MUMBAI: The Reserve Bank of India (RBI) has clarified that individuals undertaking forex transactions of a personal nature are not covered by the new Fema reporting requirements and that the central bank will soon issue an FAQs to clarify the prevailing confusion.
The new FEMA trade regulations came into effect from October 1 and have triggered concerns among freelancers, content creators and small service exporters over whether they now need to file additional export declarations for payments received from overseas.
Governor Sanjay Malhotra said, “individuals are not required to report personal imports or exports, or personal earnings or spending in forex, while small exporters with bills up to Rs 10 lakh can use self-declaration and an invoice”.
Deputy governor Raohit Jain added that small exporters with transactions of up to Rs 10 lakh per bill can use a self-declaration and the invoice, while banks and authorised dealers, rather than individual exporters and importers, will handle reporting on the IEDPMS portal.
Jain further said the new trade regulations were issued in January this year, sufficiently ahead of their October 1 implementation, with the broader objective of simplifying trade processes by liberalising handling of trade matters by authorised dealers, simplify processes and promote ease of doing business.
Services exports and imports have now been included for reporting purposes. However, individuals are not required to comply with reporting requirements for contracts of a personal nature, Jain clarified, admitting that there appears to be some misunderstanding about the reporting obligations and that the RBI would clarify the requirements through an FAQ.
Malhotra further clarified that individuals, whether undertaking imports or exports, are not required to report such transactions irrespective of the amount when they are of a personal nature.
This can include subscribing to a TV channel, an app, journals or newspapers. It can also cover individuals providing services abroad, such as tutoring or small software services, and receiving payments for those services, Malhotra said.
On small exporters Malhotra said for up to Rs 10 lakh, a self-declaration along with an invoice will suffice. The Rs 10 lakh limit applies per bill and not annually, he added and clarified that this is an alternative to the more detailed reporting process rather than an exemption from providing information.
On the reporting mechanism, the governor said reporting on the IEDPMS portal is to be undertaken by banks and authorised dealers and not individual exporters and importers.
“Reporting is to be done by banks and ADs, by the intermediaries, and not by the individual exporters and importers,” Malhotra said.
Exporters and importers therefore need to provide the required information to their banks or authorised dealers, which will undertake the reporting.
He added that some of this information was already being provided by customers when making payments, including a purpose code and other details. The new framework requires some additional information, which the RBI said would improve data reporting and the availability of data on services exports. According to Malhotra, merchandise trade already follows such reporting requirements and that bringing services into a similar framework would improve the RBI’s data on services exports.