Tag: news

Survey on Foreign Collaboration in Indian Industry: 2023–2025 – Data Release

by Pushkar Mer

Reserve Bank released the results of the fifteenth round of its biennial survey on foreign collaboration in Indian industry (FCS) covering the financial years 2023-24 and 2024-25. This survey captures information on financial parameters and operations of the Indian companies having technical collaboration with foreign companies.

Highlights:

  • Foreign technical collaboration (FTC) agreements were primarily present in the foreign direct investment (FDI) companies, which were either foreign subsidiaries (i.e., single foreign investor holding more than 50 per cent of total equity) or foreign associate companies (i.e., foreign investors’ equity holding ranging between 10 to 50 per cent), with 68 per cent and 21 per cent share of the total FTCs, respectively.
  • The FTCs in the manufacturing sector entities accounted for 78.4 per cent of the total reported FTCs, of which, machinery and motor vehicles together accounted for 30.6 per cent; while FTCs in the services sector constituted 16.6 per cent.
  • Japan, the United States of America (USA) and Germany remained the top three countries contributing to the technical collaborations in the Indian entities.
  • Around 61 per cent of FTCs involved technology know-how transfer by the foreign collaborators and 8 per cent FTCs were for use of trademarks / brand names.
  • Royalty payments, inclusive both royalty and lump sum technical fees, was the payment mode for around two-thirds of FTCs.
  • Of the 601 reported FTC agreements, 187 had export restriction clauses and 188 FTC had provision for exclusive rights on assets transferred.
  • Manufacturing sector had the highest share in value of production among the FTC companies. Within manufacturing, motor vehicles sector had the largest share.
  • The exports of the FTC reporting entities grew at a faster pace (20.3 per cent) as compared to the imports (4.6 per cent) in 2024-25 – they had 17.7 per cent and 18.6 per cent shares, respectively, in the total value of production.
  • Average profitability of FTC reporting companies, measured by the ratio of gross profit to capital employed, stood at 14.4 per cent in the current survey round.

Great initiative by Government of India towards simplification of labour laws

by Pushkar Mer

The Government has consolidated 29 labour laws into four comprehensive Labour Codes. The four Labour Codes include the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020.

The Industrial Relations Code, 2020

The Industrial Relations Code, 2020 revolutionizes labour laws by simplifying compliance and promoting harmonious employer and employee relations. It strengthens collective bargaining, dispute resolution, and job security through clearer, uniform provisions. The Code empowers workers with uniform definitions while granting employers greater flexibility in operations. Overall, it fosters industrial peace, boosts productivity, and supports a balanced, growth-oriented work environment.

The Code on Wages, 2019

The Code on Wages, 2019 promotes fairness, equity, and inclusivity in India’s labour market. By ensuring uniform wage standards and social security, it safeguards both workers’ rights and employers’ interests. Overall, it strengthens economic justice, encourages formalisation, and enhances the dignity of labour.    

The Code on Social Security, 2020

The Code on Social Security, 2020 consolidates nine existing labour laws into a single, comprehensive framework. It is a step to ensure universal social protection for all workers by strengthening social welfare coverage for both organized and unorganized workers including gig and platform workers. It also promotes women’s participation in the workforce, and simplifies compliance, thereby enhancing ease of doing business.

The Code reflects the Government’s commitment towards inclusive growth and social security for all, in line with the vision of a Viksit Bharat by 2047

The Occupational Safety, Health and Working Conditions Code, 2020

The Occupational Safety, Health and Working Conditions Code, 2020 strengthens India’s labour architecture by unifying standards, empowering workers, and enhancing ease of doing business. It lays the foundation for a safer, fairer, and more productive workforce aligned with India’s vision of inclusive and sustainable growth.

Amendments to Directions – Compounding of Contraventions under FEMA 1999

by Pushkar Mer

Reserve Bank of India’s (RBI) updated Master Directions on Compounding of Contraventions under the Foreign Exchange Management Act, 1999 (FEMA), issued on April 22, 2025, vide Notification No. RBI/FED/2025-26/135, FED Master Direction No.04/2025-26) and amended via RBI/FED/2025-26/32, A.P. (DIR Series) Circular No. 04/2025-26 dated April 24, 2025. The said guidelines aim to streamline the compounding process, promote voluntary compliance, and enhance transparency in handling FEMA violations.

