The MoF has notified Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2021 to amend the existing Foreign Exchange Management (Non-debt Instruments) Rules, 2019 vide its notification dated 06th August, 2021, which shall come into force from 09th August 2021 i.e. the date of publication in the Official Gazette
Insertion: after Rule 23(7)(i)(B), for the purpose of sub-clause (A), the following Explanation shall be inserted:
Explanation: An investment made by an Indian entity which is owned and controlled by NRI(s), on a non-repatriation basis, shall not be considered for calculation of indirect foreign investment.
REFERENCE
Rule 23(7)(i) [Downstream investment]:
(i) “indirect foreign investment” means downstream investment received by an Indian entity from-
(A) another Indian entity (IE) which has received foreign investment and (i) the IE is not owned and not controlled by resident Indian citizens or (ii) is owned or controlled by persons resident outside India; or
(B) an investment vehicle whose sponsor or manager or investment manager (i) is not owned and not controlled by resident Indian citizens or (ii) is owned or controlled by persons resident outside India:
Explanation: An investment made by an Indian entity which is owned and controlled by NRI(s), on a non-repatriation basis, shall not be considered for calculation of indirect foreign investment.
Provided that no person resident in India other than an Indian entity can receive Indirect Foreign Investment;
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MINISTRY OF FINANCE
(Department of Economic Affairs)
NOTIFICATION
New Delhi, the 6th August, 2021
S.O. 3206(E).—In exercise of the powers conferred by clauses (aa) and (ab) of sub-section (2) of section 46 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Central Government hereby makes the following rules further to amend the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, namely:-
1. Short title and commencement. – (1) These rules may be called the Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2021.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, under Rule 23 in sub-rule (7), in clause (i), after sub-clause (B), for the purpose of sub-clause (A), the following Explanation shall be inserted, namely:-
Explanation: An investment made by an Indian entity which is owned and controlled by NRI(s), on a nonrepatriation basis, shall not be considered for calculation of indirect foreign investment.
[F. No. 01/05/EM/2019]
ANAND MOHAN BAJAJ, Addl. Secy.
Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide number S.O.3732 (E), dated the 17th October, 2019 and subsequently amended vide numbers S.O. 4355 (E), dated the 5th December 2019, S.O. 1278 (E), dated the 22nd April, 2020, S.O. 1374 (E), dated the 27th April, 2020, S.O. 2442 (E), dated the 27th July, 2020 and S.O. 4441 (E), dated the 8th December, 2020.
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