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These International Transactions through Debit or Credit Cards are Banned by the RBI.

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These International Transactions through Debit or Credit Cards are Banned by the RBI.
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International travelers who use credit or debit cards need to be mindful of transactions that are prohibited under the Foreign Exchange Management Act (FEMA) – 2000. Violating these regulations can lead to penalties imposed by the Reserve Bank of India (RBI), as well as potential consequences such as card blocking or revocation. Indian citizens utilizing authorized international cards should familiarize themselves with the FEMA rules outlined below to avoid any financial penalties or legal repercussions. By understanding and adhering to these guidelines, travelers can ensure a smooth and lawful experience while making payments abroad. Failure to comply with FEMA regulations can result in financial penalties, imprisonment, or both.

RBI Rules Under FEMA 2000

Under the guidelines of the Foreign Exchange Management Act (FEMA) – 2000, the Reserve Bank of India (RBI) has established rules that prohibit certain transactions when using credit or debit cards internationally. It is crucial for Indian citizens to be aware of these regulations to avoid potential penalties or legal consequences. The RBI rules under FEMA 2000 that prohibit credit or debit card use include:

  • Prohibition of Lottery-Related Transactions:

    All transactions related to lotteries, whether domestic or international, are strictly prohibited. This includes purchasing lottery tickets or participating in any lottery-related activities.

  • Restriction on Joy or Hobby Transactions:

    Transactions for activities such as racing, riding, and other recreational hobbies are not permitted under FEMA. Payments for indulging in joy or hobby-related expenses are prohibited.

  • Ban on Specified Gambling Transactions:

    Transactions involving the purchase of foreign lottery tickets, specific magazines as notified by the RBI, and gambling on sports events such as football matches or horse races are not allowed.

  • Prohibition of Equity Investment Commissions:

    Payments made as commissions on exports for equity investment in businesses or ventures, including Indian corporate partnerships or wholly-owned branches abroad, are not permitted.

  • Restriction on Dividend Balancing Payments:

    Transactions related to dividends, where the requirement of dividend balancing is applicable for any company, are prohibited under FEMA.

  • Limitations on Export Commissions:

    Transactions involving the payment of commissions on exports under the Rupee State Credit Route (RSCR) are not permitted. However, for tea and tobacco exports, a commission of up to 10% is permissible based on the invoice value.

  • Ban on Certain Telephone Services:

    Payments for telephone calls that fall under the category of “call back services” are not permitted under FEMA.

  • Restriction on Non-Resident Special Rupee (Account) Scheme:

    Transactions arising from interest earned through the Non-Resident Special Rupee (Account) Scheme are prohibited.

  • Foreign Exchange Prohibition for Nepal and Bhutan:

    Transactions involving foreign exchange are prohibited for individuals traveling to Nepal and Bhutan. Similarly, Indian credit or debit cardholders are not allowed to make transactions for residents of Nepal and Bhutan.

It is crucial for Indian citizens using authorized international credit or debit cards to thoroughly understand these FEMA rules to ensure compliance and avoid penalties or legal consequences. By adhering to these guidelines, travelers can have a hassle-free and lawful experience while making payments abroad.

Penalties for violating the provisions of the Foreign Exchange Management Act (FEMA)

Violation of the Foreign Exchange Management Act (FEMA) can result in severe penalties and legal consequences. The penalties for violating FEMA regulations are as follows:

  • Enforcement of Three Times the Value:

    If a violation of FEMA regulations is identified, a penalty can be imposed up to three times the value of the transaction involved.

  • Penalty Based on the Value Equivalent to Indian Currency:

    The penalty for violating FEMA regulations is calculated based on the value equivalent to Indian currency.

  • Imprisonment and Fine:

    Individuals found guilty of violating FEMA regulations can face imprisonment for up to five years and may be subject to fines as applicable. The penalty may include either a prison sentence, a monetary fine, or both.

It is important to note that State Bank of India (SBI) has issued a notice to its international credit or debit card customers, stating that apart from the transactions listed in the FEMA restricted transactions list, betting, gambling, and foreign exchange trading are also prohibited.
While most countries have fewer restrictions on activities such as racing, gambling, or purchasing specific magazines, it is crucial for Indian travelers to exercise caution.

Advertisements for these businesses abroad can be enticing, but it is essential to avoid getting provoked into using international credit or debit cards for these restricted transactions.
By being aware of the FEMA regulations and understanding the penalties associated with their violation, individuals can make informed decisions and ensure compliance with the law while using international credit or debit cards during their travels.

FAQs:

  1. Can I use my international credit or debit card for online gambling while traveling abroad?
    No, online gambling is generally prohibited under FEMA regulations. It is important to refrain from using your international credit or debit card for any form of gambling to avoid violating the law.
  2. Are there any exceptions or allowances for specific types of transactions under FEMA regulations?
    FEMA regulations provide a list of prohibited transactions, and there are no specific exceptions mentioned. It is important to abide by the restrictions outlined by the RBI and avoid engaging in any prohibited transactions.
  3. What should I do if I suspect a transaction I made with my international credit or debit card may violate FEMA regulations?
    If you suspect that a transaction you made may violate FEMA regulations, it is advisable to consult with a legal professional or contact your bank for guidance. It is important to rectify any potential violations promptly.
  4. Are there any limitations on the amount of penalty that can be imposed for violating FEMA regulations?
    The penalty for violating FEMA regulations can vary depending on the nature and extent of the violation. The RBI has the authority to enforce penalties up to three times the value of the transaction involved.

Conclusion:

Compliance with FEMA regulations is crucial when using international credit or debit cards while traveling abroad. Violating these regulations can result in significant penalties, including monetary fines and imprisonment. It is essential to be aware of the prohibited transactions and restrictions outlined by the RBI under FEMA – 2000.
By understanding the consequences of non-compliance and exercising caution, individuals can ensure that they do not engage in any prohibited transactions while using their international credit or debit cards. It is advisable to stay informed about the regulations, seek guidance if needed, and act responsibly to avoid any legal or financial repercussions.

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