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Monday, May 17, 2010

No Ministry of Commerce approval is required for Royalty/Lumpsum payment above 5%/8% - RBI Current Account Transaction Amendment

In continuation of Press Note 8 issued by DIPP with effect from 16.12. 2009 that No limits for royalty/lumpsum payment in FEMA under Current Account Transaction as per PN 8 – DIPP allowed it under Automatic route (ie) without the approval of RBI

The Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2010 is passed. They shall be deemed to have come into force with effect from the 16th day of December, 2009.

In terms of Rule 4 of the Foreign Exchange Management (Current Account Transactions) Rules 2000, prior approval of the Ministry of Commerce and Industry, Government of India, is required for drawing foreign exchange for remittances under technical collaboration agreements where payment of royalty exceeds 5% on local sales and 8% on exports and lump-sum payment exceeds USD 2 million [item 8 of Schedule II to the Foreign Exchange Management (Current Account Transactions) Rules, 2000]. The Government of India has reviewed the extant policy with regard to liberalization of foreign technology agreement and it was decided to omit item number 8 of Schedule II to the Foreign Exchange Management (Current Account Transaction) Rules, 2000, and the entry relating thereto.

Accordingly, AD Category-I banks may permit drawal of foreign exchange by persons for payment of royalty and lump-sum payment under technical collaboration agreements without the approval of Ministry of Commerce and Industry, Government of India.

The amendment to the Foreign Exchange Management (Current Account Transactions) Rules, 2000, in this regard has been notified by the Government of India vide Notification No.G.S.R.382 (E) dated May 5, 2010.

Source: RBI/2009-10/465 A. P. (DIR Series) Circular No. 52 dated 13th May 2010

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