Amendments Made to SEBI’s Important Regulations

• SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE AND LISTING OF DEBT SECURITIES) (AMENDMENT) REGULATIONS, 2015

 The Board has come out with certain alterations in Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, by making amendments in the  following regulations: ─

       i.        After Regulation 17, a new regulation shall be inserted, namely “Right to recall or redeem prior to maturity” (Regulation 17A).

      ii.        After Regulation 20, a new regulation shall be inserted, namely, “Consolidation and re-issuance” (Regulation 20A).

     iii.        In Schedule I, in paragraph 3, in sub-paragraph B, in clause (a) certain words have been substituted.

SEBI (Issue & Listing of Debt Securities) Amendment Regulations, 2015

SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) (AMENDMENT) REGULATIONS, 2015

 The Board has made amendments in the following regulations of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, namely:-

       i.        In regulation 4, in sub-regulation (3)

     ii.        In regulation 54, in sub-regulation (7)

 SEBI (Issue of Capital & disclosure Requirements) Amendment regulations, 2015

SECURITIES AND EXCHANGE BOARD OF INDIA (BUY-BACK OF SECURITIES) (AMENDMENT) REGULATIONS, 2015

The Board has made amendments in the following regulations of the Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998, namely:-

    i.        In regulation 9, after sub-regulation (3), sub-regulation”3A”shall be inserted.

 SEBI (Buy Back of Securities) Amendment Regulations, 2015

SECURITIES AND EXCHANGE BOARD OF INDIA (DELISTING OF EQUITY SHARES) (AMENDMENT) REGULATIONS, 2015

The Board has made amendments in the following regulations of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009, namely:-

     i.        In regulation 2, sub-regulation (1), after clause (iv) clause”(iva)”shall be inserted.

    ii.        In regulation 2, sub-regulation (2).
    iii.        In regulation 4.
    iv.        In regulation 8.
     v.        In regulation 10.
    vi.        In regulation 11.
   vii.        In regulation 12, sub-regulation (1).
  viii.        In regulation 13.
    ix.        In regulation 14, sub-regulation (2).
     x.        In regulation 15.
    xi.        In regulation 16.
   xii.        In regulation 17.
  xiii.        In regulation 18.
 xiv.        In clause (a) of sub-regulation (2) of regulation 19
  xv.        After regulation 25, regulation “25A-Power to relax strict enforcement of the regulations” shall be inserted.

 xvi.        In regulation 27.

In regulation 31, sub-regulation (2)

In schedule I, after para 16, “16A”shall be inserted.

 xix.        In Schedule II, After para 11 , para “11A”shall be inserted &  para 12 shall be substituted.

 SEBI (Delisting of Equity Shares) Amendment Regulations, 2015

SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) (AMENDMENT) REGULATIONS, 2015

The Board has made amendments in the following regulations of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, namely:-

       i.        After Regulation 5, regulation “5A” shall be inserted, namely Delisting offer.

     ii.         After sub-regulation (6) of regulation 18, regulation (6A) shall be inserted.
    iii.        In sub-regulation (1) of regulation 22 after the first proviso, a new proviso has been inserted.

SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2015

Revised Regulatory Framework for NBFCs

RBI/2014-15/520

DNBR (PD) CC.No. 024/ 03.10.001/ 2014-15

March 27, 2015

All NBFCs (excluding Primary Dealers)

Dear Sirs,

Revised Regulatory Framework for NBFCs

Please refer to the revised regulatory framework issued vide DNBR (PD) CC.No. 002/ 03.10.001/ 2014-15 dated November 10, 2014 (the circular). At para 14 of the circular it was mentioned that the Notifications in this regard shall follow.

2. In this connection, the following Notifications are enclosed for meticulous compliance

Notification No. DNBR. 007/ CGM (CDS) -2015 dated March 27, 2015 amending the Net Owned Fund requirements.

Non-Systemically Important Non-Banking financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 issued vide Notification No. DNBR. 008/ CGM (CDS) -2015 dated March 27, 2015.

Systemically Important Non-Banking financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 issued vide Notification No. DNBR. 009/ CGM (CDS) -2015 dated March 27, 2015.

Notification No. DNBR. 010/ CGM (CDS) -2015 dated March 27, 2015 amending the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998.

Notification No. DNBR. 011/ CGM (CDS) -2015 dated March 27, 2015 amending the Non-Banking Financial (Deposit Accepting or Holding) Prudential Norms (Reserve Bank) Directions, 2007.

Notification No. DNBR. 012/ CGM (CDS) -2015 dated March 27, 2015 amending the Non-Banking Financial Company – Factor (Reserve Bank) Directions, 2012.

3. It may be emphasised that the changes made vide above notifications/ amending notifications are only that corresponding to the circular.

Yours faithfully

(C D Srinivasan)

Chief General Manager

RESERVE BANK OF INDIA

DEPARTMENT OF NON-BANKING REGULATION

CENTRAL OFFICE, CENTRE I, WORLD TRADE CENTRE

CUFFE PARADE, COLABA, MUMBAI 400 005

Notification No.DNBR.007/ CGM (CDS) -2015 dated March 27, 2015

In exercise of the powers under clause (b) of sub-section (1) of section 45 –IA of the Reserve Bank of India Act, 1934 (Act 2 of 1934) and all the powers enabling it in that behalf, the Reserve Bank of India, in supersession of Notification No. 132/ CGM (VSNM) -99 dated April 20, 1999, hereby specifies two hundred lakhs rupees as the net owned fund required for a non-banking financial company to commence or carry on the business of non-banking financial institution.

