Exchange Control Manual

Remittance on Account of Advertisements Abroad
Date : Jun 01, 2005





Exporters are permitted to retain up to 50% (70% in the case of 100% EOUs/Units located in EPZ/Software Technology Parks/Electronic Hardware Technology Parks) of the receipts from

export of goods in a foreign currency account with an authorised dealer in India titled "Exchange Earners' Foreign Currency (EEFC) account' (opened in terms of provisions contained in Chapter 14). The account may be maintained in any permitted currency and in any form [current, savings (without cheque facility) or term deposit account]. The balances in these accounts may be utilised for all bona fide payments of the account holder for purposes listed in Annexure I to Chapter 14 subject to the production, to the authorised dealer, of the necessary documentary evidence in support of the amount to be remitted (See paragraph 14D.4). Exporters maintaining foreign currency accounts in terms of paragraph 6A.12 are not allowed to maintain EEFC accounts.



Release of exchange towards charges for advertisements on overseas TV media, by debit to the EEFC Account, will be subject to the following conditions/documentation:



An application in form ADV giving brief description of advertisement against item 5 of the form.



Exporter's declaration at the end of form ADV to the effect that the advertisement is aimed at promoting their exports.



Bill/Invoice from the overseas TV company as also their confirmation that the advertisement has already been telecast on their media, is produced.



The amount of agency commission, if any, due to the Indian agent of overseas beneficiary should be deducted before allowing the remittance.



No advance remittance should be allowed.



Production of Undertaking/certificate regarding payment of Income-tax (cf. Paragraph 3B.10).


Agency Commission on Exports




Authorised dealers may allow payment of commission, either by remittance or by


deduction from invoice value, on application submitted by the exporter. The application,

by letter, should give particulars such as Importer-Exporter code number, customs/shipping bill number and date, name of commodity, name and address of buyer/agent and export value and should be supported by an attested copy of invoice and documentary evidence in support of the amount to be remitted. The remittance may be allowed subject to the following conditions:



(a) Amount of commission has been declared on GR / PP / SOFTEX form and accepted by Custom authorities or Department of Electronics, Government of India as the case may be. In cases where the commission has not been declared on GR / PP / SOFTEX form, remittance thereof may be allowed after satisfying about the reasons adduced by the exporter for not declaring commission on Export Declaration Form, provided a valid agreement/written understanding between the exporter and/or agent/beneficiary for payment of commission subsists.



Rate of commission does not exceed 12.5% of invoice value.



Commission sought to be remitted is not on export of a canalised item, project exports, or exports financed under lines of credit extended by Government of India or Exim Bank, or exports made by Indian partners towards equity participation in an overseas joint venture/wholly owned subsidiary.



The relative shipment has already been made.



Authorised dealers may allow payment of commission by Indian exporters, in

respect of their exports covered under counter trade arrangement through Escrow Accounts designated in U.S. dollar, subject to the following conditions;-



The payment of commission satisfies the conditions as at (a) to (d) stipulated in paragraph 6E.2(i) above.



The commission is not payable to Escrow Account holders themselves.



The commission should not be allowed by deduction from the invoice value.





Overprice arrangements by exporters are prohibited and no remittance towards overprice on exports will be permitted by Reserve Bank. Cases having exceptional features may be

referred to Reserve Bank explaining why the exporter is unable to remunerate overseas intermediary by payment of agency commission instead of overprice.


Sundry Remittances


Authorised dealers may allow remittances for various purposes indicated in Annexure I (Part B) subject to guidelines laid down therein. Applications not covered by the Annexure should be referred to Reserve Bank.



Authorised dealers should note that remittances can be made only on behalf of individuals, firms and companies actually availing of services. In cases where the remitter is a collection agent remitting collections from various parties towards examination fees, club membership fees etc., such remittances will require approval of Reserve Bank.