Below is a summary of the key aspects in reference to the Master Directions:

1. What is Compounding?


Compounding is a process that allows individuals or entities to voluntarily admit breaches of FEMA provisions, plead guilty, and seek redressal by paying a penalty.

This simplifies resolution, minimizes legal proceedings, and ensures compliance.

2. Key Updates in the Master Direction:

• Revised Compounding Rules: The Foreign Exchange (Compounding Proceedings) Rules, 2024, notified on September 12, 2024, have replaced the Foreign Exchange (Compounding Proceedings) Rules, 2000,

introducing higher monetary limits for compounding authorities and modernized payment methods.
• Application Process: Applications for compounding can be submitted physically or via the RBI’s PRAVAAH Portal with a fee of ₹10,000 plus GST. The application must include details such as foreign direct investment, external commercial borrowings, or branch/liaison office activities, along with an undertaking that the applicant is not under investigation by the Directorate of Enforcement (DoE).
• Compounding Authorities: The RBI’s Regional Offices and the Foreign Exchange Department (FED), CO Cell in New Delhi, are authorized to handle compounding applications.

• Non-Compoundable Cases: Contraventions involving unquantifiable amounts, serious offenses like money laundering, terror financing, or those already adjudicated by the DoE are not eligible for compounding.

Repeated contraventions within three years or cases under DoE investigation may also be ineligible.
• Payment of Penalty: The compounding amount, as specified in the order, must be paid within 15 days via demand draft or NEFT or RTGS or other permissible electronic modes in favor of the RBI. Failure to pay deems the application invalid, potentially leading to DoE referral.
• Compounding Matrix: A refined matrix provides transparency in calculating penalties, considering factors like undue gains, loss caused, and the contravener’s conduct. For non-reporting contraventions, the compounding authority may cap the penalty at ₹2,00,000 per contravention in exceptional cases, promoting a less punitive approach for technical lapses.
• Certificate of Compliance: Upon payment, the RBI issues a certificate confirming compliance with the compounding order.

It may be ensured that intimation of payment of application fee, to respective Regional Office, CO Cell, or Central Office, as the case may be. The compounding application must be accompanied by the payment details including the UTR number evidencing the payment of the application fee.

Please refer to the RBI’s official guidelines at https://www.rbi.org.in or contact the RBI’s Foreign Exchange Department for further details.

Disclaimer: This is for informational purposes only and does not constitute legal advice.

Extension of Time for delayed foreign remittance against import of goods or services

by Pushkar Mer

Reserve Bank of India (RBI) issues Master Circular to regulate import of goods and services in India. For delay remittance following guidelines of RBI Master circular should be complied

  • AD Category – I banks can consider granting extension of time for settlement of import dues up to a period of six months at a time (maximum up to the period of three years) irrespective of the invoice value for delays on account of disputes about quantity or quality or non-fulfilment of terms of contract; financial difficulties and cases where importer has filed suit against the seller. In cases where sector specific guidelines have been issued by Reserve Bank of India for extension of time (i.e. rough, cut and polished diamonds), the same will be applicable.
  •  While granting extension of time, AD Category –I banks must ensure that:

a.    The import transactions covered by the invoices are not under investigation by Directorate of Enforcement / Central Bureau of Investigation or other investigating agencies;

b.    While considering extension beyond one year from the date of remittance7 , the total outstanding of the importer does not exceed USD one million or 10 per cent of the average import remittances during the preceding two financial years, whichever is lower; and

c.     Where extension of time has been granted by the AD Category – I banks, the date up to which extension has been granted may be indicated in the ‘Remarks’ column.

(iii)                  Cases not covered by the above instructions / beyond the above limits, may be referred to the concerned Regional Office of Reserve Bank of India.

(iv)                 The above shall be reported in IDPMS as per message “Bill of Entry Extension” and the date up to which extension is granted will be indicated in “Extension Date” column.

Key Highlights of the Budget 2024-25 dated July 23,2024

by Pushkar Mer
  1. FISCAL DEFICIT REDUCTION

FY25 fiscal deficit have been projected at 4.9% of GDP as against 5.1% in Interim Budget. Further,

government is committed to reduce deficit below 4.5%.

