In the age of globalization, cross-border business transactions are common in daily business activities. However, this increasing number of such cross-border transactions has given rise to illegal transactions and money-laundering activities that are further applied towards funding terrorist activities, drugs, and human trafficking. Therefore, for the regulation of cross-border transactions and facilitating cross-border transactions, external payments, and maintenance of the foreign exchange market in India, the Government of India introduced the Foreign Exchange Management Act, 1999.

The FEMA authorizes the central government to enforce restrictions or oversee and monitoring of certain cross–border payments such as payments made/received to a person by any person outside Dehradun, Uttarakhand, forex, investments in foreign securities, etc. are some transactions which could be completed only after obtaining approval by the Reserve Bank of India under permitted route.

Therefore, the FEMA Act 1999 applies to-

  • Foreign exchange.
  • Foreign security.
  • Export of any goods or services or both from Dehradun, Uttarakhand to a foreign country;
  • Import of any goods or services or both from Dehradun, Uttarakhand to a foreign country;
  • Dealing in ‘Securities’ as defined under the Public Debt Act 1994.
  • Purchase, sale, and exchange of goods or services, etc.
  • Any Banking, financial, insurance, or related services;
  • Any overseas company held by an NRI (Non-Resident Indian) and holds the ownership either 60% or more.
  • Any citizen of Dehradun, Uttarakhand, either residing in Dehradun, Uttarakhand or outside in Dehradun, Uttarakhand;

Further, all the foreign transactions have been categorized into two types as provided below-

  1. Capital Account Transactions- As defined under section 2(e) of the FEMA Act 1999, capital account transactions are such transactions that tend to alter either the assets or liabilities or both, including contingent liabilities of either the person resident in Dehradun, Uttarakhand or outside Dehradun, Uttarakhand and includes such other transactions as provided under section 6(3) of the Act.
  2. Current account transaction- As defined under section 2(gg) means a transaction other than a capital account transaction and includes transactions such as-
  • Due payments in relation to either foreign trade, business services, or the short term credit facilities in the ordinary course of business;
  • Amounts due as interest on loans and as net income from investments,
  • Payment Transfers for various expenses such as living expenses of parents, spouses, and children residing abroad, and
  • Payments expended in relation to the foreign travel, education, and medical care of parents, spouses, and children.

Generally, the current account transactions are the transactions that are allowed unless explicitly prohibited under FEMA provisions. On the other hand, capital account transactions are such transactions that are not permitted unless explicitly permitted under the FEMA provisions.

FEMA RegistrationProcess of FEMA Registration in Dehradun, Uttarakhand

Placed at the foothills of majestic Himalayas, Uttarakhand is known for its unsullied beauty and spectacular locale. Home to verdant valleys, snow covered peaks, untouched forests, gushing rivers and presence of religious places, this place has been a paradise for the tourist ever since. Moreover, it enjoys the charm of being the most visited hill stations of the country and has been successfully able to attract 34.36 Mn domestic and 0.13 Mn foreign tourist for the year 2017 which has been iconic till date. Off late the state has emerged into a foremost terminus for manufacturing, particularly in the field of Pharmaceuticals and Automobiles due to the conducive policies of the government, business friendly environment and streamlined regulations.

Incredibly this zone is organic where four Agri Export Zones (AEZ) have been acknowledged by the Government of India for herbs, Basmati rice, litchi, herbs, medicinal plants and floriculture. The Ministry of Food Processing Industries (MoFPI) has set up a Mega Food Park in Haridwar and another park on similar lines is coming up at Udham Singh Nagar District. This state tops the ladder around the country in the production of Plum, Pear, Apricot and Peach. GB Pant Agricultural University, India’s 1st agricultural University is located in the state. Presence of Wild-life Sanctuaries and the entire zone inhibited by friendly and peaceful people provide unique life to the citizens out there.

With a dense network of rivers this state is being developed as “Energy State” to tap the Hydro-electric potential of the region. Total potential of power generation of the state is 25,000 MW, 76.85% is owned by the state utilities, with an aggregate installed capacity of 1,876.89 MW. Furthermore, the region is working towards an ambitious target to achieve 50% of its total energy requirements by renewable resources. The state possesses 3rd highest potential in terms of Hydro Power.

The buoyant growth prospects of the state are due to various perks offered to the establishments set up here. It offers highly competitive prices for World Class Industrial Estates, highly Skilled Manpower, Low-cost power supply, Nearness to the National Capital Region, Clean Water and a vast customer base, thus providing every feasible opportunity for industries to flourish. The state has opened doors for the tourism sector also, with 39 million tourist arriving in 2020. Uttarakhand has consistently been able to Rank No. 1 among other states of the country, for the Ease of Doing Business by DPIIT. Out of the 20 major states the States Investment Promotion Agency (IPA) has been ranked as No. 1 also Uttarakhand is the Top Performer in the export preparedness index 2020 under Himalayan states category.