Advertisements abroad or on Internet




Reserve Bank may consider requests from Indian agents of overseas TV media


to collect advertisements from Indian exporters, who are having export earnings of not

less than Rs.10 lakhs during each of the preceding two years, for transmission on overseas TV media subject to fulfilment of certain conditions. The eligible exporters should submit their requests for release of exchange in form ADV to Reserve Bank through such approved agents. (See note under paragraph 6E.1 for regulations applicable to exporters maintaining EEFC accounts).



Remittances towards advertisements in print media abroad or on Internet may

be allowed by authorised dealers subject to limits and conditions stipulated in item IX (Part B) of Annexure I.

           (iii)     Authorised dealers may allow remittances of net rupee collections made by Indian agents of foreign newspapers/periodicals or Internet companies representing charges for advertisements in overseas print media, after deduction of income tax, commission and other charges, if any, due to the applicants. to the overseas companies subject to submission of following documents:

a) Form A2 together with clipping/text of the advertisement.

b) Invoice/bill from the overseas publisher/Internet company, indicating the total charges, amount of commission etc. due to the applicant and the net remittable amount (A copy of the agency agreement or any other documentary evidence in support of commission payable to the applicant should also be enclosed to the application).

c) A statement indicating how net remittable amount has been arrived at, duly certified by a Chartered Accountant.

d) A certificate/undertaking regarding compliance with Income Tax provisions (cf. paragraph3B.10).

e) An approval letter from the Ministry of Finance, Department of Economic Affairs, Government of India, New Delhi in case the advertisement is released by Central/State Government Departments/Undertakings.

f) In case of advertisement for public issue of equity shares of Indian companies, a declaration from the competent authority of the concerned company to the effect that the total expenditure in foreign exchange on conference, advertisements, publicity abroad is within 1% of the total value of the equity shares (including premium amount, if any) allotted to FIIs/OCBs/NRIs against payment in foreign exchange.

g) A declaration from the applicant that he has not applied for remittance of these collections to any other authorised dealer.

NOTE: A. Authorised dealers may allow remittance in advance subject to the provisions of paragraph 8C.10 towards cost of advertisement in print media or on Internet, out of EEFC account of the advertiser concerned provided the overseas agency insists advance remittance and an undertaking has been obtained from the applicant that he would submit documentary evidence in support of publication of advertisement within 3 months from the date of remittance. Authorised dealers should follow up submission of documentary evidence with the remitter.

B. The instructions contained in paragraph 8C.2(iii) are not applicable for remittance of charges for advertisements over foreign television media.

Remittance of magazine subscription by recognised agents

8C.2A Authorised dealers may allow remittance of net rupee collections made by Indian agents towards subscription to foreign magazines/periodicals to overseas publishers/distributors after deduction of commission, handling charges, etc. due to the Indian agent (i.e. applicant) subject to the following conditions:

(a) None of the magazines subscribed should be on the banned list.

(b) Remittances of net amount of subscription after deduction of commission/discount, handling charges due to the collection agent in India (i.e. applicant) is made direct to the overseas publishers/distributors of the magazines/periodicals against their invoices/price lists.

(c) A statement showing how the remittable amount has been arrived at net of commission, handling charges, etc. togetherwith documentary evidence (viz. invoices from overseas publishers/price lists, agreements between the publishers and Indian agents, etc.)

(d) Authorised dealers should satisfy themselves that subscription amounts from overseas subscribers (including subscribers from Nepal/Bhutan) have been received in foreign exchange.

(e) A declaration from the applicant that he has not remitted the cost of the magazines/periodicals separately through any other authorised dealer.


Remittances towards Legacies, Bequests or Inheritances



Applications for remittances on account of legacies, bequests or inheritances to beneficiaries resident outside India should be submitted to Reserve Bank in form LEG.


Payment of Freight in Foreign Currency
by Indian Exporters/Importers to Airline/
Shipping Companies or their Agents in India



Indian exporters/importers are permitted to make payment of freight in respect of

exports/imports from/into India in foreign currency to airline/shipping companies operating in India. Authorised dealers may sell foreign exchange to Indian exporters/importers on verification of the relative Airway Bill/Bill of Lading. Such sales should be reported to Reserve Bank on form A2 together with copies of the relative Airway Bill/Bill of Lading.