Provided that a non-banking financial company holding a certificate of registration issued by the Reserve Bank of India and having net owned fund of less than two hundred lakhs of rupees, may continue to carry on the business of non-banking financial institution, if such company achieves net owned fund of, -

one hundred lakhs of rupees before April 1, 2016; and

two hundred lakhs of rupees before April 1, 2017

(C D Srinivasan)

Chief General Manager

RESERVE BANK OF INDIA

DEPARTMENT OF NON-BANKING REGULATION

CENTRAL OFFICE, CENTRE I, WORLD TRADE CENTRE

CUFFE PARADE, COLABA, MUMBAI 400 005

Notification No.DNBR. 010/ CGM (CDS)-2015 dated March 27, 2015

The Reserve Bank of India, having considered it necessary in public interest and being satisfied that, for the purpose of enabling the Bank to regulate the credit system to the advantage of the country, it is necessary to amend the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 (Notification No. DFC.118/ DG(SPT)-98 dated January 31, 1998) (hereinafter referred to as the said Directions), in exercise of the powers conferred by section 45J, 45K, 45L and 45MA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the powers enabling it in this behalf, hereby directs that the said Directions shall be amended with immediate effect as follows, namely –

1. In paragraph 4,

(i) in sub-paragraph (1), the existing proviso to clause (i), shall be substituted by the following new proviso, namely,-

“Provided that in case of an unrated asset finance company, it shall obtain the minimum investment grade or other specified credit rating on or before March 31, 2016. Those AFCs that do not get a minimum investment grade rating by March 31, 2016, shall not renew existing deposits or accept fresh deposits thereafter. In the intervening period, i.e. till March 31, 2016, unrated Asset Finance Companies or those with a sub-investment grade rating shall only renew the existing deposits on maturity, and shall not accept fresh deposits, till they obtain an investment grade rating”.

(ii) sub-paragraph(4) shall be modified as under–

“an asset finance company or a loan company or an investment company

(a) having minimum NOF as stipulated by the Reserve Bank, and

(b) complying with all the prudential norms,

may accept or renew public deposit, together with the amounts remaining outstanding in the books of the company as on the date of acceptance or renewal of such deposit, not exceeding one and one-half times of its NOF.”

“Provided that an asset finance company holding public deposits in excess of the limit of one and one-half times of its NOF shall not renew or accept fresh deposits till such time they reach the revised limit”.

(iii) sub-paragraph (5) shall be modified as under-

“In the event of downgrading of credit rating below the minimum specified investment grade as provided for in paragraph 4(1), a non-banking financial company, being an asset finance company or a loan company or an investment company, shall regularise the excess deposit as provided hereunder;

with immediate effect, stop accepting fresh public deposits and renewing existing deposits;

all existing deposits should runoff to maturity; and

report the position within fifteen working days, to the concerned Regional Office of the Reserve Bank of India where the NBFC is registered.

(C D Srinivasan)

Chief General Manager

RESERVE BANK OF INDIA

DEPARTMENT OF NON-BANKING REGULATION

CENTRAL OFFICE, CENTRE I, WORLD TRADE CENTRE

CUFFE PARADE, COLABA, MUMBAI 400 005

Notification No. DNBR. 011/ CGM (CDS) -2015 dated March 27, 2015

The Reserve Bank of India, having considered it necessary in public interest and being satisfied that, for the purpose of enabling the Bank to regulate the credit system to the advantage of the country, it is necessary to amend the Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007(Notification No.DNBS.192/ DG(VL)-2007 dated February 22, 2007) (hereinafter referred to as the said Directions), in exercise of the powers conferred by section 45JA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the powers enabling it in this behalf, hereby directs that the said Directions shall be amended with immediate effect as follows –

1. In paragraph 2, sub-paragraph (1),-

(A) after clause (iv), the following proviso shall be inserted -

“Provided that the period ‘exceeding 18 months’ stipulated in this clause shall be ‘exceeding 16 months’, for the financial year ending March 31, 2016; ‘exceeding 14 months’, for the financial year ending March 31, 2017 and ‘exceeding 12 months’, for the financial year ending March 31, 2018 and thereafter.”

(B) in clause (xiii),

(i) after sub clause (f), the following proviso shall be inserted, namely, –

“Provided that the period of ‘six months or more’ stipulated in sub- clauses (a) to (f) of this clause shall be ‘five months or more’ with for the financial year ending March 31, 2016; ‘four months or more’ for the financial year ending March 31, 2017 and ‘three months or more’ for the financial year ending March 31, 2018 and thereafter.”

(ii) after sub clause (g), the following proviso shall be inserted, namely, -

“Provided that the period of ‘twelve months or more’ stipulated in this sub-clause shall be ‘nine months or more’ for the financial year ending March 31, 2016; ‘six months or more’ for the financial year ending March 31, 2017 and ‘three months or more’, for the financial year ending March 31, 2018 and thereafter.”

(C) in clause (xvi), after sub-clause (a), the following proviso shall be inserted, namely, -

“Provided that the period ‘not exceeding 18 months’ stipulated in this sub-clause shall be ‘not exceeding 16 months’ for the financial year ending March 31, 2016; ‘not exceeding 14 months’ for the financial year ending March 31, 2017 and ‘not exceeding 12 months’ for the financial year ending March 31, 2018 and thereafter”.

2. After paragraph 9A, the following proviso shall be inserted –

“Provided that the provision for standard assets shall be 0.30 percent as on March 31, 2016; 0.35 percent as on March 31, 2017; 0.40 percent as on March 31, 2018 and thereafter”.

3. Paragraph 11 shall be omitted.

4. In paragraph 16,

(i) for sub-paragraph (1), the following shall be substituted, namely, -

“(1) Every non-banking financial company shall maintain a minimum capital ratio consisting of Tier I and Tier II capital which shall not be less than 15 percent of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off-balance sheet items.”.

(ii) for sub-paragraph (2), the following shall be substituted, namely, -

“(2) The total Tier I capital, at any point of time shall not be less than 8.5 percent by March 31, 2016 and 10 percent by March 31, 2017.

5. In paragraph 20, in sub-paragraph (1), the third proviso shall be omitted.

(C D Srinivasan)

Chief General Manager

RESERVE BANK OF INDIA

DEPARTMENT OF NON-BANKING REGULATION

CENTRAL OFFICE, CENTRE I, WORLD TRADE CENTRE

CUFFE PARADE, COLABA, MUMBAI 400 005

Notification No.DNBR.012/ CGM (CDS)-2015, dated March 27, 2015

The Reserve Bank of India, having considered it necessary in the public interest, and being satisfied that, for the purpose of enabling the Reserve Bank to regulate the financial system to the advantage of the country and to prevent the affairs of any Non-Banking Financial Company – Factor (NBFC-Factor) from being conducted in a manner detrimental to the interest of investors or in any manner prejudicial to the interest of such NBFC – Factors, it is necessary to amend the Non-Banking Financial Company – Factor (Reserve Bank) Directions, 2012 (Notification No. DNBS. PD.No.247/ CGM(US)-2012 dated July 23, 2012) in exercise of the powers conferred under Section 3 of the Factoring Regulation Act, 2011, hereby directs that the said Directions shall be amended with immediate effect as follows –

For Paragraph 6 following shall be substituted –

6. Principal Business

“An NBFC-Factor shall ensure that its financial assets in the factoring business constitute at least 50 per cent of its total assets and the income derived from factoring business is not less than 50 per cent of its gross income”.

