RBI has capped the penalty amount for FEMA violations to Rs 2 lakh, down from a percentage of the amount of violations earlier in an easing of regulations. Violations including use of liberalised remittance scheme (LRS) proceeds not reinvested within 180 days, exports not made within one year of advance receipt and gifting high value shares without RBI permission will now be penalised to a maximum of Rs 2 lakhs versus 0.30% to 0.75% of the violation amount earlier.

The changes were made in the master directions on FEMA by RBI on Thursday. “…based on the nature of contravention, exceptional circumstances/ facts involved in case, and in wider public interest, the maximum compounding amount imposed may be capped at Rs 2 lakh for contravention of each regulation/ rule (applied in a compounding application)…” RBi said.

FEMA rules prevents for example foreign property to be bought on a mortgage abroad, overseas direct investment (ODI) sale without a valuation report or ODI sale proceeds not repatriated within 90 days, resident Indians gifting high value shares to non-resident relatives without RBI permission and agricultural property purchases by NRIs.

“Rationalization of the penalty amount would significantly ease the burden on individuals and corporations involved in high-value contraventions,” said Harshal Bhuta, partner, P R Bhuta & Co, a chartered accountant firm.