With a view to simplifying the procedures and providing greater flexibility in foreign exchange transactions, the Reserve Bank of India ("RBI") has vide its circular dated 20th December 2006, liberalized the Remittance Scheme of USD 25,000 ("Scheme") by enhancing the remittance limit for resident individuals.
As per the circular, resident individuals would now be allowed to remit up to USD 50,000 per financial year (March – April) for any current or capital account transaction or a combination of both. Previously under the Scheme, resident individuals were permitted to remit only up to USD 25,000 per calendar year for any current or capital account transaction or a combination of both subject to specified terms and conditions including remittance facility not being made available for certain purposes.
Remittances towards gift and donation by a resident individual would also be included within the said cap of USD 50,000 under the Scheme. Investment by resident individuals in overseas companies would be subsumed under the rationalized Scheme and the 10% reciprocal shareholding requirement in the listed Indian companies by such overseas companies has also been dispensed with by the RBI.
Further, the existing facility of release of exchange by authorised persons upto USD 10,000 or its equivalent in one calendar year on a declaration basis for one or more private visits to any country (except Nepal and Bhutan) will now be available on a financial year, basis instead of a calendar year as was the case earlier.
Moreover, all domestic as well as overseas banks, including those banks who do not have an operational presence in India will now be required to obtain prior approval of the RBI for the schemes being marketed by them in India to residents either for soliciting foreign currency deposits for their foreign or overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company.
The resident individual desiring to make the remittance is required to furnish an Application –cum- Declaration in the prescribed format.
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The MDO Guidelines further state that the intent of the MCA was for the purpose of achieving a standard contractual arrangement that may be entered into across the country for procurement of such services.
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