Bids in Foreign Currency for Projects
to be executed in India



(i) In terms of the guidelines issued by the Government of India, where the Central

Government has authorised bidding procedures enabling Indian as well as foreign companies/entities to bid for the supply of goods and services, Indian bidders have been permitted to bid in any currency and receive amounts in such currencies as in the case of foreign bidders. In cases where such bids providing for payment in foreign currency are accepted from Indian bidders, it will be necessary for the Indian agency inviting the bid to make payment in foreign currency to the Indian bidders as also the Indian bidder to receive payment in foreign currency from the Indian agency. Reserve Bank has accordingly granted general permission vide its Notification No.FERA.l25/93-RB dated l5th January 1993, issued under Section 8(l) of FERA 1973, to persons resident in India to incur liability in foreign exchange and to make or to receive payments in foreign exchange in respect of global bids where the Central Government has authorised bidding procedure enabling Indian as well as foreign companies/entities to bid for the supply of goods and services for projects to be executed in India. To enable the concerned Indian companies to meet their financial obligations in foreign currencies in such cases, authorised dealers may sell foreign exchange to the concerned resident Indian company which has awarded the contract on verification of the Government authorisation and terms of the contract. The Indian bidder will also be entitled to receive payments in foreign currency in such cases which should be surrendered to an authorised dealer in foreign exchange in terms of paragraph 3A.4 of ECM. Authorised dealers may also treat such foreign currency receipts by the Indian bidders on par with remittances received from abroad and extend the facility of crediting the foreign currency receipts to their EEFC account in accordance with the instructions laid down in Part D of Chapter 14 of ECM.



The following will constitute Government authorisation for the purpose:



Where foreign companies are permitted to bid for a project under a financing arrangement with a multilateral or bilateral institution and a certification to that effect has been given by the Indian agency or entity.



Where a bid is certified by an Administrative Ministry of the Government of India as one in which foreign companies/entities are permitted to bid as per guidelines specifically approved by the Department of Economic Affairs of the Ministry of Finance.



Where a certificate is issued by ONGC, OIL and GAIL in the case of global tenders floated by them in accordance with the guidelines issued by the Empowered Committee of Indigenisation of Oil fields equipment and services.



In all other cases, where specific authorisation has been issued by the Department of Economic Affairs of the Ministry of Finance.



All foreign currency sales as stated in paragraph (i) above should be reported to

Reserve Bank on form A2, together with the copy of the Government authorisation.


Supply of Goods by one 100% EOU/EPZ Unit to another 100% EOU/EPZ Unit against payment in foreign exchange



100% EOUs and units in EPZs have been permitted to sell goods manufactured by

them to other 100% EOUs/EPZs units against payment in foreign exchange provided such goods are required as input by buyer EOU/EPZ unit for its export production and both the buyer and supplier units comply with the relevant provisions of Exim Policy in force and the prescribed value addition criteria. Authorised dealers may sell foreign exchange to buyer units on receipt of application on form A2 containing details of the payments such as name, address of the EOU/EPZ beneficiary, cost of goods duly supported by documentary evidence such as invoice/bill etc. Such sales should be reported to Reserve Bank on form A2 in appropriate R Return together with copies of the relative invoice/bill and other required details.



The above provisions will also apply, mutatis mutandis, to supply of computer services and hardware by one unit in Software Technology Park (STP)/ Electronic Hardware Technology Park (EHTP) to another unit in STP/EHTP against payment in foreign exchange.