* Expenditure for FY25 seen at 48.21 lakh crore and Receipts for FY25 32.07 lakh crore.

* FY25 Fiscal Deficit projected at 4.9% of GDP versus 5.1% in Interim Budget with a aim to

reach a fiscal deficit of below 4.5% next year.

2. SUPPORT TO MSMEs

New mechanism for facilitating continuation of bank credit to MSMEs during their stress

period. Further, Limit of Mudra loans increased from ₹10 lakh to ₹20 lakh.

* Turnover threshold of buyers for mandatory onboarding on TReDS platform to be reduced

from ₹500 crore to ₹250 crore.

* Financial support for 50 multi-product food irradiation units in MSME sector.

* E-Commerce Export Hubs to be set up in PPP mode to enable MSMEs and traditional artisans

to sell their products in international markets.

3. DEVELOPMENT OF INDUSTRIAL PARKS

* Investment-ready “plug and play” industrial parks to be developed in or near 100 cities.

* 12 industrial parks sanctioned under National Industrial Corridor Development

Programme.

* Critical Mineral Mission to be set up for domestic production, recycling of critical minerals,

& overseas acquisition of critical mineral assets

4. SKILLING AND INTERNSHIP PROGRAMMES

* 1,000 ITIs to be upgraded in hub & spoke arrangements in 5 years with focus on outcome

and quality in collaboration with states and industry.

* 1 crore youth to be skilled by India’s top companies in five years. Further, 12-month Prime

Minister’s Internship with monthly allowance of ₹5,000 to be spend by companies from their

CSR funds.

5. TAXES ON CAPITAL GAIN AND TDS/TCS REFORMS

* Short term gains tax on specified financial assets raised to 20% from 15%, while that on all

other financial assets and non-financial assets shall continue to attract the applicable tax rate.

Further, Long term gains tax on all financial and non-financial assets raised to 12.5%. Also,

the limit of exemption of capital gains on certain listed financial assets has been increased

from ₹1 lakh to ₹1.25 lakh per year.

* TDS rate on e-commerce operators reduced to 0.1% from 1%. Delays in payments of TDS to

be decriminalized upto their filing due date and the process of reassessment and reopening

of returns to be simplified.

* Payments made by a firm to its partner shall be subject to TDS at 10% for aggregate amounts

more than ₹20,000 in a financial year.

* TCS Levy of 1% on notified luxury goods of value exceeding ₹10 lakhs.

* TDS levy on interest exceeding ₹10,000 on Floating Rate Savings (Taxable) Bonds (FRSB)

2020 or any other notified security of the Central or State Governments

6. EMPLOYEE LINKED INCENTIVE SCHEMES

* First-time enrolments in EPFO to receive one month’s wage upon entering the workforce

in all formal sectors. A direct benefit transfer (DBT) of one month’s salary up to ₹15,000

will be provided in 3 instalments.

* Incentives to be provided to both employees and employers as per their EPFO

contributions for the first 4 years of employment.

* Reimbursement to employers up to ₹3,000 per month for 2 years towards their EPFO

contribution for each additional employee. The eligibility limit for this will be a salary of ₹1

lakh per month.

7. REDUCTION/EXEMPTION IN CUSTOM DUTIES

* Customs duties on gold, silver reduced to 6%, platinum to 6.4% and Lithium, Copper, Cobalt

have been exempted from Custom Duty. Duty has also been exempted on manufacturing of

connectors and Oxygen-fused copper.

* 3 medicines also fully exempted from custom duty for cancer patients.

8. REVISION IN TAX STRUCTURE UNDER THE NEW REGIME AND INCOME TAX REFORMS

Income Slab Applicable Tax Rate

₹Upto 3 lakh                      Nil

₹3-7 lakh                              5%

₹7-10 lakh                           10%

₹10-12 lakh                         15%

₹15 lakh and above         30%

* Withdrawal of the 2% equalisation levy. Further, standard deduction for salaried

employees will be hiked to ₹75,000, from ₹50,000 under new income tax regime in FY25.

