Compounding under FEMA refers to the process by which businesses can seek approval from the Reserve Bank of India (RBI) for the regularization of any violation of FEMA regulations. This process involves the payment of a penalty for the violation and helps businesses avoid legal consequences while ensuring compliance. Here are some crucial regulations related to compounding under FEMA:

• Categories of Violations: RBI classifies violations of FEMA regulations into two types: technical and material. Technical violations don’t involve any breach of the law or intent to violate the law, while material violations involve a breach of the law or the intent to violate the law.
• Eligibility for Compounding: RBI has established specific eligibility criteria for compounding, including the nature of the violation, the amount involved, and the number of times the violation has occurred. Not all violations are eligible for compounding.
• Penalty: The penalty for compounding depends on the category of violation and the amount involved. RBI has detailed guidelines for calculating the penalty for compounding.
• Documentation: Businesses seeking compounding under FEMA must submit comprehensive documentation, including a compounding application, an undertaking of confidentiality, and supporting documents like bank statements, contracts, and invoices.

• Compliance Audit: Our team conducts an in-depth compliance audit to identify any violations of FEMA regulations. This involves reviewing foreign exchange transactions, such as imports, exports, foreign investments, loans, borrowings, and other relevant documents like contracts and invoices. Our experts also assess your compliance with FEMA regulations regarding repatriation of funds and reporting requirements.
• Eligibility Assessment: After identifying any violations of FEMA regulations, we assess their eligibility for compounding under FEMA. Our experts consider various factors such as the nature and gravity of the violation, the amount involved, and the number of times the violation has occurred to determine whether compounding is possible.
• Compounding Application: If compounding is possible, we prepare a detailed compounding application on your behalf. The application includes all required information, such as the nature of the violation, the amount involved, and the reasons for the violation. We also prepare supporting documents like bank statements, contracts, invoices, and other relevant documents.
• Liaison with RBI: Our team liaises with the RBI on your behalf to ensure smooth and timely processing of the compounding application. We provide all necessary documentation to the RBI and respond to any queries they may have.
• Progress Monitoring and Updates: We monitor the progress of the compounding application and provide regular updates to you on the application status. We also ensure that all deadlines and other requirements are met to avoid any delays in the approval process.
• Compliance Assistance: Once the compounding is approved, we provide guidance on best practices and ensure compliance with FEMA regulations to avoid any future violations. Our experts offer ongoing support to ensure that your business remains compliant with FEMA regulations.