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    REPORTING OF ADVANCE REMITTANCE FORM (ARF) TO RBI

    1. Introduction: 

    Foreign Exchange Management Act, 1999 (FEMA) is administered through the Authorised Persons. It is based on the declarations made to them by persons while undertaking the transactions. The Reserve Bank, therefore, has prescribed various reports and forms under FEMA to be submitted by/through Authorised Persons/ Authorised Dealer (AD) Category – I Banks/ Authorised Banks. Accurate compilations and timely submission of these reports are of critical importance as they not only act as a supervisory tool but also help in fine-tuning the policies relating to Foreign Exchange transactions regulated under FEMA. 

    1. Reporting under statutory requirements: 

    As per paragraph-9(A)(1) of Schedule I of FEMA Regulations, 2000 and Regulation 13.1(1) of FEMA FDI Regulations, 2017 ,an Indian company which has received amount of consideration for issue of capital instruments (Shares/ Convertible Debentures or any other instruments as per Foreign Direct Investment Scheme) and where such issue is reckoned as FDI, then Indian company shall report each receipt (including each upfront/ call payment) mentioning below details in ARF to the concerned Regional Office (RO) of the Reserve Bank of India (RBI) within 30 days of receipt of funds from the Foreign Entity. 

    • What is an ARF: 

    ARF is a form containing details such as

    • Name of the Indian Company
    • Address of the Indian Company
    • PAN (Permanent Account Number) of the Indian Company
    • Name of the AD Bank
    • Address of the AD Bank
    • Name of the Foreign Investor
    • Address of the Foreign Investor
    • Date of receipt of funds
    • Amount received in Indian Rupees
    • Amount received in Foreign Currency (if specifically mentioned in the certificate)
    • Type of Foreign Currency (if specifically mentioned in the certificate)
    • Conversion Rate (if specifically mentioned in the certificate)
    • Bank Account details into which the funds have been credited (Account Number, IFSC). 

    For Example: ABC Private Limited is an Indian Company. It has received funds from an US company named XYZ LLC on 10th February, 2018. ABC has to report the amount received in ARF within 30 days. Hence, due date for filing of ARF is 12th March, 2018. The date of filing is reckoned only on the date on which the ARF is forwarded to RBI and no other date is considered. 

    1. How to file ARF: 

    Earlier reporting of FDI was done through offline forms. We have been visiting the AD bank and submitting the forms to them in physical form. Now the scenario has been changed, reporting platform has enabled the customer to create an account in the e-Biz portal at the time of initial submission of the forms. Later on, for filing the forms, login into the e-Biz portal, fill the online Form ARF completely and then submit the same using Digitally Signed Certificates (DSC). AD Bank will be required to process the completed forms, verifying the contents from the available documents, if necessary by calling for additional information from the customer and then submit the same for RBI to process and allot the Unique Identification Number (UIN). With effect from 08.02.2016, filing of Form ARF need to be mandatorily filed through e-Biz portal. 

    1. Documents required for filing form ARF: 
    • Know Your Customer (KYC) in respect of Non-resident Investor: KYC is a six-pointer form in which is issued by the remitter bank. It contains name of the remitter, registration number, registered address, name of the investor’s bank, investor’s bank account number, period of banking relationship between the investor and investor bank. This is a mandatory document to be attached to the form at the time of filing. Lack of this, makes an application incomplete and AD bank will be put form for re-submission with KYC. 
    • Foreign Inward Remittance Certificate (FIRC): FIRC is an optional attachment to the Form ARF. It is issued by the concerned AD bank in which FDI have been received. Upon submission of a request letter by the investee after the receipt of funds, FIRC will be issued. It is a typical document containing the details of investor, investment amount details, purpose of investment and such other required details as required. However, FIRC need to be mandatorily obtained by the company for all capital account transactions. 
    1. Consequences of non-reporting of ARF: 

    In case of non-reporting of FDI received, it shall be treated as a contravention of the provisions made under FEMA. It may be required to compound all the contraventions made under FEMA regulations either by suo moto or by notice from RBI. For compounding the contraventions, an application has to be filed with RBI RO as per the prescribed procedure. In some cases of non-reporting of FDI, we may be required to submit compounding application to Central Office of RBI. 

    In case, the company has contravened the provisions, Late Service Fee (LSF) at the rates prescribed can be paid, without opting for compounding.

     

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