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Delays in Reporting FDI: Late Submission Fees (LSF)

July 11, 2018     by Simratjeet Kaur

FDI reporting compliances involve coordination with the authorised dealer bank and the remitter bank; and it also involves compliances under other Regulations, like Companies Act.  Many Companies could not, therefore, make timely reporting under FEMA. These are only procedural lapses and the law only provided for adjudication process, or the company could have gone for compounding.

Now, the RBI vide notification dated 7th November 2017, has laid down a simple procedure for payment of late fees to regularise the instances of delay in reporting.  These sanctions such as late submission fees (LSF) will provide an incentive for the prompt filing of returns and is in the interests of good and efficient administration.

Master Direction on Reporting under Foreign Exchange Management Act, 1999 has laid down the amount of Late Submission Fees (LSF) that shall be laid down on the reporting delays that have taken place post 7th November 2017. The important points with respect to delayed submission and levy of late fees are as follows:

 

  1. Amount of late fees that shall be levied:
Amount involved in reporting (in INR) Late Submission Fees (LSF) as % of the amount involved* Maximum amount of LSF applicable
Up to INR 1,00,00,000

0.05 %

Lower of:

  • INR 10,00,000 or
  • 300% of the amount involved
More than INR 1,00,00,000

0.15 %

Lower of:

  • INR 1,00,00,000 or
  • 300% of the amount involved
*Note:

  1. The %age of LSF will be doubled every 12 months
  2. Minimum applicable LSF shall be INR 100.

 

  1. The payment of LSF is an option for regularizing reporting delays without undergoing compounding procedure.
  2. Calculation of amount of LSF to be done based on the following formula:

Amount involved X time rounded off to the next higher month X 0.05 % or 0.15 % as the case may be

In the case of ARF, the amount involved shall be the amount of inward remittance. And in the case of FC-GPR, the amount involved shall be the amount allotted to the non-resident person.

  1. The final acknowledgement shall be granted after the late submission fee is paid by the applicant.
  2. The date of reporting to the AD bank shall be deemed to be the date of reporting to the Reserve Bank provided the prescribed documentation is complete in all respects.
  3. In case the reporting form (whether in physical or electronic form) is incomplete, then the delay will continue till such time the form is received complete in all respects.
  4. The late submission fee is for reporting delays only and not for contraventions made for non-issue/ late issue of capital instruments or non-transfer/ late transfer of capital instruments etc.
  5. Mode of payment: The Late Submission Fee may be paid by way of a demand draft drawn in favour of “Reserve Bank of India” and payable at the Regional Office concerned.

It is to be noted that the Regional office of RBI has the discretion to levy LSF ranging from Minimum LSF as calculated by the aid of formula to the criteria mentioned for Maximum LSF (as detailed in the table above).

 

The reader can also look through other blogs based on New FEMA Regulations as notified on 7th November 2017, by clicking the following links:

  1. Issue of Securities: A Glimpse into the new FDI Regime
  2. Foreign Direct Investment In LLPs
  3. Reporting Requirements Under FEMA (Part 1)
  4. Reporting Requirements Under FEMA (Part 2)

 

 

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