Context: Recently, in a bid to promote ease of doing business, the finance ministry notified the Foreign Exchange Management (Overseas Investment) Rules, 2022.

Foreign Exchange Management (Overseas Investment) Rules, 2022

• It will subsume extant regulations pertaining to Overseas Investments and Acquisition and Transfer of Immovable Property Outside India Regulations, 2015.

• It provides for simplification of the existing framework for overseas investment and has been aligned with the current business and economic dynamics.

• The new rules have included overseas investment in the International Financial Services Centre (IFSC) by persons resident in India.

• A person resident in India may make overseas investment in an IFSC in India within the limits, a gazette notification issued by the finance ministry.

• A person resident in India can make a contribution to an investment fund or vehicle set up in an IFSC as Overseas Portfolio Investment (OPI).

• A resident individual may make Overseas Direct Investment (ODI) in a foreign entity, including an entity engaged in financial services activity, (except in banking and insurance), in IFSC, if such entity does not have subsidiary or step-down subsidiary outside IFSC where the resident individual has control in the foreign entity.

• An authorised dealer bank including its overseas branch may acquire or transfer foreign securities in accordance with the terms of the host country or host jurisdiction, as the case may be, in the normal course of its banking business.

Any resident individual can make an ODI by way of investment in equity capital or OPI subject to the overall ceiling under the Liberalised Remittance Scheme (LRS) of the Reserve Bank.

• Currently, the LRS permits USD 2,50,000 outward investment by an individual in a year.

With regard to corporate, an Indian entity can make OPI not exceeding 50 per cent of its net worth as on the date of its last audited balance sheet.

• An Indian resident may acquire immovable property outside India from a person resident outside the country by way of inheritance, purchase out of foreign exchange held in RFC account; purchase out of the remittances sent under the Liberalised Remittance Scheme; jointly with a relative; out of the income or sale proceeds of the assets, other than ODI.