Owning overseas real estate, whether in Dubai, London or Singapore, has become an increasingly popular aspiration among Indian investors. But recent enforcement action has highlighted that foreign property purchases can invite regulatory scrutiny if Foreign Exchange Management Act (FEMA) rules are not followed carefully.
Earlier this month, the Directorate of Enforcement conducted searches under FEMA, 1999 against high net-worth individuals who had acquired multiple properties in Dubai without corresponding outward remittances through authorised banking channels. As the foreign properties could not be seized directly, equivalent immovable assets in India worth Rs 27.83 crore were attached instead.

1. LRS limit is the first checkpoint
Under the Liberalised Remittance Scheme (LRS), resident individuals can remit up to USD 250,000 per financial year without prior RBI approval to acquire overseas immovable property, according to an ET report.

The Enforcement Directorate (ED) will shift its focus toward violations under the Foreign Exchange Management Act (FEMA) in 2025, announced the agency's Director Rahul Navin on Thursday. Navin made the statement during the foundation day address of the federal agency, mentioning specifically "the next area where ED intend to focus this year is on FEMA violations." Highlighting the agency's evolving priorities, the Director stated that ED has been entrusted with enforcing FEMA to ensure full compliance with regulations issued by the Central Government and the Reserve Bank of India (RBI). These include rules, directives, and circulars intended to regulate cross-border financial transactions. "To fulfil this mandate, ED will conduct necessary investigations and adjudication, and will impose penalties in cases of defaults," the Director said.

RBI has capped the penalty amount for FEMA violations to Rs 2 lakh, down from a percentage of the amount of violations earlier in an easing of regulations. Violations including use of liberalised remittance scheme (LRS) proceeds not reinvested within 180 days, exports not made within one year of advance receipt and gifting high value shares without RBI permission will now be penalised to a maximum of Rs 2 lakhs versus 0.30% to 0.75% of the violation amount earlier. The changes were made in the master directions on FEMA by RBI on Thursday. “…based on the nature of contravention, exceptional circumstances/ facts involved in case, and in wider public interest, the maximum compounding amount imposed may be capped at Rs 2 lakh for contravention of each regulation/ rule (applied in a compounding application)…” RBi said.

The Reserve Bank on Friday came out with revised draft regulations that cover export and import transactions under FEMA with an aim to promote ease of doing business. As per the revised draft, if the export proceeds of an exporter remain unrealised for a period beyond two years from the due date and the cumulative unrealised export proceeds of that exporter exceeds Rs 25 crore, he shall undertake further exports only against receipt of full advance or an irrevocable letter of credit.

The finance ministry and the Reserve Bank of India (RBI) are in talks to further ease foreign exchange rules, especially with regard to non-debt instruments, economic affairs secretary Ajay Seth told ET. He said the exercise focused on simplifying Foreign Exchange Management Act (FEMA) regulations and updating them to modern standards will be completed in three-four months. Given that sector-specific limits for foreign direct investment (FDI) have already been substantially relaxed, the government is turning its attention to easing restrictive rules to woo foreign investors. These changes will further liberalise the rules on equity investments, helping India attract more risk capital.

In a bid to promote cross-border transactions in rupees and currencies of other countries, the Reserve Bank of India (RBI) has further liberalised the Foreign Exchange Management Act (FEMA). On Thursday, the RBI said that domestic exporters will now be able to open accounts in any foreign currency overseas to settle trade transactions, including receiving export proceeds, and use these proceeds to pay for imports. “In order to promote cross-border transactions in INR and local/national currencies, a further review of the existing regulations issued under FEMA, 1999, has been undertaken by the Reserve Bank in consultation with the Central Government,” the regulator said in a press release.

