## Report on Master Direction: Remittance of Assets
**1. Executive Summary:**
This report analyzes the Reserve Bank of India's (RBI) Master Direction No. 13/2015-16 on Remittance of Assets, updated as of April 28, 2016, based solely on the provided text. The Master Direction governs the remittance of assets outside India by both residents and non-residents, in accordance with the Foreign Exchange Management Act (FEMA), 1999. The report identifies key definitions, outlines permissible remittances, and highlights requirements for authorized dealers (ADs). This updated Master Direction incorporates amendments that include revisions to the definition of Person of Indian Origin (PIO) and provisions for remittances by non-resident widows/widowers. The key finding is the stringent regulatory framework governing asset remittances to prevent misuse and ensure compliance with FEMA.
**2. Introduction:**
This report provides an overview of the RBI's Master Direction on Remittance of Assets based on the provided policy text (RBIFED2015168 FED Master Direction No. 13/2015-16, updated April 28, 2016). The purpose is to inform stakeholders, particularly authorized dealer category I banks and authorized banks, about the regulatory framework governing remittance of assets outside India.
**3. Policy Overview:**
* This Master Direction updates and consolidates instructions on the remittance of assets.
* **Core Objective(s):** As inferred from the text, the core objectives are to:
* Regulate and monitor the outflow of assets from India.
* Ensure compliance with the Foreign Exchange Management Act (FEMA), 1999.
* Provide clear guidelines to Authorised Dealers (ADs) regarding permissible remittances.
**4. Background and Rationale:**
* This is an updated Master Direction incorporating amendments to previous regulations. The rationale for the update appears to be the need to clarify definitions (such as PIO), address specific scenarios (such as remittances by non-resident widows/widowers), and streamline the regulatory framework. The amendments also reflect ongoing efforts to prevent misuse of remittance facilities and ensure that remittances are made from legitimate sources.
**5. Key Provisions / Changes:**
This Master Direction is a consolidation of existing regulations and directions with some key changes/insertions. This section focuses specifically on the *changes* introduced in this updated Master Direction as evident from the provided text.
* **Changes to the Definition of Person of Indian Origin (PIO):** The definition of PIO has been significantly revised. The previous definition was based on holding an Indian passport at any time, or having parents or grandparents who were Indian citizens, or being the spouse of an Indian citizen or a person referred to in (a) or (b). The updated definition narrows the criteria, focusing on individuals who were citizens of India, belonged to territories that became part of India after August 15, 1947, or are descendants of such citizens, excluding citizens of Bangladesh or Pakistan. It also now includes Overseas Citizen of India (OCI) cardholders within the meaning of Section 7A of the Citizenship Act, 1955.
* **Effect:** This change likely aims to provide a more precise and legally robust definition of PIO, potentially impacting eligibility for certain remittance facilities.
* **Remittances by Non-Resident Widows/Widowers:** A new provision has been added allowing ADs to permit remittance of assets by a non-resident widow/widower who has inherited assets from their deceased spouse who was an Indian national resident in India. The remittance should not exceed USD one million per financial year.
* **Effect:** This provides a specific avenue for non-resident widows/widowers to remit inherited assets, subject to a defined limit.
* **Requirement of Undertaking for Remittances from NRO Accounts:** A new provision mandates that when remittances are to be made from balances held in Non-Resident Ordinary (NRO) accounts, the Authorised Dealer must obtain an undertaking from the account holder. This undertaking confirms that the remittance is sought to be made out of the remitter's legitimate receivables in India and not by borrowing or transferring from other NRO accounts. If found otherwise, the account holder would be liable for penal action under FEMA.
* **Effect:** This change adds a layer of scrutiny to remittances from NRO accounts, aiming to prevent the use of borrowed funds or funds transferred from other NRO accounts, thus ensuring that remittances are made from legitimate sources.
