Modes of Fund Repatriation

• Foreign JV partners can repatriate funds through various legal methods.
  
• Common modes include dividends, royalties, technical service fees, management fees, and capital disinvestment.
  
• All remittances must comply with the Foreign Exchange Management Act (FEMA), 1999, and Reserve Bank of India (RBI) regulations.
  
• The JV agreement must define repatriation rights, frequency, and procedural requirements.
  
• Tax implications and regulatory approvals must be considered before initiating remittance.
  

Repatriation of Dividends

• Dividends declared by an Indian JV company can be freely repatriated to foreign shareholders.
  
• There is no requirement for RBI approval for repatriating dividends under the automatic route.
  
• Dividend distribution must follow the Companies Act, 2013, and the Income Tax Act.
  
• Dividend income is exempt from Dividend Distribution Tax (DDT), but may attract withholding tax under Section 195.
  
• The company must deduct applicable taxes at source and remit the net amount.
  

Repatriation of Capital on Exit

• A foreign partner can repatriate capital gains upon the sale or transfer of its equity in the JV.
  
• Valuation must be conducted by a SEBI-registered merchant banker or chartered accountant.
  
• The pricing must comply with FEMA pricing guidelines for equity instruments.
  
• Share transfer proceeds can be repatriated under the automatic route, provided sectoral caps and FDI norms are met.
  
• RBI approval may be required if repatriation is outside the prescribed limits.
  

Royalties, Technical and Management Fees

• Repatriation of royalties and fees for technical or management services is permitted under FEMA regulations.
  
• These must be within the limits specified in the FDI Policy and the RBI Master Directions.
  
• Agreements must be genuine and arms-length, supported by valid invoices and agreements.
  
• Prior approval is not needed in most sectors, but documentation must be preserved for audit.
  
• The Indian JV must deduct withholding tax and comply with Transfer Pricing regulations.
  

Repatriation Through Liquidation

• Upon winding up or liquidation of the JV, foreign partners can repatriate the remaining capital.
  
• All dues, taxes, and liabilities must be settled before remittance.
  
• A liquidator’s certificate and a Chartered Accountant certificate are required for fund transfer.
  
• RBI approval may be needed for large or complex disinvestments.
  
• Compliance with the Company Law, IBC, and Income Tax Act is mandatory.
  

Banking and Documentation Requirements

• Repatriation is processed through Authorized Dealer (AD) banks.
  
• Required documents include Form 15CB/15CA, board resolutions, invoices, FIRC, and valuation reports.
  
• Foreign partners must maintain a Designated Bank Account for receipt and remittance.
  
• The AD bank ensures compliance with FEMA, tax laws, and RBI reporting norms.
  
• Foreign investors must file an Annual Return on Foreign Liabilities and Assets (FLA Return) with the RBI.