RBI/2006-2007/368
A. P. (DIR Series) Circular No. 47 April
30, 2007 To,
All
Category - I Authorised Dealer Banks Madam
/ Sir, Foreign
Exchange Management Act (FEMA), 1999 – Current Account Transactions – Reimbursement
of pre-incorporation expenses - Liberalisation Attention
of Authorised Dealer Category - I (AD Category - I) banks is invited to Foreign
Exchange Management (Current Account Transactions) Rules, 2000 notified vide Notification
No. G.S.R.381(E) dated 4th May 2000. In terms
of Rule 5 of the Foreign Exchange Management (Current Account Transactions) Rules,
2000 (the Rules), prior approval of the Reserve Bank is required for drawing foreign
exchange for remittance exceeding USD 100,000 by an entity in India by way of
reimbursement of pre-incorporation expenses [item 17 of Schedule III of the Rules].
2.
As announced in the Annual
Policy Statement for the year 2007-08 (para 146 (i) iii)) and with a view
to liberalise the procedure further and providing greater flexibility, it has
been decided to allow remittance of foreign exchange towards reimbursement of
pre-incorporation expenses incurred in India up to 5 per cent of the investment
brought into India or USD 100,000, whichever is higher, on the basis of certification
from statutory auditors. Accordingly, AD Category - I banks may permit drawal
of foreign exchange by an entity in India by way of reimbursement of pre-incorporation
expenses up to the limit mentioned above, on the basis of certification from statutory
auditors. 3.
Necessary amendments to Foreign Exchange Management (Current Account Transactions)
Rules, 2000 are being notified separately. 4.
AD Category - I banks may bring the contents of this circular to the notice of
their constituents and customers concerned. 5.
The directions contained in this circular have been issued under Section 10 (4)
and 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without
prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully, (Salim
Gangadharan)
Chief General Manager |