Finmin revises foreign investment rules in consultation with the RBI. Details here

Currently, foreign investment by a person resident in India is governed by the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Rules, 2004 and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Rules, 2015.

In its statement on Monday, the finance ministry said, “Given the evolving needs of businesses in India, in an increasingly integrated global market, Indian corporates need to be part of the global value chain. For this, the revised regulatory framework for foreign investment provides for simplification of the existing framework for foreign investment and the current trade and economic linked to mobility.”

“Clarification has been brought in foreign direct investment and foreign portfolio investment and various foreign investment related transactions which were earlier under approval route are now under automatic route, significantly enhancing the “ease of doing business”.

Here are some amendments under the Foreign Investment Rules.

Under the new amendment, the net worth of a registered partnership firm or LLP will be the sum of accumulated losses, deferred expenses, and unaccounted miscellaneous expenses from the capital contribution of the partners and the total value of the undistributed profits of the partners. Closed, as per latest audited balance sheet.

Meanwhile, in the revised guidelines, investment made by a person resident in India in the equity capital of a foreign entity is classified as ODI (Overseas Direct Investment), even if such investment is less than 10 levels, it will be treated as ODI. percentage of the paid-up capital or such person loses control over the foreign entity.

Further, any Indian resident who has acquired and continues to acquire the equity capital of any foreign entity may, as a matter of right, invest in the equity capital issued by such entity; or bonus shares may be awarded subject to the terms and conditions under these rules.

Also, the RBI may, if necessary in consultation with the Central Government – prescribe limits for total outflows during a financial year based on financial commitments or foreign portfolio investment. Further, the RBI may prescribe a limit on the amount of financial commitment of a resident of India in a financial year requiring its prior approval.

Any Indian resident whose account is classified as a non-performing asset, or as a willful defaulter by any bank, or under investigation by the Financial Services Regulator – must obtain a ‘No Objection Certificate’ from the lending bank or regulatory body. or investigative agency before making any financial commitment or disinvestment.

The amendment states that pricing will be on an arm’s length basis. It said, “Before facilitating a transaction under sub-rule (1), AD Bank shall ensure compliance with arm’s length pricing by taking into account valuation as per any internationally accepted pricing method for valuation.”

Further, any resident of India may transfer equity capital by way of sale to a person resident in India or resident outside India eligible for such investment under these rules.

If the transfer is due to merger, consolidation, or demerger or buyback of foreign securities, such transfer or liquidation shall require the approval of the competent authority in accordance with the prevailing laws of India or the laws of the host country. Or the host jurisdiction, as the case may be.

No person resident in India shall, at the time of such financial commitment or at any time thereafter, directly or indirectly, make a financial commitment to a foreign entity that has invested or has invested in India as a result of a structure having more than two tiers. of Subsidiaries as per Revised Rules.

An Indian organization having an office abroad can acquire immovable property outside India for business and residential purposes of its employees.

Meanwhile, an Indian resident can acquire immovable property outside India by way of inheritance from a resident outside the country, purchase with foreign currency held in an RFC account; purchase from remittances sent under the Liberalized Remittance Scheme established by the RBI; combined with a relative; from proceeds or sale of assets other than ODI.

An Indian entity not engaged in financial service activities in India may make ODI to a foreign entity directly or indirectly engaged in financial service activities other than banking or insurance, provided that such Indian entity has earned net profit in the previous period. Three fiscal years.

In particular, an Indian entity not engaged in the insurance sector may undertake ODI and health insurance in general where such insurance business is supporting the core activities carried on by such Indian entity abroad.

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