What changed
Earlier, remittances exceeding USD 100,000 for pre-incorporation expenses required RBI prior approval under Schedule III of FEMA rules. Now, AD Category-I banks can permit such remittances up to the higher of 5% of investment brought into India or USD 100,000, based solely on statutory auditor certification.
What it means for you
This liberalisation reduces compliance burden for entities bringing foreign investment into India, as they no longer need RBI approval for pre-incorporation expense remittances within the new limits. Banks must verify the statutory auditor certificate before processing, ensuring due diligence without central bank pre-clearance.
What you must do
- Update internal FEMA processing guidelines to reflect the new limit (higher of 5% of investment or USD 100,000).
- Train staff to accept statutory auditor certification as sufficient documentation for such remittances.
- Inform customers about the liberalised procedure and the required auditor certificate.
- Maintain records of remittances under this circular for audit and reporting purposes.
Who it affects
AD Category-I banks, Entities in India bringing foreign investment, Statutory auditors certifying pre-incorporation expenses
What is the new limit for pre-incorporation expense remittance?
The limit is the higher of 5% of the investment brought into India or USD 100,000, as per the circular.
Do we still need RBI approval for these remittances?
No, prior RBI approval is no longer required. AD banks can process based on a statutory auditor certificate.
What documentation is needed from the customer?
A certification from the entity's statutory auditors confirming the pre-incorporation expenses incurred in India.