Superior industrial ranges are developed by the State Infrastructure and Industrial Development Corporation Uttarakhand Ltd (SIIDCUL). The region is unfailingly been able to maintain Compound Annual Growth Rate (CAGR) of 10.34% amid 2011-12 to 2018-19 which is primarily due to the improving manufacturing sector of the region, which is above 38% of the states GSDP. The efficient Relationship managers have been able to successfully guide investors to the investment cycle of the state and provide appropriate funding for the upcoming projects.

Investment opportunities in Uttarakhand value more than $619.98 bn, comprising of a total of 507 projects out of which 2 are private and 505 are Government owned projects, with 109 promoters involved, spread across 15 districts of the state, which makes Uttarakhand a paradise for developmental projects in the commercial segment. Prestigious Government schemes are also running here successfully like Pradhan Mantri Awaas Yojana Gramin which values about $59.41 bn, Pradahan Mantri gram Sadak Yojana Project costs a whooping amount of $50.25 bn, Solar Power Project of the valuation of $63.59 bn and Wind Power Project worth $56.49 bn.

For the purposes of FEMA registration, apart from an individual following legal entity shall be required to get registration and follow FEMA compliances, as required from time to time-

  • A company incorporated within the provisions of the Companies Act, 2013
  • A Limited Liability Partnership (LLP) registered as per the provisions of the LLP Act 2008;
  • A legal entity recognized as a start-up that fulfills the criteria prescribed for recognition of start-up under the DPIIT Scheme under the Ministry of Commerce and Industry, Government of Dehradun, Uttarakhand.

Therefore, the RBI along with the Govt. of Dehradun, Uttarakhand launched the FIRMS portal intending to simplify the foreign investment reporting under one master form under Single Master Form (SMF) through which the legal entity can report FEMA compliances and can complete foreign investment reporting, without having to acquire a digital signature certificate of the authorized signatory of the business entity. Thus, The Foreign Investment Reporting and Management System (FIRMS) is a one-stop-shop for various reporting compliances under the provisions of FEMA and is available on a 24*7 basis.

Documents Required for FEMA registrationDocuments Required for FEMA registration in Dehradun, Uttarakhand

  • Details of the Business Units;
  • Proof of registered address of the main office as well as correspondence address;
  • Bank Details of the business unit including the IFSC code;
  • Unique CIN/LLPIN of the Business entity;
  • PAN number of the business entity;
  • Authority letter-Attachment as specified under FIRMS system.
  • Details related to the foreign investment in the entity must be prepared.

Process of FEMA Registration in Dehradun, Uttarakhand

  • Go to the FIRMS online portal by accessing the website (https://firms.rbi.org.in)
  • On the online portal, select the Registration form for “New Business user” registration (Business user is the applicant authorized by the business entity for reporting transaction through FIRMS portal and shall be applicable concerning one entity only)
  • Fill up the form with basic details such as business user such as name, last name, business user address details, bank details, etc.
  • After filling all the details, submit the form and in case of any discrepancy, rectify errors and submit the application carefully. A message stating ‘Record Saved Successfully’ will be displayed on the box.
  • Next the Business user will be verified by the Authorised Dealer (AD) (a bank which has been specifically authorized for dealing in foreign exchange or foreign securities under FEMA act 1999 by the RBI)bank through its e-KYC procedure and the approval/rejection will be informed to the Business user through the provided e-mail address.
  • On getting approval of FEMA registration by the RBI, the applicant shall be required to visit again the FEMA portal and change the password. After logging in with the new password, the applicant will be able to go to his/her user workspace and fill out forms accordingly.

Annual Compliances under FEMA

  • Annual Return under FEMA

Every Dehradun, Uttarakhand company that has made a Foreign Direct Investment (FDI) in the previous year and the current year, must submit an annual return providing details of the foreign liabilities and assets in the annual return. Such annual return must submit the annual return except in the year in which no investment is made by the company.

  • Annual Performance Report

Overseas Direct Investment is investments made either through contribution to the capital or subscription to the memorandum of a foreign company through direct purchase of existing shares of a foreign entity in the open market or private placement or the stock exchange but does not include Portfolio.

Every resident Dehradun, Uttarakhand person who has made an Overseas Direct Investment (ODI) in the previous year and the current year, has to submit an annual performance report in Form ODI Part II to the concerned AD (Authorised Dealer) bank either on or before 31st December every year, prescribing details of any investments made in any Joint Venture or Wholly Owned Subsidiaries outside Dehradun, Uttarakhand.