Other key provisions of the overall Master Direction include:
* **Permissible Remittances:** Lays down the rules for ADs to allow remittances by individuals (NRIs, PIOs, and other foreign nationals), companies under liquidation, and Indian entities remitting contributions to provident funds for expatriate staff.
* **Remittance Limits:** Specifies a USD 1 million per financial year limit for certain remittances, subject to specific conditions.
* **Documentation Requirements:** Mandates submission of documentary evidence for various types of remittances.
* **RBI Approval:** Outlines situations where prior approval from the RBI is required for remittance of assets.
**6. Target Audience and Stakeholders:**
Based on the provided text, the directly affected audience and stakeholders include:
* Authorised Dealer Category I banks and Authorised banks (ADs)
* Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs)
* Foreign nationals residing in India, particularly those who have retired or inherited assets.
* Indian companies under liquidation.
* Indian entities employing expatriate staff.
* Non-resident widows/widowers inheriting assets from deceased Indian spouses.
**7. Implementation Aspects (Inferred):**
* **Responsible Agency/Bodies:** The Reserve Bank of India (RBI) is the primary regulatory body. Authorised Dealers (ADs) are responsible for implementing the regulations and ensuring compliance.
* **Procedures:** ADs are required to obtain necessary documentation from remitters, verify the legitimacy of the remittance, and adhere to the specified limits. The undertaking requirement for NRO account remittances adds a new procedural step.
* **Timelines:** The text mentions a "financial year" as the reference period for remittance limits, suggesting an annual monitoring cycle.
**8. Expected Outcomes / Impact of Changes:**
* The revised definition of PIO may lead to changes in eligibility for certain remittance facilities, requiring ADs to re-evaluate the status of their customers.
* The specific provision for remittances by non-resident widows/widowers is expected to facilitate legitimate asset transfers in such cases, subject to the stipulated conditions.
* The undertaking requirement for NRO account remittances is expected to enhance scrutiny and reduce the potential for misuse of NRO accounts for illegitimate transfers. The expected outcome of these changes is a more robust and transparent remittance process, aligned with the objectives of FEMA.
**9. Conclusion:**
The RBI's Master Direction on Remittance of Assets, updated as of April 28, 2016, provides a comprehensive regulatory framework for asset remittances from India. The amendments introduced, particularly regarding the definition of PIO, remittances by non-resident widows/widowers, and the undertaking requirement for NRO remittances, aim to strengthen the regulatory oversight, prevent misuse, and ensure compliance with FEMA. The updated Master Direction is of critical importance to Authorised Dealers and individuals/entities involved in cross-border asset transfers.
Key Entities Referenced
RBIFED2015168: Identifier of the document.
FED Master Direction No. 13201516: Title of the document relating to Foreign Exchange Department Master Direction.
January 1, 2016: Date of issue of the Master Direction.
April 28, 2016: Date of update of the Master Direction.
All Authorised Dealer Category I banks and Authorised banks: Addressees of the Master Direction.
Master Direction Remittance of Assets: Subject of the Master Direction.
section 47 of the Foreign Exchange Management Act, 1999: Legal provision governing remittance of assets.
FEMA: Foreign Exchange Management Act, 1999.
Notification No. FEMA 13R2016RB: Notification related to Foreign Exchange Management Act.
April 1, 2016: Date of the FEMA 13R2016RB Notification.
Reserve Bank of India: The central bank of India.
Section 11 of the Foreign Exchange Management Act FEMA, 1999: Section of FEMA related to directions to Authorised Persons.
Authorised Persons: Entities authorized to deal in foreign exchange.
Master Direction No. 18: Master Direction on reporting.
A K Pandey: Chief General Manager.
FEM Remittance of Assets Regulations, 2000: Regulations governing remittance of assets which were repealed.
FEM Remittance of Assets Regulations, 2016: Regulations governing remittance of assets.
Notification No. FEMA 132000RB: Notification related to Foreign Exchange Management Act.
May 3, 2000: Date of the FEMA 132000RB Notification.
