TaxTMI 
TaxTMI 
Master Direction- Compounding of Contraventions under FEMA, 1999 (Updated as on May 24, 2022)
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....c framework for the compounding process. 2. Instructions issued on "Compounding of Contraventions under FEMA, 1999" have been compiled in this Master Direction. The list of underlying circulars/ notifications which form the basis of this Master Direction is furnished in the Appendix. All AD Category - I banks and Authorised banks may bring the instructions contained in this Master Direction to the notice of their constituents. 3. The Master Direction will be updated from time to time as and when fresh instructions are issued. Yours faithfully, (Ajay Kumar Misra) Chief General Manager in Charge INDEX Description General Power to compound by Reserve Bank Delegation of Powers to Regional Offices Authorisation to compound the contraventions by FED, CO Cell, New Delhi Application for Compounding Pre-requisite for Compounding process Scope and Procedure for Compounding Issue of Compounding order Payment of the amount for which contravention is compounded Directions to the Authorised Dealers Reporting requirements 1. General 1.1 In terms of Section 15 of the FEMA 1999, any contravention under section 13 of FEM....
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.... hundred lakhs or more, by the Chief General Manager of the Reserve Bank of India; Provided further that no contravention shall be compounded unless the amount involved in such contravention is quantifiable. 2.2 Every officer specified under sub-rule (1) of rule 4 of the Reserve Bank of India (Compounding Authority) shall exercise the powers to compound any contravention subject to the direction, control and supervision of the Governor of the Reserve Bank of India. 3. Delegation of Powers to Regional Offices/Sub-Offices As a measure of customer service and in order to facilitate the operational convenience, compounding powers have been delegated to the Regional Offices/ Sub-Offices of the Reserve Bank of India and they are accordingly empowered to compound the following contraventions of FEMA 20, FEMA 20(R), FEM (NDI) Rules and FEMA 395 as per details below: FEMA 20/2000-RB dated May 3, 2000 Paragraph 9(1)(A) of Schedule 1 Paragraph 9(1)(B) of Schedule 1 ^1Paragraph 9(2) of Schedule 1 Paragraph 8 of Schedule 1 Paragraph 5 of Schedule 1 Regulation 2(ii) read with Regulation 5(1) Paragraph 2 or 3 of Schedule 1 (Issue of shares w....
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....w Delhi 4.1 The work related to Liaison/ Branch/ Project office(LO/ BO/ PO) division, Non Resident Foreign Account Division (NRFAD) and Immovable Property (IP) Division is carried out at FED, CO Cell, New Delhi with effect from July 15, 2014. Accordingly the officers attached to the FED, CO, Cell at New Delhi office are authorized to compound the contraventions as per details below: FEMA Notification FEMA 7/2000-RB, dated 3-5-2000 / FEMA 7(R) /2015-RB dated 21-1-2016 FEMA 21/2000-RB, dated 3-5-2000 / FEMA 21(R)/2018-RB, dated 26-3-2018 / Chapter IX of Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 dated 17-10-2019 FEMA 22/2000-RB, dated 3-5-2000 / FEMA 22(R) /2016-RB dated 31-3-2016 FEMA 5/2000-RB, dated 3-5-2000 / FEMA 5(R)/2016-RB dated 1-4-16 4.2 The contraventions for amounts of Rupees one hundred lakh (Rs. 1,00,00,000/-) or more under the jurisdiction of Panaji and Kochi offices shall be compounded at Mumbai Regional Office and Thiruvananthapuram Regional Office respectively, in case these offices are headed by an officer below the rank of a Chief General Manager. 4.3 Accordingly, applications....
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....ed along with the application will be returned by crediting the same to the applicant's account through NEFT as per the ECS mandate and details of their bank account as per Annex IV furnished along with the application. The Annexes relating to Foreign Direct Investment, External Commercial Borrowings, Overseas Direct Investment and Branch Office / Liaison Office, as given in A.P.(Dir Series) Circular No.57 dated December 13, 2011, have also been modified to include the details of income-tax PAN and the activity as per NIC codes - 1987 in terms of A.P.(Dir Series) Circular No.20 dated August 12, 2013. The application will be treated as incomplete without these details. 5.5 The applicants are also advised to bring to the notice of the compounding authority change, if any, in the address/ contact details of the applicant during the pendency of the compounding application with Reserve Bank. 5.6 If an application for compounding is not submitted in the prescribed format or is found incomplete due to the absence of any mandatory details, declarations, documents, or the demand draft (as prescribed) towards the application fee, it will not be taken up for processi....