(C D Srinivasan)

Chief General Manager

Circular of Ministry of Corporate Affairs reg. Amounts Received by the Pvt. Companies

The Ministry of Corporate Affairs has issued a General Circular No. 5/2015 dated 30th March, 2015 to provide clarification on the amounts received by the private companies before the commencement of the Act which is as follows:

1.Stakeholders have sought clarifications as to whether amounts received by private companies from their members, directors or their relatives prior to 1st April, 2014 shall be considered as deposits under the Companies Act, 2013 as such amounts were not treated as ‘deposits’ under section 58A of the Companies Act, 1956 and rules made there under.

2.The matter has been examined in consultation with RBI and it is clarified that such amounts received by private companies prior to 1st April, 2014 shall not be treated as ‘deposits’ under the Companies Act, 2013 and Companies (Acceptance of Deposits) Rules, 2014 subject to the condition that relevant private company shall disclose, in the notes to its financial statement for the financial year commencing on or after 1st April, 2014 the figure of such amounts and the accounting head in which such amounts have been shown in the financial statement.

3. Any renewal or acceptance of fresh deposits on or after 1st April, 2014 shall, however, be in accordance with the provisions of Companies Act, 2013 and rules made there under.

SEBI Requires Issuer to Demand 25% of issue Price in case of Part Payment

1.These regulations may be called the SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2015.

2. They shall come into force on the date of their publication in the Official Gazette.

3. In the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, – (i) in regulation 4, in sub-regulation (3), – A. in clause (a), the word “twelve” shall be substituted with the word “eighteen”; B. in clause

(b), the symbol ” . ” shall be substituted with symbol ” ; ” ;

C. after clause (b), the following new clauses shall be inserted, namely:- “(c) the price or conversion formula of the warrants shall be determined upfront and at least 25% of the consideration amount shall also be received upfront;

(d) in case the warrant holder does not exercise the option to take equity shares against any of the warrants held by him, the consideration paid in respect of such warrant shall be forfeited by the issuer.”

2 (ii) in regulation 54, in sub-regulation (7), in the proviso, the words, numbers and symbol “the part payment on application shall not be less than 25% of the issue price and” shall be inserted after the word and symbol “investors,”

DIPP moves cabinet to permit composite caps on FDI

In an effort to simplify the foreign direct investment regime, the department of industrial policy and promotion has moved a note to the Cabinet to do away with the distinction between different types of foreign investments through a composite cap on foreign investments.

The move, aimed to promote ease of doing business in India, was announced by Finance Minister Arun Jaitley in the budget last month.

“We have attempted to incorporate suggestions by various departments and ministries. Investors want clarity in policies for safety of their investments. The aim is to attract foreign investment by clearing ambiguity in the existing FDI policy related to sectoral caps and conditionality.

The composite foreign investment caps will encompass all types of foreign investments. These will include foreign portfolio investment, NRI investment and depository receipts, and will include foreign currency convertible bonds and fully and mandatorily convertible preference shares or debentures.

DIPP had floated the note for interministerial consultation last year but met with resistance from certain ministries including the departments of pharmaceuticals and economic affairs. Composite cap is already applicable in sectors including defence, telecom and insurance.

“The move will be significant for sectors that have a sectoral cap. It will bring in a lot more clarity on how the cap is to be calculated. The companies should know how much room they have to bring in foreign investment”.

Acquisition/transfer of Immovable Property–Prohibition on Citizens of Certain Countries

RBI/2014-15/495

A.P.(DIR Series) Circular No.83

March 11, 2015

To

All Category – I Authorised Dealer Banks

Madam / Sir,

Acquisition/transfer of immovable property – Prohibition on citizens of certain countries

Attention of Authorised Dealers in Foreign Exchange is invited to Regulation 7 of Foreign Exchange Management (Acquisition and Transfer of immovable property in India) Regulations, 2000 notified vide Notification No. FEMA 21/2000-RB dated 3rd May 2000 in terms of which no person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan without prior permission of the Reserve Bank shall acquire or transfer immovable property in India, other than lease, not exceeding five years.

2. It has been observed that Macau and Hong Kong are the two Special Administrative Regions of China. As they are notified separately, it has been decided, in consultation with the Government of India, that citizens of Macau and Hong Kong will also be included in the list of countries which are prohibited to acquire/transfer immovable property in India in terms of Regulation 7 of FEMA ibid.

3. Reserve Bank has since amended the Principal Regulations through the Foreign Exchange Management (Acquisition and Transfer of immovable property in India) (Amendment) Regulations, 2015 notified vide Notification No. FEMA.335/2015-RB dated February 4, 2015 c.f. G.S.R. No.120 (E) dated February 24, 2015.

4. Authorised Dealers may bring the contents of this circular to the notice of their constituents concerned.

5. The directions contained in this circular have been issued under Section 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

Yours faithfully

(B. P. Kanungo)

Principal Chief General Manager

Companies can access all the professional services as a one step solution very soon

In a move that could significantly alter the road map of corporate compliance, audit and consulting, three professional bodies are preparing a regulatory framework to allow a single entity to provide all such services to a company as early as this year.

The Institute of Chartered Accountants of India, the Institute of Company Secretaries of India and the Institute of Cost Accountants of India are finalising guidelines to make multi-disciplinary partnerships (MDPs) operational in India so that audit, accounting, tax, legal and business consulting services could become available under one roof.

The proposed regulations will allow MDP professional firms to be registered as limited liability partnerships.

The argument in favour of MDPs is that getting compliance services from a single firm – as opposed to multiple firms – can reduce costs and save time.