India eased cross-border share swaps, allowing issue or transfer of equity instruments of a local company in exchange for those of a foreign firm in a significant rejig of foreign investment norms. Investments by an overseas citizen of India (OCI) on a non-repatriation basis would not be counted as indirect foreign investment, as per the changes, which were announced late on Friday. The amendments in the Foreign Exchange Management (Non-debt Instruments) Rules follow the budget pledge by finance minister Nirmala Sitharaman to simplify overseas investment rules. The latest changes have aligned the provisions governing downstream investments by overseas citizens of India with those for non-residents. This, experts said, would encourage greater participation of NRIs in the country's economy. Easier share swap rules will "facilitate global expansion of Indian companies through mergers, acquisitions, and other strategic initiatives", the finance ministry said. The government also clarified that transfer of all shares in companies having foreign direct investment (FDI) from countries sharing land borders with India would require prior nod irrespective of the sector.

The commerce ministry is in discussions with the Reserve Bank of India (RBI) to facilitate e-commerce exports by liberalising the Foreign Exchange Management Act (FEMA) guidelines, Santosh Kumar Sarangi, Director General of Foreign Trade (DGFT) said on Thursday. “A few days back we had a meeting with the entire team of RBI officials who deal with this. There is a lot of liberalisation which is coming in the RBI guidelines and we should be seeing the results in next two to three months with regard to ecommerce (export) policies,” Sarangi said at the 1st Asia Pacific e-commerce policy summit organised by economic think tank ICRIER.

Foreign companies in defence, telecom, information & broadcasting, and private security sectors will not require the Reserve Bank of India's (RBI) nod to open branch offices, provided they have an approval of the regulator and the ministry concerned. The RBI has made amendments to this effect in the FEMA regulations concerning the opening of branch and liaison offices by foreign entities. "... approval of the Reserve Bank of India is not required in case where government approval or license/permission by the concerned ministry/ regulator has already been granted," according to the amendments to the Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations notified by the RBI.

On the heels of the diesel subsidy reduction, on September 20, 2012, the central government sprang into action with the revival of their reform agenda. A slew of key reforms were unleashed in retail, aviation and power sectors, with the opening up of the multibrand retail sector as the starred item. On this issue, there was expectedly great uproar, of how the East India Company came as an investor and stayed on to rule. While India’s credit ratings went up, foreign investors evinced interest, but with caution. In the meanwhile the government proceeded to issue the Press Notes by way of delegated legislation under Article 73 of the Indian Constitution which empowers the Union to make laws on all matters on which the Parliament is empowered to. Political opponents and activists voiced their protests, as did a political ally in withdrawing its support to the central government.

The government has tabled amendments to the Foreign Exchange Management Act in the Lok Sabha, required to allow foreign direct investment in multi-brand retail trade. Five amendments to regulations issued by the Reserve Bank of India between May and October were tabled by minister of state for finance Namo Narain Meena during zero hour. The amendments seek to provide for 51% foreign investment in multi-brand retail, 100% FDI in single-brand retail and investment by foreign airlines in domestic carriers. RBI had notified the amendments after a directive from Supreme Court in October. The apexBSE 0.00 % court had admitted a PIL that accused the government of not following proper procedure in introducing the new FDI policy.

In a move, which could provide additional liquidity to Indian companies and ease borrowing from outside India, the government is set to allow promoters of Indian companies to pledge shares against external commercial borrowings (ECBs). The move will also ensure additional security to the ECB lenders and enable infrastructure companies, who are the highest recipients of overseas loans, raise ECBs easily. The move is part of the new Foreign Exchange Management Act (Fema) guidelines, which is being amended after 10 years. However, RBI has directed that no person would be allowed to pledge shares if he doesn’t have a no-objection certification (NOC) from a bank, which is an authorised dealer.

Contravention is the breach of provisions and norms under the Foreign Exchange Management Act, or FEMA 1999. Compounding of contraventions refers to the process where the individual or the corporate entity can admit the contravention and seek redress from the Reserve Bank, restricted to a specific sum. The applications for compounding contraventions are categorised into technical, material or sensitive by the Reserve Bank of India. The contravention involving money laundering, national and security concerns involving serious infringement of the regulatory framework, etc, are sensitive contraventions.

The Enforcement Directorate, which deals with foreign exchange violations, may begin a probe into the world’s richest cricket body - the Board of Control for Cricket in India, said senior officials in the government.The probe, if happens, will be for BCCI guaranteeing a minimum payment for overseas cricketers to play in the Twenty20 limited over cricket tournament run by the Indian Premier League, or IPL.