NonResident Indian: A person resident outside India who is a citizen of India (NRI).
Person of Indian Origin: A person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government (PIO).
Bangladesh: Country.
Pakistan: Country.
Constitution of India: The supreme law of India.
Citizenship Act, 1955: An Act of the Parliament of India that consolidates and amends the law relating to Indian citizenship.
Overseas Citizen of India: Cardholder within the meaning of Section 7A of the Citizenship Act, 1955.
Section 7A of the Citizenship Act, 1955: Section defining Overseas Citizen of India.
Authorised Dealer: A person authorised as an authorised dealer under subsection 1 of section 10 of the Act (AD).
subsection 1 of section 10 of the Act: Legal provision related to authorized dealer.
Expatriate staff: A person whose provident superannuation pension fund is maintained outside India by his principal employer outside India.
Nepal: Country.
Bhutan: Country.
NRO: Non-resident ordinary accounts
Companies Act, 2013: Act governing companies in India.
Companies Act, 1956: Act governing companies in India.
Registrar of Companies: Government office that registers companies.
RBI: Reserve Bank of India.
USD 1,000,000: US Dollar One million.
6FEMA 13R2016RB: Notification related to Foreign Exchange Management Act.
7A.P.DIR Series Circular No. 64201516: A.P.DIR series circular.
113R: Circular number.
6 FEMA 132000RB: Notification related to Foreign Exchange Management Act.
A.P.DIR Series Circular No. 64201516 113R: Circular related to remittance of assets.
RBI/FED/2015-16/8
FED Master Direction No. 13/2015-16 January 1, 2016
(Updated as on April 28, 2016)
To,
All Authorised Dealer Category – I banks and Authorised banks
Madam / Dear Sir,
Master Direction - Remittance of Assets
Remittance outside India by a person whether resident in India or not, of assets in India, are
governed by section 47 of the Foreign Exchange Management Act, 1999 (FEMA) read with
1Notification No. FEMA 13(R)/2016-RB dated April 1, 2016. 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. Instructions issued on remittance of assets have been compiled in this Master Direction.
The list of underlying circulars/ notifications which form the basis of this Master Direction is
furnished in the Appendix. Reporting instructions can be found in Master Directions on
reporting (Master Direction No. 18 dated January 01, 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.
Yours faithfully,
(A K Pandey)
Chief General Manager
1
FEM (Remittance of Assets) Regulations, 2000 was repealed and replaced by FEM (Remittance of Assets) Regulations, 2016 with effect
from April 1, 2016.2Master Direction 13/2015-16 - Remittance of assets
1. Introduction
The Regulations for remittance outside India of assets in India by a person, whether
resident in India or not, are laid down in the Notification No. FEMA 13/2000-RB
dated May 3, 2000, as amended from time to time.
2. Definitions
Some key terms used in the regulations are given below:
2.1 'Remittance of assets' means remittance outside India of funds in a deposit with
a bank/ firm/ company, provident fund balance or superannuation benefits, amount
of claim or maturity proceeds of insurance policy, sale proceeds of shares,
securities, immovable property or any other asset held in India in accordance with
the provisions of the Foreign Exchange Management Act, 1999 (FEMA) or rules/
regulations made under FEMA.
2.2 ‘Non-Resident Indian’ (NRI) means a person resident outside India who is a
citizen of India.
2.3 3A ‘Person of Indian Origin (PIO)’ is a person resident outside India who is a
citizen of any country other than Bangladesh or Pakistan or such other country as
may be specified by the Central Government, satisfying the following conditions:
a) Who was a citizen of India by virtue of the Constitution of India or the
Citizenship Act, 1955 (57 of 1955); or
b) Who belonged to a territory that became part of India after the 15th day of
August, 1947; or
c) Who is a child or a grandchild or a great grandchild of a citizen of India or of a
person referred to in clause (a) or (b); or
d) Who is a spouse of foreign origin of a citizen of India or spouse of foreign
origin of a person referred to in clause (a) or (b) or (c)
Explanation: PIO will include an ‘Overseas Citizen of India’ cardholder within the
meaning of Section 7(A) of the Citizenship Act, 1955.