Experts say international experience can be useful in setting up these processes so that concerns over conflict of interest, especially if consultancy is bundled in, are addressed. Several countries have created safeguards to avoid the risks associated with combining accounting and consultancy under one umbrella.

“Business structures are so complex that companies now need holistic advice. MDPs will be better placed to provide that in an expeditious manner. A lot of information was lost in the cracks between single-discipline firms.Experts say the concept could also help globally competitive professional firms in the country.

Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015

• The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015 was introduced in the Lok Sabha by the Minister for Rural Development, Mr. Birender Singh on February 24, 2015.  The Bill amends the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (LARR Act, 2013).  

• The Bill replaces the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Ordinance, 2014.  

• The LARR Act, 2013 outlines the process to be followed when land is acquired for a public purpose.  Key changes made by the Bill are:

• Provisions of other laws in consonance with the LARR 2013: The LARR Act, 2013 exempted 13 laws (such as the National Highways Act, 1956 and the Railways Act, 1989) from its purview.  However, the LARR Act, 2013 required that the compensation, rehabilitation, and resettlement provisions of these 13 laws be brought in consonance with the LARR Act, 2013, within a year of its enactment (that is, by January 1, 2015), through a notification.  The Bill brings the compensation, rehabilitation, and resettlement provisions of these 13 laws in consonance with the LARR Act, 2013.

• Exemption of five categories of land use from certain provisions: The Bill creates five special categories of land use: (i) defence, (ii) rural infrastructure, (iii) affordable housing, (iv) industrial corridors, and (v) infrastructure projects including Public Private Partnership (PPP) projects where the government owns the land. 

• The LARR Act, 2013 requires that the consent of 80% of land owners is obtained for private projects and that the consent of 70% of land owners be obtained for PPP projects.  The Bill exempts the five categories mentioned above from this provision of the Act. 

• In addition,  the Bill permits the government to exempt projects in these five categories from the following provisions, through a notification:

• The LARR Act, 2013 requires that a Social Impact Assessment be conducted to identify affected families and calculate the social impact when land is acquired. 

• The LARR Act, 2013 imposes certain restrictions on the acquisition of irrigated multi-cropped land and other agricultural land.  For example, irrigated multi-cropped land cannot be acquired beyond the limit specified by the appropriate government. 

• Return of unutilised land: The LARR Act, 2013 required land acquired under it which remained unutilised for five years, to be returned to the original owners or the land bank.  The Bill states that the period after which unutilised land will need to be returned will be: (i) five years, or (ii) any period specified at the time of setting up the project, whichever is later.

• Time period for retrospective application: The LARR Act, 2013 states that the Land Acquisition Act, 1894 will continue to apply in certain cases, where an award has been made under the 1894 Act.  However, if such an award was made five years or more before the enactment of the LARR Act, 2013, and the physical possession of land has not been taken or compensation has not been paid, the LARR Act, 2013 will apply. 

• The Bill states that in calculating this time period, any period during which the proceedings of acquisition were held up: (i) due to a stay order of a court, or (ii) a period specified in the award of a Tribunal for taking possession, or (iii) any period where possession has been taken but the compensation is lying deposited in a court or any account, will not be counted.

• Other changes: The LARR Act, 2013 excluded the acquisition of land for private hospitals and private educational institutions from its purview.  The Bill removes this restriction. 

• While the LARR Act, 2013 was applicable for the acquisition of land for private companies, the Bill changes this to acquisition for ‘private entities’.  A private entity is an entity other than a government entity, and could include a proprietorship, partnership, company, corporation, non-profit organisation, or other entity under any other law.

• The LARR Act, 2013 stated that if an offence is committed by the government, the head of the department would be deemed guilty unless he could show that the offence was committed without his knowledge, or that he had exercised due diligence to prevent the commission of the offence.  The Bill replaces this provision and states that if an offence is committed by a government official, he cannot be prosecuted without the prior sanction of the government.

Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015

Listed Companies mandatory to have Women Directors by 31st March 2015

The Securities and Exchange Board of India vide its circular dated 17th April, 2014 has made it mandatory for all the listed companies to appoint atleast one Woman Director on their Board of Directors by 31stMarch, 2015 in alignment with the requirement of Section 149 of the Companies Act, 2013, under corporate governance norms.

With just 10 days left to meet the deadline, SEBI is very serious on the compliance to these norms and has proactively sought the action initiated to ensure compliance with the aforesaid requirement for the companies that are yet to appoint a Woman Director on their board.

On behest of the SEBI, I request all my professional colleagues to apprise their Board of Directors to appoint atleast one Woman Director on their Board by 31st March, 2015, if not yet appointed, to comply with the aforesaid compulsory requirement of SEBI.

SEBI all Set to Expand the Probe on the Insider Trading Practitioners

As a probe continues into alleged leak and sale of secret government documents, regulator Sebi is looking into suspected use of such information for ‘insider trading’ in stocks through a nexus between CAs, brokers and market operators.

Sebi first began looking into the matter last month after a Delhi Police crackdown on a suspected ‘corporate espionage’ case involving some corporate executives, consultants and a few junior-level staff at the Petroleum Ministry.

Sebi has expanded the scope of its probe after the latest CBI action in similar cases relating to leak of classified documents from other government departments, including in the Finance and Commerce ministries, wherein names of some large corporate houses have also cropped up.

Sebi is looking into whether such leaks were used to manipulate share prices of listed companies, including by the Chartered Accountants, consultants, brokers and even the company promoters and executives.

Those found to have traded on the basis of stolen information from government offices would be probed under recently revised Insider Trading Regulations, as also under the Prevention of Fraudulent and Unfair Trade Practices (PFUTP) norms, followed by stern penal actions.

Under the new norms, “no insider shall communicate, provide, or allow access to any unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, to any person including other insiders except where such communication is in furtherance of legitimate purposes, performance of duties or discharge of legal obligations.”

It also states that “no person shall procure from or cause the communication by any insider of Unpublished Price Sensitive Information.

Direct Tax Amendments from 2015-16

Budget 2015 – Highlight on on Direct Taxation:

1.Surcharge increase by 2% in all cases except in case of foreign company which is continue to be at the rate of 2% if taxable income exceeds Rs. 1 crore & 5% if taxable income exceeds Rs. 10 crore.

