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Ministry of Finance Notifies Foreign Exchange (Compounding Proceedings) Rules, 2024, Replacing 2000 Rules - MMJC
The Ministry of Finance on 12 September, 2024 had notified Foreign Exchange (Compounding Proceedings) Rules, 2024 (herein after referred to as “the Rules”) in suppression of Foreign Exchange (Compounding Proceedings) Rules, 2000.
The major modifications introduced by the ministry through the Rules include:
1, Revision in the limits/ designations of RBI officials to decide on compounding application:
| Amount involved in the contravention (Earlier Scenario) | Designation of RBI official to compound the case (Earlier Scenario) | Amount involved in the contravention (Post Notification) | Designation of RBI official to compound the case (Post Notification) |
| INR 10 Lakhs or below | Assistant General Manager | Does not exceed 60 lakh rupees | Officer not below the rank of the Assistant General Manager |
| More than INR 10 lakhs but less than INR 40 lakhs | Deputy General Manager | Does not exceed INR 2.5 crore | Officer not below the rank of the Deputy General Manager |
| INR 40 lakhs or more but less than INR 100 lakhs | General Manager | Does not exceed INR 5 crore rupees | Officer not below the rank of the General Manager |
| INR 100 lakhs or more | Chief General Manager | Above 5 crore rupees | Officer not below the rank of the Chief General Manager |
2. Revision in compounding fees:
The compounding fees to be submitted with RBI/ DOE along with the compounding application has been revised to INR 10,000/- plus goods and services tax as may be applicable as compared to Rs. 5,000/- prescribed earlier.
3. Provision of payment facility:
The compounding fees and compounding penalty was to be submitted by way of demand draft. The Rules now provide an option for payment either by way of demand draft, NEFT/ RTGS or other permissible electronic or online modes of payment, in favour of the compounding authority.
4. Format of form provided:
The form to be submitted along with the compounding application has been revised in the Rules to additionally include the Goods and Services Tax Identification Number of the applicant, details of any adjudication notices/ orders, details of compounding orders issued under FEMA.
5. List of contraventions not to be compounded:
The Ruled specifically list contraventions that shall not be compounded which shall include contraventions where:
- Amount involved in not quantifiable.
- Provisions of Sec 37A of the Act are applicable i.e. Special provisions relating to assets held outside India in contravention of Section 4 of FEMA.
- Proceeding relates to serious contraventions suspected of Money laundering, terror financing or affecting the sovereignty and integrity of the nation.
- The Adjudicating Authority has already passed an order imposing penalty under section 13 of FEMA.
- Compounding authority is of the view that contravention requires further investigation.
Conclusion:
The Ministry has modified the Rules to provide higher authority to RBI officers which might aid speedy disposal off compounding orders, the timeline for disposal of compounding applications by the authority however shall continue to be 180 days. The payment options provided aligns the Rules to the present era. Further directions from Reserve Bank of India on the compounding proceedings are yet awaited.