2
Updated up to April 28, 2016 (cf. AP (DIR Series) circular No 64/2015-16/[(1)/13(R)] dated April 28, 2016. The Original Master Direction
No. 12/2015-16 was issued on January 1, 2016
3 Inserted vide FEM (Remittance of Assets) Regulations, 2016 dated April 1, 2016 and A.P.(DIR Series) Circular No. 64/2015-16 [(1)/13(R)]
dated 28.04.2016. Prior to insertion it read as “Person of Indian Origin’ (PIO) means a citizen of any country other than Bangladesh or
Pakistan who had (a) at any time held Indian passport or (b) he or either of his parents or any of his grandparents was a citizen of India by
virtue of the Constitution of India or the Citizenship Act, 1955; or (c) the person is a spouse of an Indian citizen or a person referred to in
(a) or (b).”
12.4 ‘Authorised Dealer’ (AD) means a person authorised as an authorised dealer
under subsection (1) of section 10 of the Act.
2.5 'Expatriate staff' is a person whose provident/ superannuation/ pension fund is
maintained outside India by his principal employer outside India.
2.6 ‘Not permanently resident' is a person resident in India for employment of a
specified duration or for a specific job/ assignment, the duration of which is not more
than three years.
3. Remittance of assets permitted under the regulations
3.1 Remittances by individuals not being NRIs/ PIOs
ADs may allow remittance of assets by a foreign national where:
(i) the person has retired from employment in India;
(ii) the person has inherited from a person referred to in section 6(5) of the Act;
(iii) the person is a non-resident widow/4widower and has inherited assets from
her/his deceased spouse who was an Indian national resident in India.
The remittance should not exceed USD one million per financial year. This limit,
however, will not cover sale proceeds of assets held on repatriation basis. In case
the remittance is made in more than one instalment, the remittance of all instalments
should be made through the same AD on submission of documentary evidence.
(iv) the remittance is in respect of balances held in a bank account by a foreign
student who has completed his/ her studies, provided such balance
represents proceeds of remittances received from abroad through normal
banking channels or rupee proceeds of foreign exchange brought by such
person and sold to an authorised dealer or out of stipend/ scholarship
received from the Government or any organisation in India.
These facilities are not available for citizens of Nepal or Bhutan or a PIO.
3.2 Remittances by NRIs/ PIOs
ADs may allow NRIs/ PIOs, on submission of documentary evidence, to remit up to
USD one million, per financial year:
(i) out of balances in their non-resident (ordinary) (NRO) accounts/ sale
proceeds of assets/ assets acquired in India by way of inheritance/ legacy;
4
Inserted vide FEM (Remittance of Assets), Regulations 2016 dated April 1, 2016 and A.P.(DIR Series) Circular No. 64/2015-16 [(1)/13(R)]
dated 28.04.2016.
2(ii) in respect of assets acquired under a deed of settlement made by either of
his/ her parents or a relative as defined in Companies Act, 2013. The
settlement should take effect on the death of the settler;
(iii) in case settlement is done without retaining any life interest in the property
i.e. during the lifetime of the owner/ parent, it would tantamount to regular
transfer by way of gift and the remittance of sale proceeds of such property
would be guided by the extant instructions on remittance of balance in the
NRO account;
In case the remittance is made in more than one instalment, the remittance of all
instalments should be made through the same AD. 5 Where the remittance is to be
made from the balances held in the NRO account, the Authorised Dealer should
obtain an undertaking from the account holder stating that “the said remittance is
sought to be made out of the remitter’s balances held in the account arising from his/
her legitimate receivables in India and not by borrowing from any other person or a
transfer from any other NRO account and if such is found to be the case, the account
holder will render himself/ herself liable for penal action under FEMA.”