Now effective rate of surcharge w.e.f AY 2016-17 will be 7% if taxable income exceeds Rs. 1 crore & 12% if taxable income exceeds Rs. 10 crore.

2. Dealing in cash in immovable property transactions is covered under section 269SS & T.

Consequential amendments in section 271D and section 271E to provide penalty for failure to comply with the amended provisions of section 269SS and 269T, respectively.

3. Incentives for the State of Andhra Pradesh and the State of Telangana

In order to encourage the setting up of industrial undertakings in the backward areas of the State of Andhra Pradesh and the State of Telangana

(I)Insert a new section 32AD in the Act to provide for an additional investment allowanceof an amount equal to 15% of the cost of new asset acquired and installed by an assessee. if—

he sets up an undertaking or enterprise for manufacture or production of any article or thing on or after 1st  April, 2015 in any notified backward areas in the State of Andhra Pradesh and the State of Telangana; andthe new assets are acquired and installed for the purposes of the said undertaking or enterprise during the period beginning from the 1stApril, 2015 to 31stMarch, 2020.

This deduction shall be available over and above the existing deduction available under section 32AC of the Act.

(II)In order to incentivise acquisition and installation of plant and machinery for setting up of manufacturing units in the notified backward area in the State of Andhra Pradesh or the State of Telangana, it is proposed to allow higher additional depreciation at the rate of 35% (instead of 20%) in respect of the actual cost of new machinery or plant (other than a ship and aircraft) acquired and installed by a manufacturing undertaking or enterprise which is set up in the notified backward area of the State of Andhra Pradesh or the State of Telangana on or after the First day of April 2015 and ending before the 1stday of April, 2020.

If Plant or machinery put to use for less than 180 days in the year of acquisition and installation then additional depreciation to the extent of 50% was available. However, the balance 50% of the allowance is also proposed to be allowed in the immediately succeeding financial year in this budget.

4.It is proposed to amend section 194LD to provide that the concessional rate of 5% withholding tax on interest payment to FII’s and QFIs on their investments in Government securities and rupee denominated corporate bonds will now be available upto 30th June, 2017. Earlier it was available upto 1st June, 2015.

5.In order to reduce the hardship faced by small non-resident entities due to high rate of tax of 25%, it is proposed to amend the Act to reduce the rate of tax provided under section 115A onroyalty and FTS payments made to non-residents to 10%.

6.With a view to encourage generation of employment, it is proposed to amend the section 80JJAAdeduction allowed is equal to thirty per cent of additional wages paid to the new regular workmen employed), so as to extend the benefit to all type of assessees(individual, HUF, Firm, etc) having manufacturing units rather than restricting it to corporate assessees only as it was earlier.

Further in order to enable the smaller units to claim this incentive, it is proposed to extend the benefit under this section to units employing even 50 workmen instead of 100 regular workmen as it was earlier.

7.Non-availability of full 100% of additional depreciation u/s 32(1)(iia) for acquisition and installation of new plant or machinery in the second half of the year may motivate the assessee to defer such investment to the next year for availing full 100% of additional depreciation in the next year.

To remove the discrimination in the matter of allowing additional depreciation on plant or machinery used for less than 180 days and used for 180 days or more, it is proposed to Provide that the balance 50% of the additional depreciation on new plant or machinery acquired and used for less than 180 days which has not been allowed in the year of acquisition and installation of such plant or machinery shall be allowed  in immediately  succeeding previous year.

8.Explanation 5 to section 9 clarified that an asset or capital asset, being any share or interest in a company or entity registered or incorporated outside India shall he deemed to be situated in India if the share or Interest derives, directly or indirectly, its value substantially from the assets located India.

Considering the concerns raised by various stakeholders regarding the scope and impact of these earlier amendments. The following amendments are proposed in the provisions of section 9 relating to indirect transfer –

The share or interest in a foreign companies, or entity shall be deemed to derive its value substantially from the assets (whether tangible or intangible) located in India, if on the specified date, the value of an Indian assets, -

Exceeds the amount of Rs. 10 Crore rupees ; andRepresents at least 50% of the value of all the assets owned by the company and the entity

9. In order to address the issue of compliance cost in case of small businesses on account of low threshold of Rs.5 crores, it is proposed to amend section92BA to provide that the aggregate of specified transactions entered into by the assessee in the previous year should exceed a sum of Rs.20 crores for such transaction to be treated as ‘specified domestic transaction‘.

10.  The activity of Yoga has been one of the focus areas in the present times and international recognition has also been granted to it by the Unite Nations. Therefore, it is proposed to include ‘yoga‘ as a specific category in the definition of charitable purpose under section 2(15).

Second proviso to section 2(15), provides that advancement of any other object of general public utility shall not be a charitable purpose if it involves any activity in the nature of trade, commerce or business.

However, the relaxation was given if aggregate value of the receipts from the activities referred above, is Rs.25 Lakh or less in the previous year.

In order to protect the activities undertaken by the genuine organization as part of actual carrying out for the primary purpose of the trust or institution. The relaxation limit increase to, “20% of the total receipts” of the trust or institution undertaking such activity. ( Earlier relaxation limit was Rs.25 lakh)

11. It provides that single member bench of ITAT may dispose of any case which pertains to an assessee whose total income as compute by the assessing officer does not exceed 5 lakhs rupees.

It is proposed to amend sub section (3) of section 255 of the Income-tax Act to increase the above limit to Rs. 15 Lakhs.

12.Procedure for appeal by revenue when an identical question of law Is pending before Supreme Court

There is presently no parallel provision for revenue to not file appeal for subsequent years where the Department is in appeal on the same question of law, for an earlier year. As a result, appeals are filed by the revenue year after year on the same question of law until it is finally decided by the Supreme Court thus, multiplying litigation.

Accordingly, it is proposed to insert a new section 158AA so as to provide that the Commissioner or Principal Commissioner may, direct the Assessing Officer to make an application to the ITAT in the prescribed form within the sixty days from the date of receipt of order of the Commissioner (Appeals) stating that an appeal on the question of law arising in the relevant case may be filed when the decision on the question of law becomes final in the earlier case which will reduce the litigation.

