Since 1991, the regulatory environment in terms of foreign investments has been consistently eased to make it investor-friendly. The liberalisation programme of the government aims at rapid and substantial growth of the country's economy and a harmonious integration with the global economy.
The Indian regulations permit outbound investments from India into overseas companies, branch offices, joint ventures, etc. The Indian home grown business houses interested in or aiming to set-up shop abroad or getting listed on the overseas bourses, also need to understand and stride through an interplay of cross-border taxes and regulatory challenges.
The foreign exchange regulations have been liberalised over the years to facilitate the remittance of funds both in and out of India. The changes have been introduced on a continuous basis in line with the government policy of economic liberalisation. Still, in few cases, specific approvals are required from the regulatory authorities for foreign exchange transactions/remittances.
The foreign exchange regulations in India are governed by the Foreign Exchange Management Act, 1999 (“FEMA”). The apex foreign exchange regulatory authority in India is the Reserve Bank of India (“RBI”) which regulates the law and is responsible for all key approvals.
FEMA is not only applicable to all parts of India but is also applicable to all branches, offices and set-ups outside India which are owned or controlled by a person resident in India. It also applies to all branches, offices and set-ups in India which are controlled or owned by person resident outside India. FEMA regulates all aspects of foreign exchange and has direct implications on external trade and payments.
FEMA also impacts foreign nationals who are working in India or outside.
