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CMA Final · Corporate and Economic Laws · Foreign Exchange Management Act, 1999

Ravi, resident in India, receives a payment on behalf of a person resident outside India through a domestic intermediary, without any corresponding inward remittance from outside India. Under the Explanation to Section 3(c) of FEMA, 1999, how is this receipt treated?

Such a receipt is deemed to have been received otherwise than through an authorised person. The Explanation to Section 3(c) applies this where payment on behalf of a non-resident arrives via another person without a corresponding inward remittance from outside India.

  1. AIt is deemed received through an authorised person because an intermediary was used
  2. BIt is deemed received otherwise than through an authorised personCorrect
  3. CIt is exempt because the payment was made within India
  4. DIt is treated as a capital account transaction needing no permission

Explanation

The Explanation to Section 3(c) says that where a person in or resident in India receives a payment by order or on behalf of a person resident outside India through any other person (including an authorised person) without a corresponding inward remittance from abroad, the payment is deemed received otherwise than through an authorised person. Using an intermediary does not cure this.

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