* Similarly, deduction for family pension for pensioners will be enhanced from ₹15,000 to

₹25,000

* The deduction limit increased to 14% from 10% for employers’ contribution for the

National Pension System (NPS).

* Reduction in the rate of income-tax chargeable on income of foreign company (other than

that chargeable at special rates) from 40% to 35%.

9. TAXES ON BUYBACK OF SHARES, STT ON F&O

The income from buy-back of shares by companies be chargeable in the hands of the

recipient investor as dividend, instead of the current regime of additional income-tax in the

hands of the company. Further, the cost of such shares shall be treated as a capital loss to

the investor.

* An increase in the rates of STT on sale of an option in securities from 0.0625% to 0.1%

of the option premium, and on sale of a futures in securities from 0.0125% to 0.02% of the

price at which such futures are traded.

10. LABOUR RELATED REFORMS

    * Open architecture databases for the widely changing job market, and connecting potential

    employees with industry will be covered in the reforms.

    Shram Suvidha and Samadhan portal will be revamped to enhance ease of compliance for

    industry and trade.

    11. Abolishing angel tax

      In addition to the angel tax abolition, the Finance Minister extended the definition of “eligible startup” under the Startup India scheme to include entities incorporated between April 1, 2016, and March 31, 2025. This extension allows more startups to benefits from the tax holiday offered under the scheme.

      *Disallowances of expenses due to non-payment to MSMEs [Section 43B(h)]

      by Pushkar Mer

      Section 43B(h) is introduced by the Finance Act, 2023 and applicable from FY 2023-2024. The Government wants to ensure timely payments to Micro & Small Enterprises. As per MSMED Act, 2006, the definition of MSME enterprises is as under:

      *Particulars*                                    *Micro*     *Small*   *Medium*

      Turnover                                         <=5 crore <=50 crore <=250 crore

      Investment in Plant & Machinery <=1 crore <=10 crore <=50 crore

      As per MSMED Act, 2006, *the time limit for making payments* is as under:

      (a) Where written agreement does not exist – within 15 days from the date of acceptance

      (b) Where written agreement exist – Agreed date or within 45 days from the date of acceptance, whichever is earlier

      Section 43B(h) says that if payment is not made to MSME enterprises within the specified time limit, then the expenses will not be allowed as deduction under Income Tax Act and shall be added back to the total income. 

      Thus, if the payment is made in subsequent year or payment is made before the due date of income tax return or filing of income tax return in the subsequent year, then the same shall not be allowed as expense in the previous financial year, however the same shall be allowed as expense in the financial year in which the payment has been made.

      *Key points of Section 43B(h):*

      (a) This Clause is not applicable to Medium category enterprises. It is applicable only on Micro and Small category enterprises.

      (b) This Clause is not applicable on Capital expenditure (CAPEX) items, it is applicable on goods & services.

      (c) This Clause is not applicable on Traders, it is applicable on manufacturing & services sector

      (d) This Clause is not applicable on buyers who are filing their income tax return u/s 44AD/44ADA/44AE of the Income Tax Act;

      (e) This Clause is not applicable on those vendors who are not registered under MSMED Act, 2006

      (f) This Clause is not applicable on those payables for invoices dated on or before 31/03/2023

      Storage of Payment System Data

      by Pushkar Mer

      The entire payment data shall be stored in systems located only in India, except in cases clarified herein.

      The data should include end-to-end transaction details and information pertaining to payment or settlement transaction that is gathered / transmitted / processed as part of a payment message / instruction. This may, interalia, include – Customer data (Name, Mobile Number, email, Aadhaar Number, PAN number, etc. as applicable); Payment sensitive data (customer and beneficiary account details); Payment Credentials (OTP, PIN, Passwords, etc.); and, Transaction data (originating & destination system information, transaction reference, timestamp, amount, etc.).

      • There is no bar on processing of payment transactions outside India if so desired by the PSOs. However, the data shall be stored only in India after the processing. The complete end-to-end transaction details should be part of the data.
      • In case the processing is done abroad, the data should be deleted from the systems abroad and brought back to India not later than the one business day or 24 hours from payment processing, whichever is earlier. The same should be stored only in India.
      • However, any subsequent activity such as settlement processing after payment processing, if done outside India, shall also be undertaken / performed on a near real time basis. The data should be stored only in India.
      • In case of any other related processing activity, such as chargeback, etc., the data can be accessed, at any time, from India where it is stored.