Sale of Overseas Telephone Cards



Agents in India enter into arrangements with reputed overseas organisations for selling

latter's pre-paid telephone cards against payment in Indian rupees or in foreign exchange drawn for business etc. visits abroad including travel under the Basic Travel Quota except for employment and on emigration. These cards are sold to the Indian travellers. Authorised dealers may allow the agents to remit the cost of such telephone cards to the overseas principals, after deducting commission. The application should be made by the Indian agent alongwith a statement showing the details such as the name and address of the overseas organisation, cost of each card, country/ies where the card can be used, rate of agency commission/mark-up receivable by the agent, name/address and passport number of each Indian traveller, accompanied by a certified copy of the agency agreement(s). An agent in India should also designate the branch of an authorised dealer with which the collections will be deposited and through which the remittance will be made to foreign principal/s. The designated branch of authorised dealer on satisfying that the application is in order with reference to the particulars furnished, allow the remittance net of commission of Indian agent subject to the compliance with the Guidelines in Annexure IV. No advance payment towards pre-paid telephone cards should be made to the overseas principal.


Commission to Overseas Agents on securing Advertisements for Indian newspapers/ periodicals, etc.




Indian newspapers, periodicals etc. are permitted to enter into agreements with their


overseas agents through whom advertisements are secured, for payment of commission

and other charges actually incurred towards postage, telephone, etc. provided the total amount does not exceed 30% of the gross tariff earned in foreign exchange for such advertisements. Authorised dealers may allow remittances of commission and reimbursement of other charges to the overseas agents of Indian newspapers etc. provided the net amount does not exceed 30% of the gross tariff earned by them in foreign exchange for advertisement in India subject to verification of the relative agreements entered into with their overseas agents, bank certificates of realisation of advertising charges and obtaining an undertaking/certificate regarding payment of Income-tax (cf. paragraph 3B.10)



Sometimes, the Indian newspapers etc. may enter into agreements with their

overseas agents providing for deduction of the amount of commission and other charges as stated above from the gross amount of the bills raised for tariff in foreign exchange. It will be necessary for the Indian newspapers etc. to ensure that the total deductions do not exceed 30% of tariff amount earned and atleast 70% is repatriated to India through normal banking channel and the tax liability of the non-resident is met by the Indian company concerned.


Supply of goods by 100% Export Oriented Units (EOUs)/Units in Export Processing Zones (EPZs), Electronic Hardware Technology Parks (EHTPs) and Software Technology Parks (STPs) to units in Domestic Tariff Area (DTA) against payment in foreign exchange



In terms of paragraph 9.10(b) of Chapter 9 of Export and Import Policy (1997-2002)

supplies made in Domestic Tariff Area (DTA) by EOUs and units in EPZs, EHTPs and STPs against payment in foreign exchange shall be counted towards fulfilment of the export obligation. Accordingly, concerned authorities may permit EOUs, units in EPZs, EHTPs and STPs to sell goods to buyers in DTA against payment in free foreign exchange. Authorised dealers may allow the buyers in DTA to make payment in free foreign exchange including funds held in their Exchange Earners Foreign Currency (EEFC) Accounts, without prior approval of the Reserve Bank. Authorised dealers should ensure that the seller EOUs, units in EPZs, EHTPs and STPs have been specifically authorised by the concerned authority to sell their goods in DTA and that the relative provisions of the Export and Import Policy and the terms and conditions of the permission granted by the concerned authority have been fully complied with.


Advance Remittances for Transactions other than Imports


8 C.10

Authorised dealers have been permitted to make advance remittances for import of goods

subject to conditions stipulated in paragraph 7A.10. Advance remittances may similarly be required to be made in respect of transactions other than imports e.g. engagement of foreign nationals, consultancy services, charges for advertisement in overseas newspapers/periodicals, specialised training in India/abroad, etc. which are either covered under the powers delegated to authorised dealers or which are being remitted by authorised dealers after obtaining approval in principle from Reserve Bank. It will be in order for authorised dealers to allow advance remittances in such cases after verifying the terms of contract and satisfying other conditions stipulated in the relevant paragraphs of the Manual. A guarantee from an overseas bank of international repute should be obtained from the overseas beneficiary, where the amount of remittance exceeds U.S. $ 15,000 or its equivalent. The authorised dealer concerned should follow up the matter to ensure that the beneficiary of the advance remittance has fulfilled his obligation under the contract/agreement with the remitter in India.

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