rbi-compliance

RBI COMPLIANCE

DEFINITION

Section 13 of the FEMA Act states that if an individual breaches any provisions mentioned in the Act or any rule/notification/regulation/order/direction issued while exercising the powers of the Act, or breaches any provision subject to authorizations issued by the RBI, he/she will be slapped with a penalty up to thrice the amount related to such a breach. This amount can go up to a maximum of Rs.2 lakhs, wherever the said amount is quantifiable. Whenever the amount is not quantifiable/or the same is continuous in nature, the penalty charged may be extended to Rs.5000 per day, post the first day of the discovery of such a breach.

In the eyes of the law, compounding means a cordial/amicable settlement that may lead to avoiding prosecution for a past offence committed by an individual. However, compounding is not regarded as an intrinsic right. It is only delegated by the concerned Acts of law under which the said offence has been committed.

BASIC CONCEPTS

A) Under Section 15 of the FEMA (Foreign Exchange Management Act) 1999, compounding of contraventions is permitted. This also gives the Reserve Bank of India (RBI) power to compound as per the provisions of Section 13 of FEMA. However, this will exclude contraventions made under section 3(a), if an application is made by the individual committing the said contravention. Wherever such a contravention has been compounded, no further proceeding continuation/initiation will be there in respect to the contravention thus compounded.

B) Section 13 of the FEMA Act states that if an individual breaches any provisions mentioned in the Act or any rule/notification/regulation/order/direction issued while exercising the powers of the Act, or breaches any provision subject to authorizations issued by the RBI, he/she will be slapped with a penalty up to thrice the amount related to such a breach. This amount can go up to a maximum of Rs.2 lakhs, wherever the said amount is quantifiable. Whenever the amount is not quantifiable/or the same is continuous in nature, the penalty charged may be extended to Rs.5000 per day, post the first day of the discovery of such a breach.

C) By exercising the powers conferred by Section 46, along with that of Section 15, sub-section (1) of the FEMA, the Central Government has framed the Foreign Exchange (Compounding Proceedings) Rules, 2000. It relates to the compounding contraventions mentioned in Chapter IV of FEMA and has come into effect from 03.05.2020.

DOCUMENT REQUIRED FOR RBI APPLICATION:

  • Memorandum that has been received from the RBI
  • All the FIRC’s & FDI report that have been filed with the RBI
  • Board resolutions in respect of item no 2
  • FCGPR & allotment that have been filed with the RBI & ROC
  • List of previous compounding offences, if any
  • List of litigations

PROCEDURE FOR RBI COMPOUNDING APPLICATION

An applicant has to prepare the compounding application and submit the same to the regional office of the RBI. Then get the order and pay the penalty amount to the RBI.

Our team of tax and legal experts at ACE ALLIANCE will help you with your compounding application by collecting the memorandum, all the files of your previous compounding, the board resolution approval, FICR report etc. Then our team will write and submit a compounding application on your behalf to the RBI office. Our team will ensure you get the order as quickly as possible without incurring a huge cost.