3.3 Remittances by companies/ entities
3.3.1 ADs may allow remittances by Indian companies under liquidation on directions
issued by a Court in India/ orders issued by official liquidator in case of voluntary
winding up on submission of:
(a) Auditor's certificate confirming that all liabilities in India have been either fully
paid or adequately provided for.
(b) Auditor's certificate to the effect that the winding up is in accordance with the
provisions of the Companies Act, 1956.
(c) In case of winding up otherwise than by a court, an auditor's certificate to the
effect that there are no legal proceedings pending in any court in India
against the applicant or the company under liquidation and there is no legal
impediment in permitting the remittance.
3.3.2 ADs may also allow Indian entities to remit their contribution towards the
provident fund/ superannuation/ pension fund in respect of their expatriate staff
resident but “not permanently resident” in India.
5
Inserted vide FEM (Remittance of Assets) Regulations, 2016 dated April 1, 2016 and A.P.(DIR Series) Circular No. 64/2015-16 [(1)/13(R)]
dated 28.04.2016.
33.4 Remittances/ winding up proceeds of branch/ office
ADs may permit remittance of assets on closure or remittance of winding up
proceeds of branch office/ liaison office (other than project office) on submission of
the following documents:
(i) A copy of the Reserve Bank's permission for establishing the branch/ office in
India.
(ii) Auditor’s certificate:
(a) indicating the manner in which the remittable amount has been arrived
and supported by a statement of assets and liabilities of the applicant,
and indicating the manner of disposal of assets;
(b) confirming that all liabilities in India including arrears of gratuity and
other benefits to the employees etc., of the branch/ office have been
either fully met or adequately provided for;
(c) confirming that no income accruing from sources outside India
(including proceeds of exports) has remained un-repatriated to India;
(d) confirming that the branch/office has complied with all regulatory
requirements stipulated by the Reserve Bank of India from time to time
regarding functioning of such offices in India;
(iii) a confirmation from the applicant that no legal proceedings are pending in
any Court in India and there is no legal impediment to the remittance; and
(iv) a report from the Registrar of Companies regarding compliance with the
provisions of the Companies Act, 2013, in case of winding up of the office in
India.
4. Remittance of assets requiring RBI approval
4.1 Prior approval of the Reserve Bank is necessary for remittance of assets where:
a) Remittance is in excess of USD 1,000,000 (US Dollar One million only) per
financial year (i) on account of legacy, bequest or inheritance to a citizen of
foreign state, resident outside India; (ii) by NRIs/ PIOs out of the balances
held in NRO accounts/ sale proceeds of assets/ the assets acquired by way
of inheritance/ legacy.
b) Hardship will be caused to a person if remittance from India is not made to
such a person.
44.2 Remittance of funds from the sale of assets in India held by a person, whether
resident in or outside India, not covered under the directions stipulated above will
require approval of the Reserve Bank.
5. Income-tax clearance
The remittances are subject to payment of applicable taxes in India. Reserve Bank
of India will not issue any instructions under FEMA clarifying tax issues. It shall be
mandatory on the part of Authorised Dealers to comply with the requirement of tax
laws, as applicable.
5APPENDIX
List of notifications/ circulars which have been consolidated in this Master
Direction
Sl No Notification/ Circular Date
1 6FEMA 13(R)/2016-RB April 1, 2016
2 7A.P.(DIR Series) Circular No. 64/2015-16 April 28, 2016
[(1)/13(R)]
6
FEMA 13/2000-RB dated May 3, 2000 and all the amendments thereto repealed and replaced by FEMA 13(R)/2016-RB dated April 1, 2016
7 All the A.P.(Dir Series) Circulars issued in respect of Remittance of Assets have been replaced by A.P.(DIR Series) Circular No. 64/2015-16
[(1)/13(R)] dated April 28, 2016.
6