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....n this connection, it is clarified that whenever a contravention is identified by the Reserve Bank or brought to its notice by the entity involved in contravention, the Bank shall examine (i) whether it is material and, hence is required to be compounded for which the necessary compounding procedure has to be followed or (ii) whether the issues involved are sensitive / serious in nature and, therefore, need to be referred to the Directorate of Enforcement (DOE). 6.6 In terms of the proviso to rule 8 (2) of Foreign Exchange (Compounding Proceedings) Rules, 2000 inserted vide GOI notification dated February 20, 2017, if the Enforcement Directorate is of the view that the compounding proceeding relates to a serious contravention suspected of money laundering, terror financing or affecting sovereignty and integrity of the nation, the Compounding Authority shall not proceed with the matter and shall remit the case to the appropriate Adjudicating Authority for adjudicating contravention under section 13. Further, the cases attracting the provisions under section 3(a) or those attracting special provisions under section 37(A) of the FEMA, 1999 - relating to assets held outsi....
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....FCTRS (Reg. 4) B) FEMA 3 Non submission of ECB statements C) FEMA 120 Non reporting/delay in reporting of acquisition/setup of subsidiaries/step down subsidiaries /changes in the shareholding pattern D) Any other reporting contraventions (except those in Row 2 below) Fixed amount : Rs10000/- (applied once for each contravention in a compounding application) + Variable amount as under: Up to 10 lakhs: 1000 per year Above Rs.10 lakhs & below Rs. 40 lakhs: 2500 per year Rs.40 lakhs or more and below Rs. 100 lakhs: 7000 per year Rs.1-10 crore : &n....
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....tees or any other contravention related to issue of Corporate Guarantees. Rs.500000/- + given percentage: 1st year : 0.050% 1-2 years : 0.055% 2-3 years : 0.060% 3-4 years : 0.065% 4-5 years : 0.070% >5 years : 0.075% In case the contravention includes issue of guarantees for raising loans which are invested back into India, the amount imposed may be trebled. *The contraventions of FEMA 20 existing and continuing as on November 07, 2017 (i.e. the starting date of contraventions prior to November 07, 2017) will be compounded as per 1(A) above. II. The above amounts are presently subject to the following provisos, viz. • the amount imposed should not exceed 300% of the amount of contravention • In case the amount of contravention is less than Rs. One lakh, the total amount imposed should not be more than amount of simple interest @5% p.a. calculated on the amount of contravention and for the period of the contravention in case of reporting contraventions and @10% p.a. in respect of all other contraventions. • In case of paragraph 8 of Schedule I to FEMA 20/2000 RB contraventions, the amount imposed wi....
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....Compounding Authority may pass the order based on available information/ documents. 8.4 The Compounding Order shall specify the provisions of the FEMA, 1999 or any rule, regulation, notification, direction or order issued in exercise of the powers under FEMA, 1999 in respect of which contravention has taken place along with details of the contravention. 8.5 One copy of the compounding order issued under sub rule (2) of Rule 8 of Foreign Exchange (Compounding Proceedings) Rules, 2000 shall be supplied to the applicant (the contravener) and also to the Adjudicating Authority, where the compounding of any contravention is made after making of a complaint under sub-section (3) of section 16 of the FEMA, as the case may be. ^68.6 In terms of AP (DIR Series) Circular No. 06 dated November 17, 2020 the summary information about the compounding orders passed on or after March 01, 2020 shall be hosted on the Reserve Bank's website (www.rbi.org.in) in the following format: Sr. No. Name of the Applicant Details of contraventions (provisions of the Act/Regulation/Rules compounded) Date of compounding order Amount imposed for compounding of contraventions 9.....