13. The collection of wealth-tax over the years has not shown any significant growth and has only resulted into disproportionate compliance burden on the assessees and administrative burden on the department. It is, therefore, proposed to abolish the levy of wealth tax under the Wealth-tax Act, 1957 with effect from the 1stApril, 2016.

14.With a view to allow the deduction under section 80C to the parent or legal guardian of the girl child, amendment of section 80C of the Act is proposed to be made so as to provide that a sum paid or deposited during the year in the Sukanya Samriddhi Account Scheme in the name of any girl child of the individual or in the name of any girl child for whom such individual is the legal guardian, would be eligible for deduction under section 80C of the Act.

Interest accruing on deposits in such account and the withdrawal from the said scheme will also exempt from tax.

These amendments will take effect retrospectively from AY 2015-16.

15. Increase in limit under section 80D relating to deduction in respect of health insurance premia

Raise the limit of deduction from Rs.15,000/- to Rs.25,000/-

It is further proposed to raise the limit of deduction for senior citizens from Rs.20,000/- to Rs.30,000/-

Further, as a welfare measure towards very senior citizens is also proposed to provide that any payment made on account of medical expenditure in respect of a very senior citizen, allowed as deduction upto Rs.30,000/-.

16. It is proposed to amend section 80DDB to provide for a higher limit of deduction upto Rs. 80,000/-, for the expenditure incurred in respect of the medical treatment of a “very senior citizen“.

Further,it is also proposed to amend section 80DDB so as to provide that the assessee will be required to obtain only a prescription from a specialist doctor for the purpose of availing this deduction instead of certificate from government doctor.

17. In view of the rising cost of medical care and special needs of a disabled person, it is proposed to amend section 80DD and section 80U  raise the limit of deduction in respect of a person with disability from Rs.50,000/- to Rs.75,000/-.

It is further proposed to amend the section so as to raise the limit of deduction in respect of a person with severe disability from Rs.100,000/- to Rs.1,25,000/-.

18.In order to promote social security, it is proposed to increase limit of section 80CCC from Rs.1,00,000/- to Rs.1,50,000/-, within the overall limit provided in section 80CCE.

19. Limit of Rs. 100,000/- under section 80CCDhas been omitted.

In addition to the enhancement of the limit under section 80CCD(1), it is further proposed to provide for an additional deduction in respect of any amount paid, of up to Rs.50,000/- for contributions made by any individual assessee under the NPS.

20. The Finance (No.2) Act, 2014, inserted section 194DA in the Act with effect from 1.10.2014 to provide for deduction of tax at source at the rate of 2% from payments made under life insurance policy which are chargeable to tax.

It is, therefore, proposed to amend the provisions of section 197A for making the recipients of payments referred to in section 194DA also eligible for filing self-declaration in Form No.15G/15H for non-deduction of TDS w.r.t. payment made under life insurance policy in accordance with the provisions of section 197A.

21.National Fund for Control of Drug Abuse is also eligible for 100% deduction under section 80G.

22. Donations made to the Swachh Bharat Kosh and Clean Ganga Fund will be eligible for a deduction of 100% from the total income under section 80G.

However any amount spent in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013, will not be eligible for deduction from the total income of the donor.

These amendments will take effect retrospectively from AY 2015-16.

23. The Corporate Income Tax Rates will reduce from 30% to 25% over a next 4 years.

Draft Circular for Card Payments – Removal of Authentication

The Reserve Bank of India has today placed on its website the Draft Circular for Card Payments – Removal of requirement of Additional Factor of Authentication for small value card present transactions, for feedback. Comments may be emailed or sent by post to the Chief General Manager, Department of Payment and Settlement Systems, Reserve Bank of India, Central Office, 14th Floor, Shahid Bhagat Singh Marg, Mumbai-400001 on or before April 04, 2015.

Background

The Reserve Bank of India has been receiving requests from customers and entities in certain niche segments indicating the need to foster innovative payment products / processes and for enhancing the convenience factor in certain use cases / type of transactions without the need for having the mandatory additional factor of authentication (AFA).

Based on discussion with various stakeholders the concerned draft circular indicating the additional factor of authentication (AFA) relaxation for small value card present transactions only for contact-less card payments using NFC technology is being put up on the site for public comments.

Sangeeta Das

Director

Refund of Over-payment of Pension to the Government Account

RBI/2014-2015/500

Ref.DGBA.GAD.No.H4054/45.03.001/2014-15

March 13, 2015

The Chairman / Chief Executive Officer

All Agency Banks

Dear Sir

Refund of overpayment of pension to the Government Account – Recovery of excess/ wrong pension payments made to the pensioners

Please refer to our circular DGBA.GAD.No.H-10450/45.03.001/2008-09 dated June 1, 2009 on the above subject advising that whenever any excess payment of government pension is detected, the entire amount should be credited to the government account immediately.

2. It is hereby clarified that the above instructions contained therein presume an act of omission on the part of the agency bank. On the other hand, if the agency bank is of the view that the excess/wrong payment to the pensioner is due to errors committed by the government, they may take up the matter with full particulars of the cases with respective Government Department for a quick resolution of the matter. However, this must be a time bound exercise, and the government authority’s acknowledgement to this effect must be kept on the bank’s record. The banks may take up such cases with government departments without reference to the Reserve Bank of India.

3. In all other cases, where the excess payment has arisen on account of mistakes committed by the bank, the amount paid in excess should be credited back to government account in lump sum immediately, as advised in the circular referred to above.

Yours faithfully

(Monisha Chakraborty)

General Manager

Guidelines on Managing Risks & Code of Conduct in Outsourcing of Financial Services by Banks

RBI/2014-15/497

DBR.No.BP.BC.76/21.04.158/2014-15

March 11, 2015

All Scheduled Commercial Banks

(excluding RRBs)

Dear Sir,

Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by Banks

Please refer to our circular DBOD.No.BP.40/21.04.158/2014-15 dated November 3, 2006 forwarding the final guidelines on managing risks as applicable in outsourcing of financial services.

2. In view of concerns raised that these instructions are not being adhered to, we reiterate that outsourcing of any activity by the bank does not diminish its obligations, and those of its Board and senior management, who have the ultimate responsibility for the outsourced activity. Banks have been advised to take steps to ensure that the service provider employs the same high standard of care in performing the services as would be employed by the banks, if the activities were conducted within the banks and not outsourced. Further, banks should not engage in outsourcing that would result in their internal control, business conduct or reputation being compromised or weakened.