  • External Commercial Borrowings (ECB)

ECBs are the commercial loans raised by the eligible person’s residents of a country that are from non-resident legal entities (foreign companies) under the prescribed rules and regulations. Therefore, every resident person in Dehradun, Uttarakhand must report all ECB transactions to the RBI through his authorized dealer bank in the form ‘ECB 2 Return’. This form is a simplified return which allows the person to disclose details like-

    • Total outstanding principal ECB amount and the currency;
    • Notional value and percentage of outstanding ECB; and
    • Annualized percentage cost of the financial hedge(s) for ECB
  • Foreign Direct Investment (FDI ) Reporting for Various Purposes

The latest FEMA (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 notified by the RBI on October 17, 2019, prescribes for the various forms required to be filled for various purposes within provided timelines for the FDI reporting on the FIRMS portal-

Form Name Purpose Time-line
i. FCGPR (Foreign Currency-Gross Provisional Return) Form For an Dehradun, Uttarakhand company that intends to issue equity instruments to a person residing outside Dehradun, Uttarakhand; To be filed within a period of 30 days from the date of issue of the equity instruments by the Dehradun, Uttarakhand Company;
ii. FCTRS (Form Foreign Currency-Transfer of Shares) Form Where any resident transferor/transferee or the person resident outside Dehradun, Uttarakhand holds equity instruments on a non-repatriable basis; To be filed either within

· 60 days from the transfer of equity instruments; or

· receipt/remittance of funds, whichever is former;
iii. LLP(I) Form Where an LLP intends to receive consideration for the capital contribution made for an entity outside Dehradun, Uttarakhand; To be filed within 30 days from the date of receipt of consideration.
iv. LLP(II) Form Where any resident transferor/transferee intends to receive capital contribution either from a resident or non-resident outside Dehradun, Uttarakhand or vice-versa; To be filed within 60 days of the receipt of the amount of consideration;
v. CN Form Where any Dehradun, Uttarakhand start-up wishes to issue convertible notes to a person resident outside Dehradun, Uttarakhand; To be filed within 30 days from the date of issuance of the convertible notes;
vi. DRR Form The domestic custodian issuing/transferring the depository receipts, in accordance with the Depository Receipt Scheme, 2014 should report in DRR Form Within a period of 30 days of issuance/transfer of depository receipts.
vii. ESOP Form Where an Dehradun, Uttarakhand company wishes to issue stock options to a person resident outside Dehradun, Uttarakhand who are either-

· employees/directors of the company; or

· employees/directors of its holding company/joint venture; or

· wholly-owned overseas subsidiary/subsidiaries

 To be filed within 30 days from the date of issuance of employees’ stock option.
viii. DI Form Where an Dehradun, Uttarakhand business entity or investment vehicle has invested in another Dehradun, Uttarakhand business entity, such investment will be called foreign indirect investment; To be filed within 30 days of the allotment of equity instruments.
ix. INVI Form An investment vehicle that has issued securities to a person resident outside Dehradun, Uttarakhand; To be filed within 30 days from the date of issuance of units.

Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 also provide that any delay in reporting foreign investments would attract a penalty known as late submission fees (LSF). Only after receipt of LSF, the registration of the legal entity will be approved by the RBI.

Benefits of FEMA Registration in Dehradun, Uttarakhand

  • Compliance with Legal Procedures-Under s. 3 of the FEMA 1999, it is compulsory for each person to obtain registration by the person who is-
    • To enter into any arrangement related to foreign exchange or foreign security to an unauthorized person;
    • To make any payment to or for making payment of loans to a person resident outside Dehradun, Uttarakhand in any manner;
    • To receive any payment through orders by a person who is not authorized on behalf of a person resident outside Dehradun, Uttarakhand in any manner;
    • To engage in any monetary transactions with respect to any consideration or association for the creation or transfer of a “right to acquire” an asset outside Dehradun, Uttarakhand by any other person.

Therefore, failing to comply with FEMA requirements shall be an “offense” under FEMA provisions and shall invite penalties and prosecutions.

  • Legality of Cross-border Payments-Obtaining registration under the FEMA Act 1999, will naturally give the confidence to the person to enter foreign transactions confidently and ensure compliances with the applicable provisions to eliminate the fears of committing any offense under the Act or payment of a hefty sum of penalty;
  • Avoidance of Penalty under FEMA– Under the FEMA provisions, if any person contravenes the applicable provisions of FEMA Act or any other rules, regulations, directions, or notifications issued by the RBI or Govt. of Dehradun, Uttarakhand, such person shall be liable to be prosecuted and penalized for an amount which could be up to thrice the amount involved, where the amount is assessable. Where the amount involved in the contravention could not be assessed, it could lead to a maximum of Rs. Two lakh maximum for each offense. Where such contravention is of continuing nature, the person shall be made liable to an additional penalty of Rs. 5000/- per day during the period when the contravention continues to take place.

Conclusion

Therefore, FEMA registration in Dehradun, Uttarakhand is an important registration for an entity that wants to make cross-border transactions on a time-to-time basis and further to save themselves from any further consequences under the Act.