation (details given in a compounding matrix). 🔹 Payment of Compounding Amount * Pay within 15 days of receiving the compounding order. * Mode: Demand Draft / NEFT / RTGS / Online * No withdrawal or appeal after payment. * A certificate is issued upon successful payment. 🔹 Examples of Compounding Amounts (as per m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atrix) Type of Contravention Example Fine Delayed FDI Reporting Rs.10,000 fixed + Rs.1,000 per year (if < Rs.10L) Non-allotment of shares after FDI 0.3-0.75% of amount involved Delay in filing Annual Return (APR, FLA) Rs.10,000 per return/year Guarantee without approval Fixed Rs.5L + 0.05-0.075% of amount 🔹 Important Timelines * 180 days: RBI must issue compounding order wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin this from receipt of application.
*
15 days: To pay the compounded amount.
*
Application may be returned if incomplete or fee unpaid.
🔹 Final Notes
*
Compounding is voluntary.
*
It is meant to reduce litigation, promote compliance, and ease of doing business.
*
Serious violations are still dealt with under criminal or adjudication procedures. X X X X Extracts X X X X X X X X Extracts X X X X ..... for knowledge sharing by authors, experts, professionals ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