3. Instances of non adherence with the aforementioned guidelines have been observed with regard to subcontracting by the primary outsourced vendors and the engagement of subcontractors by the outsourced service providers without the prior consent of the bank. It is clarified that the Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by Banks apply mutatis mutandis to subcontracted activities, as well. Attention is invited to paragraph 5.5.1 of the guidelines, wherein banks have inter-alia been advised that the outsourcing contract should provide for prior approval/ consent by the bank of the use of subcontractors by the service provider for all or part of an outsourced activity. Before giving their consent, banks should review the subcontracting arrangements and ensure that these arrangements are compliant with the extant guidelines on outsourcing.

4. Certain cases, like outsourcing of cash management, might involve reconciliation of transactions between the bank, the service provider and its sub-contractors. In such cases, banks should ensure that reconciliation of transactions between the bank and the service provider (and/ or its subcontractor), are carried out in a timely manner. An ageing analysis of entries pending reconciliation with outsourced vendors should be placed before the Audit Committee of the Board (ACB) and banks should make efforts to reduce the old outstanding items therein at the earliest.

5. A robust system of internal audit of all outsourced activities should also be put in place and monitored by the ACB of the bank.

Yours faithfully,

(Sudarshan Sen)

Chief General Manager – in- Charge

Clarification under Section 185/186 of the CA 2013 w.r.t Advancing Loans to Employees

The Ministry of Corporate Affairs has issued a general circular no 04/ 2015 dated 10th March,  2015 to provide clarification with respect to advancing loans to employees would attract Section 185 or 186 or not.

1.Ministry has received a number of references seeking clarification on the applicability of provisions of section 186 of the Companies Act, 2013 relating to grant of loans and advances by Companies to their employees.

2. The issue has been examined and it is hereby clarified that loans and/or advances made by the companies to thelr employees, other than the managing or whole time directors (which is governed by section 185) are not governed by the requirements of section 186 of the Companies Act, 2013. This clarification will, however, be applicable if such loans/advances to employees are in accordance with the conditions of service applicable to employees and are also in accordance with the remuneration policy, in cases where such policy is required to be formulated.

Availability of new e-Forms at MCA portal w.e.f 11th March, 2015

The Ministry of Corporate affairs has issued a General Notice to inform all the stakeholders regarding the availability of the certain new e-Forms on the MCA portal with effect from 11th March, 2015.

The following e-Forms shall be available:

Form MGT-3 : Notice of situation or change of situation or discontinuation of situation, of place where foreign register shall be kept {Section 88(4)}

Form MGT-15 : Filing of Report on Annual General Meeting to ROC. {Section 121(2)}

Form PAS-6 : Filing of private placement offer letter. {Section 42}

Form DPT-3 : Return of deposits to be filed with the Registrar.

{Section 74(1)}

in order to provide ease to the stakeholders the following forms can be downloaded under the forms tab on the MCA portal and are requested to plan according for the same.

All About Sukanya Samriddhi Account

RBI/2014-15/494

IDMD(DGBA).CDD.No.4052/15.02.006/2014-15

March 11, 2015

The Chairman and Managing Director/Managing Director

Head Office, Government Accounts Department

State Bank of India/State Bank of Patiala/

State Bank of Bikaner & Jaipur/State Bank of Travancore/

State Bank of Hyderabad/State Bank of Mysore/Andhra Bank/

Allahabad Bank/Bank of Baroda/Bank of India/Punjab & Sind Bank/

Bank of Maharashtra/Canara Bank/Central Bank of India/ Corporation Bank/

Dena Bank/Indian Bank/Indian Overseas Bank/ Punjab National Bank/

Syndicate Bank/UCO Bank/Oriental Bank of Commerce/ Union Bank of India/

United Bank of India/Vijaya Bank/Axis Bank Ltd./ICICI Bank Ltd./IDBI Bank Ltd.

Dear Sir/Madam,

Sukanya Samriddhi Account

We forward herewith a copy of the Government of India Notification No. G.S.R.863(E) dated December 02, 2014 regarding the Sukanya Samriddhi Account for necessary action at your end. The Government of India, vide this Notification, has notified the Sukanya Samriddhi Account Rules, 2014, which came into force with effect from December 02, 2014.

2. Reporting of the Sukanya Samriddhi Account transactions i.e. receipt, payment, penalty, etc. may be directly done through the Government Account at Central Account Section, Reserve Bank of India, Nagpur on daily basis like the transactions of PPF, 1968, in order to have uniformity in reporting, reconciliation and accounting.

3. The Agency banks are required to observe the rules and regulations of the Scheme, and non-observance of rules and regulations would attract penal action, including de-authorization of the branch or bank. Pecuniary liabilities, if any, arising from such non-observance shall be borne entirely by the bank.

4. You may, therefore, approach Central Account Section, Reserve Bank of India, Nagpur for necessary arrangements to report Sukanya Samriddhi Account transactions with immediate effect.

5. Specimen of account opening application form and the passbook of the Sukanya Samriddhi Account are also enclosed for ready reference and necessary action at your end.

6. The contents of this circular may be brought to the notice of the branches of your bank operating the PPF, 1968 Scheme. These instructions should also be displayed on the notice boards of your branches for information.

Yours faithfully

(R. K. Singh)

Deputy General Manager

About Scheme:

• Rate of interest 9.1% Per Annum(2014-15),calculated on yearly basis ,Yearly compounded. 

• Minimum INR. 1000/-and Maximum INR. 1,50,000/- in a financial year. Subsequent deposit in multiple of INR 100/- Deposits can be made in lump-sum No limit on number of deposits either in a month or in a Financial year 

• A legal Guardian/Natural Guardian can open account in the name of Girl Child.

• A guardian can open only one account in the name of one girl child and maximum two accounts in the name of two different Girl children. 

• Account can be opened up to age of 10 years only from the date of birth. For initial operations of Scheme, one year grace has been given. With the grace, Girl child who is born between 2.12.2003 &1.12.2004 can open account up to1.12.2015.

