Laws you need to know about International Money Transfer
In the present era of globalization, there is a hike in the number of overseas remittances. The internationalization of production increased in world commercial services, and e-commerce activity has led to a total increase in cross-border transfers. Moreover, factors such as migration to abroad countries, overseas tourism, overseas education, employment opportunities, etc., have made cross-border transactions necessary in contemporary times.
This article covers the main concepts and laws applicable and the essential concepts regarding international money transfer laws you need to know about
Laws governing international payments
All the nations have their particular rules and regulations about governing their forex markets. The RBI is obligated to fulfil this duty in India. The umbrella legislation regulating India’s inward and outward remittances is the FEMA. Several rules and guidelines are established in furtherance of this Act.
The purpose of this legislation is two-fold:
- To make sure that the money remitted out of India does not have its roots in some crime. It also ensures that such outward remittance is not used for illegal purposes, such as funding terrorism.
- It helps the Reserve Bank of India stabilize the local currency markets by ensuring no sudden outflow of money from India, negatively affecting the economy.
FEMA is the legislation that replaced Foreign Exchange Regulation Act, 1973. The Indian economy was at an all-time low of reserves when FERA was implemented. The government strictly monitored all such foreign exchange transactions, which impacted the Indian economy directly or indirectly. But the legislation could not generate the desired results.
FERA remained of minor importance due to its strict regime after the Liberalization, Privatization, Globalisation (LPG) Reforms. Eventually, FEMA was implemented by the government. By this legislation, the government showed the shift from regulating to managing forex transfers.
Important terminologies under FEMA
Capital Account Transaction:
It means a transaction that alters the assets or liabilities, including contingent liabilities, outside India of belonging to the persons residing in India or alterations in assets and liabilities in India of those living outside India.
Current Account Transaction:
It includes all other transactions that do not fall in the ambit of capital account transactions.
Foreign Exchange:
It has a broad definition of foreign currency and includes deposits, letters of credit, bills of exchange, travellers cheques, etc
Person Resident in India:
It is a significant term for interpreting several schemes put forth by the Reserve Bank of India.
Anyone who has lived in India for more than 182 days during a financial year is a resident. But there are specific exclusions:
- Any Indian national who goes out of India or stays outside India under the below-mentioned circumstances will not be covered under this classification.
- For being employed out of India
- For doing a business or job outside of India
- Any other purpose which would depict such a person’s intent to stay outside of India for an undefined interval
- Anyone who comes to India or stays in India for any purpose other than those mentioned as below:
- For accepting to work inside India
- For carrying out a business or practice/job inside India
- For any other purposes which could depict such a person’s intent to live in India for an uncertain duration.
The definition also includes any individual or body corporate registered or incorporated as an individual resident in India. Further, any office, branch, or agency in India owned or controlled by a person residing out of India is included in this definition. Any office, unit, or agency outside India owned or controlled by a person living in India also comes under the ambit of this definition.
Authorized Dealer
FEMA mentions that any person specifically authorized by the Reserve Bank of India to deal in forex or foreign securities is called an Authorised Dealer. In short, while proceeding to make an international money transfer, try to comply with these laws for a hassle-free outward remittance from India.
