Finance Ministry Modifies Compounding Rules for Offences under FEMA
The Finance Ministry has made significant modifications to the compounding rules for offences under the Foreign Exchange Management Act (FEMA). These changes include raising the monetary limits for adjudications by RBI officials and introducing the option for online payments.
According to the Foreign Exchange (Compounding Proceedings) Rules, 2024, the fees for filing a compounding application have been doubled to Rs 10,000 plus GST, up from Rs 5,000 previously. Moreover, Assistant General Manager rank officials of the RBI are now authorized to decide on compounding applications of up to Rs 60 lakh, a substantial increase from the previous limit of Rs 10 lakh. Similarly, the monetary limits for Deputy GM and General Manager rank officers have been raised to Rs 2.5 crore and Rs 5 crore respectively. Furthermore, Chief General Manager in the RBI will now be empowered to decide on compounding cases exceeding Rs 5 crore.
In a statement, the Finance Ministry emphasized that the Foreign Exchange (Compounding Proceedings) Rules, 2024, aim to replace the Rules issued in 2000. This move aligns with the Union Budget 2024-25 announcement by Finance Minister Nirmala Sitharaman, demonstrating the government’s commitment to simplifying rules and regulations for Foreign Investments. The Department of Economic Affairs (DEA), Ministry of Finance, has notified the Foreign Exchange (Compounding Proceedings) Rules, 2024, as part of a broader initiative to streamline and rationalize existing rules and regulations, thereby facilitating ease of doing business.
The Ministry further highlighted that the amendments represent the government’s dedication to promoting ‘ease of investment’ for investors and ‘ease of doing business’ for enterprises. Nangia Andersen India’s Partner – Regulatory, Angali Malhotra, emphasized the notable upward revision of monetary limits for contraventions subject to compounding, indicating an increased level of responsibility across various levels of authority. Malhotra noted that this restructuring aims to enhance the efficiency with which cases are handled, reflecting the evolving regulatory environment and payment systems.
These amendments signify the Government’s commitment towards promoting ‘ease of investment’ for investors and ‘ease of doing business’ for businesses. Nangia Andersen India, Partner – Regulatory, Angali Malhotra said one of the key updates in the Rules include a notable upward revision of monetary limits for contraventions subject to compounding.
The revamped structure reflects the evolution of both the regulatory environment and payment systems, providing a more streamlined and efficient process for stakeholders involved.