• If minimum Rs 1000/- is not deposited in a financial year, account will become discontinued and can be revived with a penalty of Rs 50/- per year with minimum amount required for deposit for that year. 

• Partial withdrawal, maximum up to 50% of balance standing at the end of the preceding financial year can be taken after Account holder’s attaining age of 18 years.

• Account can be closed after completion of 21 years.

• If account is not closed after maturity, balance will continue to earn interest as specified for the scheme from time to time.

• Normal Premature closer will be allowed after completion of 18 years /provided that girl is married.

Know everything you wanted to know about the new investment avenue.

1. Who can open the account?

This account can be opened only for girl child who is below 10 years of age (as of account opening date) by their natural or legal guardian. One year relaxation is available for this year, which means even if the child has turned 10 anytime in 2014, you can still open this account in her name.

The account can only be opened for 2 girl children. Third account can be opened in exceptional cases where the depositor was blessed with 3 girl children at the first birth or twin girl children at the second birth.

2. Where can the account be opened?

The account can be opened in most public sector banks and Post offices.

I personally would advise going to large public sector banks like SBI as they are more advanced in terms of online access etc. As this is new investment avenue most banks would not have online access in place, but going forward larger banks would be first to bring those accounts online thereby giving convenience as it happened in case of PPF.

Moreover, the account can be transferred anywhere in India.

3. How much interest would be paid?

The interest would be paid annually and would be notified every year by Government of India like in case of PPF.

For Financial year 2014-15 its 9.1%.

4. What are the documents required?

You would require the following documents for opening of account:

Date of Birth proof for the child

Your Identity Proof

Your Address Proof

These are regular KYC documents that you require for opening a new bank account.

5. Rules for Deposit?

The account can be opened with minimum deposit of Rs 1,000 and multiples of Rs 100 thereafter. The maximum amount that can be deposited in the account is Rs 1.5 lakhs every financial year.

The deposit has to be made in cash, cheque or demand draft. Online option might be available in future as banks connect this with core banking.

Also minimum deposit of Rs 1,000 needs to be made every financial year; else a penalty of Rs 50 would be levied.

6. Premature withdrawal?

Depositors can withdraw 50% of the balance after the girl child turns 18 for higher education or marriage only.

7. Account Maturity?

The deposit has to be made for first 14 years from the year of account opening. The account matures either from 21 years from the date of account opening or when the girl is married, whichever is earlier.

Account would be closed prematurely in event of death of the girl child.

8. Loan Facility?

There is NO loan facility under this scheme.

9. Taxation?

Budget 2015 has made taxation of Sukanya Samriddhi Account EEE – i.e, “Exempt”,”Exempt”,”Exempt”. This means that the amount deposited up to Rs 1.5 lakh gives tax exemption u/s 80C.

Moreover there is no tax on interest received in the account and also there is no tax on withdrawal at maturity.

Recommendation:

Sukanya Samriddhi Account is a good initiative from Government to secure the future of girl child. Also the offer of higher interest rates than PPF is a welcome proposition.

Also Budget 2015 has made the product tax free at the time of maturity which is similar to PPF. So in most cases Sukanya Samriddhi Account is better alternative to PPF for girl child. This said you should also look to equity mutual funds for planning your child’s future.

FEME Act Amended for First Time to Prevent the Money Laundering.

The Foreign Exchange Management Act (FEMA) has been amended for the first time since its inception in the year 2000 and that too by the Finance Bill! There are some very important policy amendments which have been brought about by the amendments.

II. Power to regulate Capital Account Transactions

The Financial Sector Legislative Reforms Commission (FSLRC) was set up in the year 2013 under the chairmanship of Justice BN Srikrishna to consider all financial sector laws comprehensively. It had suggested changes regarding policy and regulation for foreign exchange capital flows.

It had suggested that power to make rules for inward capital flows (FDI) should be with the Government. Rules for outward flows (ODI) could be made by RBI.

The finance bill has proposed even more powers for the Central Government thanwhat has been recommended by the FSLRC.

Section 6 of FEMA provides that RBI may prescribe rules for Capital Account transactions. Sub-section (3) lists several capital account transactions – inflow of investment, outflow of investment, loans, guarantees, immovable property, etc.

The Finance Bill proposes that RBI will have the powers to prescribe any transactions of capital account transactions involving debt instruments. The Central Government will have the powers to prescribe any transactions of capital account transaction which do not involve debt instruments. The meaning of debt instruments will be determined by the Central Government.

Thus not just for inflow of funds, but even for outflow of funds, RBI will not have any powers. Only the Central Government will have the powers.

The Finance Bill clarifies that the rules issued by RBI will continue till the same are amended.

The Regulatory Powers under FEMA may be broadly considered to be divided as under:

-  Current Account Transactions – Section 5 – Already with Central Government.

-  Capital Account Transactions – Section 6 – was with RBI.

Now only debt instruments stay with RBI. All other capital account transactions shall be regulated by Central Government.

Thus RBI will have very little powers as far as FEMA is concerned.

There were differences between RBI and Ministry of Finance regarding foreign inward investment. Some of the differences took several years to get resolved. Even Supreme Court had to comment upon different regulations by Government & by RBI. With powers being centralisedwith the Central Government, these differences should not be there.

Administration of Section 3 (Dealing in Foreign Exchange) and Section 7 (Export of goods & services) continue with RBI.

III. Action against black money held abroad:

Assets held outside India in contravention of FEMA:

A new section 37A is proposed to be inserted. It provides that if any person holds any foreign exchange, foreign security or any immovable property outside India in contravention of section 4 of FEMA, the equivalent value of property in India can be seized. Prescribed procedure has to be followed.

This power of seizure under FEMA is in addition to the penal action under Income-tax Act and penal action under FEMA.

This provision is drastic. It provides that if the Authorised officer has “reason to believesuspected to have been held in contravention of FEMA …” the consequences of seizure will follow.

Any penal consequence should follow if the contravention is proved. One cannot seize property if an officer has mere reason to believe and he just suspects a contravention. Penal consequences should follow only after the contravention is established.

There are several instances where FEMA rules are not clear at all. Yet RBI or the Enforcement Directorate believe that there is a violation. A difference of view cannot be a basis for seizure.

Budget 2015 Analysis by Axis Bank

Budget 2015 Analysis