      Banks having server outside India have been strictly directed by RBI for not sharing customer account sensitive data in bank statement

      In order to be in adherence to the Reserve Bank of India (RBI) Directive, the below listed information will not be available in the periodic banks statement/s for RTGS and NEFT transactions undertaken at your end (in cases if banks are storing data outside India):-

      • Serial Number of the Transaction
      • Message to Beneficiary
      • Beneficiary IFSC Number
      • Remitting IFSC Number
      • Address of the Remitter
      • Remarks
      • Debit Account Number
      • Beneficiary Account Number
      • Remitter Account Number
      • Reject Reason Description
      • Sender to Receiver Information

      Self-certification of eBRC

      by Pushkar Mer

      DGFT initiated a tremendous step towards ease of doing business by enhancing digital platform for exporters. Directorate General of Foreign Trade (DGFT) issued Trade Notice 33/2023-24 dated 10th November, 2023.

      Pilot Launch: A soft launch of the revamped eBRC system was proposed with effect from 15th November 2023. Starting from given date, each bank will set its cut-off date based on their readiness after completing User Acceptance Testing (UAT).

      To improve trade facilitation for exporters, DGFT has implemented an enhanced electronic Bank Realisation Certificate (eBRC) system. This more streamlined process is based on electronic Inward Remittance Messages (IRMs) to be transmitted directly by banks to DGFT. Based on the IRMs received, the exporters shall self-certify their eBRCs.

      The enhanced eBRC system shall enable exporters to reduce transaction time and costs. It would also ease the burden on bankers by simplifying the reconciliation of IRMs with shipping bills, SOFTEX, invoices, etc. and promote ease of doing business in general.

      Exporters can use this facility given by DGFT for the following activities:

      • View the IRMs/ORMs reported by the banks
      • Generate eBRC (self-certification) from IRMs
      • Cancellation of eBRC (if wrongly generated)
      • Utilization of report for the IRMs

      Exporters may contact the DGFT Helpdesk for eBRC-related issues, suggestions, or feedback through the following channels –

      • Call the Toll-Free Helpdesk Support Number.
      • Raise a Helpdesk ticket by navigating to DGFT website — > Services — > DGFT Helpdesk Service. Users may also track their earlier helpdesk ticket status or search previously filed helpdesk tickets.

      The revamped eBRC system’s user guide and Frequently Asked Questions (FAQs) will be available on the DGFT Website under the Learn Section. Additionally, DGFT will organize Exporter Outreach Programs to demonstrate and raise awareness about the revamped eBRC facility.

      Mandatory ISIN in India

      by Pushkar Mer

      By 30 September 2024, companies must convert all types of shares and debentures into dematerialized form by making the necessary application to a depository and securing International Security Identification Number (ISIN) for each type of security and shall notify all its existing security holders of this facility

      The Ministry of Corporate Affairs (MCA) has taken a significant step towards transparency by issuing notification dated 27th October, 2023. This notification introduces new rules under the Companies (Prospectus & Allotment of Securities) Second Amendment Rules, 2023 making the dematerialization of shares mandatory for private companies.

      MCA notification for dematerialization of shares of Private Limited Companies and it is very important for companies to comply with the notification of MCA to avoid penalties and other compliances issues.

      MCA notification in brief

      • Every Private Company other than a small company as on 31st March 2023 shall issue the securities only in Dematerialized Form
      • All such companies to comply with the MCA notification by 30th September 2024
      • Companies intending for Bonus, Buyback, ESOP, Rights shall ensure that before making such offer, the entire holding of securities of its promoters, directors, key managerial personnel has been dematerialized in accordance with provisions of the Depositories Act 1996 and regulations made there under
      • Transfer, Purchase and Sell of shares can only happen in dematerialize form


      Definition of non-small private limited companies?

      • Companies whose paid-up capital is Rs. 4 Crores & above
      • Turnover for preceding financial year is Rs. 40 Crores & above

      The above notification is not applicable to following-

      • Small private limited companies
      • Nidhi Companies
      • Government Companies
      • Wholly owned subsidiaries of Public companies