TaxTMI 
TaxTMI 
Master Direction- Compounding of Contraventions under FEMA, 1999 (Updated as on May 24, 2022)
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompounding 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 FEMA 1999 may, on an application made by the person committing such contravention, be compounded within one hundred and eighty d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 without approval of RBI or Government, wherever required) Regulation 10A (b)(i) read with paragraph 10 of Schedule 1 Regulation 10B (2) read with paragraph 10 of Schedule 1 Regulation 4 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....O, 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 for compounding related to the above contraventions may be submitted to the respective Regional Offices under whose jurisdiction they fall or to FED, CO Cell, New Delhi, as applicable. For all other contraventions, applications may continue to be submitted to CEFA, Foreign Exchange Department, Reserve Bank of India, 5th floor, Amar Building, Sir P. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 processing and shall be liable to be 'returned' to the applicant. If the applicant is allowed by the Reserve Bank to submit such mandatory details, declarations or documents within a reasonable time, then the date of such submission towards making it a complete application shall be taken as the date of receipt of the application at the Reserve Bank for the purpose of Rule 8(2) of the Foreign Exchange (Compounding Proceedings) Rules, 20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 outside India in contravention of section 4, shall also not be eligible for compounding by the Reserve Bank. 7. Scope and procedure for compounding 7.1 On receipt of the application for compounding, the Reserve Bank shall examine the application based on the documents and submissions made in the application and assess whether contravention is quantifiable and, if so, the amount of contravention. 7.2 The Compounding Authority may call for any information, record or any oth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0 lakhs: 7000 per year Rs.1-10 crore : 50000 per year Rs.10 -100 Crore : 100000 per year Above Rs.100 Crore : 200000 per year E) Reporting contraventions by LO/BO/PO As above, subject to ceiling of Rs.2 lakhs. In case of Project Office, the amount imposed shall be calculated on 10% of total project cost. 2] AAC/ APR/ FLAR/ Share certificate delays In case of non-submission/ delayed submission of APR/ share certificates (FEMA 120) or AAC (FEMA 22) or FCGPR (B) 4or FLA Returns - FEMA 20 / FEMA 20 (R) / FEMA 120/FEMA 395 Rs.10000/- per AAC/APR/FCGPR (B)5/FLA Return delayed. Delayed receipt of share certificate - Rs.10000/- per year, the total amount being subject to ceiling of 300% of the amount invested. 3] A] Allotment/Refunds Para 8 of FEMA 20/2000-RB (non-allotment of shares or allotment/ refund after the stipulated 180 days) B] LO/BO/PO (Other than reporting contraventions) Rs.30000/- + given percentage: 1st year : 0.30% 1-2 years : 0.35% 2-3 years : 0.40% 3-4 years : 0.45% 4-5 years : 0.50% >5 years : 0.75% (For project offices the amount of contravention shall be deemed to be 10% of the cost of project). 4] All other contraventions, - includin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rlier applies for compounding again for similar contravention, the amount calculated as above may be enhanced by 50%. III. For calculating amount in respect of reporting contraventions under para I.1 above, the period of contravention may be considered proportionately {(approx. rounded off to next higher month ÷ 12) X amount for 1 year}. The total no. of days does not exclude Sundays/holidays. 8. Issue of the Compounding Order 8.1 The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all the concerned as expeditiously as possible as and not later than 180 days from the date of application on the basis of the averments made in the application as well as other documents and submissions made in this context by the contravener during the personal hearings. 8.2 The time limit for this purpose would be reckoned from the date of receipt of the completed application for compounding by the Reserve Bank. 8.3 If the applicant opts for appearing for the personal hearing, the Reserve Bank would encourage the applicant to appear directly for it rather than being represented / accompanied by legal experts / consultants, as compou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder these Rules. 9.4 In respect of the contraventions of the FEMA, 1999 which are not compounded by the Compounding Authority, other relevant provisions of FEMA, 1999 dealing with contraventions shall apply accordingly. 9.5 On realization of the sum for which contravention is compounded a certificate in this regard shall be issued by the Reserve Bank subject to the specified conditions, if any, in the order. 10. Directions to Authorised Dealers 10.1 In terms of Section 11 (2) of FEMA, 1999, the Reserve Bank may, for the purpose of ensuring the compliance with the provisions of the Act or of any rule, regulation, notification, direction or order made thereunder, direct any authorized person to furnish such information, in such manner, as it deems fit. Accordingly, RBI has entrusted to the Authorised Dealers (ADs) the responsibility of complying with the prescribed rules/ regulations for the foreign exchange transactions and reporting the same as per the directions issued from time to time. Authorised Dealers have, therefore, advised to take necessary steps to ensure that checks and balances are incorporated in systems relating to dealing with and reporting of foreign exchange t....