Corporate and Other LawsQuestion 5362 of 221
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11. Considering the provisions of the FEMA, 1999 decide upon the maximum amount of commission that can be paid to Mr. Cooper as well as Consultancy charges to Accurate Consultants Ltd. for which approval of RBI would not be required under the above Act.

Options

AUSD 30000 and USD 10,000,000 respectively
BUSD 25000 and USD 1,000,000 respectively
CUSD10000 and USD 1,00,000 respectively
DUSD 15000 and USD 10000 respectively
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Correct Answer

Option AUSD 30000 and USD 10,000,000 respectively

All Options:

  • AUSD 30000 and USD 10,000,000 respectively
  • BUSD 25000 and USD 1,000,000 respectively
  • CUSD10000 and USD 1,00,000 respectively
  • DUSD 15000 and USD 10000 respectively

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Detailed Solution & Explanation

Under Schedule III of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, the following rules apply: 1. Commission to agents abroad for the sale of residential flats or commercial plots in India does not require prior approval of the Reserve Bank of India (RBI) if the commission per transaction does not exceed USD 25,000\displaystyle 25,000 or 5%\displaystyle 5\% of the inward remittance, whichever is more.
The villa cost is USD 600,000\displaystyle 600,000. Computing 5%\displaystyle 5\% of the inward remittance: 5%×USD 600,000=USD 30,0005\% \times \text{USD } 600,000 = \text{USD } 30,000 Comparing the two values: max(USD 25,000,USD 30,000)=USD 30,000\max(\text{USD } 25,000, \text{USD } 30,000) = \text{USD } 30,000 Therefore, the maximum commission that can be paid without RBI approval is USD 30,000\displaystyle 30,000.
2. Remittance for consultancy services for infrastructure projects does not require prior approval of the RBI up to USD 10,000,000\displaystyle 10,000,000 per project, whereas for other consultancy services the limit is USD 1,000,000\displaystyle 1,000,000. Shaping/curing of land, roads, and power facilities fall under infrastructure backup, so the limit is USD 10,000,000\displaystyle 10,000,000.
Thus, the maximum amounts for which RBI approval is not required are USD 30,000\displaystyle 30,000 and USD 10,000,000\displaystyle 10,000,000 respectively.
Hence, **Option A** is the correct answer.

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