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+{{htmlmetatags>metatag-description=(Filed your FC-GPR or FC-TRS return late or breached the LRS limit? Compounding under Section 15 of FEMA 1999 lets you admit and settle it voluntarily.)&metatag-keywords=(FEMA compounding, Section 15 FEMA, foreign exchange violation, RBI compounding authority, FC-GPR late filing, LRS breach)&metatag-robots=(index,follow)&metatag-og:title=(FEMA Compounding: Regularise a Foreign Exchange Violation)&metatag-og:description=(Filed your FC-GPR or FC-TRS return late or breached the LRS limit? Compounding under Section 15 of FEMA 1999 lets you admit and settle it voluntarily.)&metatag-og:type=(article)}}
+====== FEMA Compounding: Regularise a Foreign Exchange Violation ======
+{{ :social:auto:fema-compounding-application-rbi-foreign-exchange-violation-india.png?direct&1200 |FEMA Compounding: Regularise a Foreign Exchange Violation — RTI Wiki}}
+<WRAP center round info 95%>
+**Quick Reply:** Filed your FC-GPR or FC-TRS return late or breached the LRS limit? Compounding under Section 15 of FEMA 1999 lets you admit and settle it voluntarily.
+</WRAP>
+A Pune resident received Rs 80 lakh from a foreign investor into her startup but filed the FC-GPR return with the RBI eleven months late, well past the deadline. Instead of waiting in fear of penalty proceedings, she can fix it: **compounding under Section 15 of FEMA 1999 is a voluntary, one-time settlement where you admit a foreign exchange contravention, pay a sum fixed by the Reserve Bank of India, and close the matter with no further proceedings.** This is the legal route for honest defaults like a late or missed FC-GPR, FC-TRS, ODI or APR return, a delay in allotting shares or repatriating funds, or a breach of the Liberalised Remittance Scheme limit.
+===== What compounding actually means =====
+Compounding is not a court case and it is not an admission of fraud. Under the Foreign Exchange Management Act 1999, **Section 13** sets out the penalty for a contravention, and **Section 15** gives the authority the power to compound, that is, to settle, most contraventions on payment of a fixed amount. Once a contravention is compounded, no further proceedings can be started against you for that same default. It is a clean, final closure.
+The current procedure is governed by the Foreign Exchange Compounding Proceedings Rules 2024, notified by the Ministry of Finance, Department of Economic Affairs, on 12 September 2024. These rules replaced the older 2000 Rules and came into force on the date of gazette publication. The rule-making power itself flows from **Section 46** of FEMA.
+For most resident individuals, NRIs, startups and companies, the everyday triggers are simple paperwork slips: you received foreign investment but reported it to the RBI late, you sent money abroad without correctly tracking the LRS ceiling, or you held shares in a foreign company and skipped the Annual Performance Report. These are exactly the kind of defaults compounding is meant to regularise.
+===== Who decides: the RBI officer pecuniary limits =====
+Within the Reserve Bank, the compounding authority depends on the rupee amount of the contravention. The more money involved, the more senior the officer who handles your application. The table below sets out the limits.
+^ Contravention amount ^ RBI compounding authority ^
+| Below Rs 60 lakh | Assistant General Manager |
+| Below Rs 2.5 crore | Deputy General Manager |
+| Below Rs 5 crore | General Manager |
+| Rs 5 crore and above | Chief General Manager |
+There is one important carve-out. Contraventions under **Section 3a** of FEMA, which cover hawala-type dealings and unauthorised dealing in foreign exchange, are not compounded by the RBI at all. Those are handled by the Directorate of Enforcement. So before you apply, identify which provision you breached: a reporting or allotment default goes to the RBI, but a Section 3a matter goes to the Enforcement Directorate.
+===== How to apply for compounding =====
+The process is designed to be done on your own or with a chartered accountant or company secretary. Follow these steps.
+  - **Identify the contravention.** Write down exactly which FEMA provision and which RBI regulation you breached, the amount involved, and the dates. For a late FC-GPR, this is the date you received funds versus the date you actually reported.
+  - **Stop the breach first.** Compounding regularises a past contravention, so complete the pending filing or allotment before or along with your application. The RBI expects the underlying default to be cured.
+  - **Prepare the application.** Submit a written application to the RBI Regional Office or the Compounding Authority of the Foreign Exchange Department, giving full facts, the nature of the contravention, and supporting documents.
+  - **Pay the fee.** The application fee is **Rs 10,000 plus applicable GST**, raised from the earlier Rs 5,000. Pay by demand draft or through NEFT or the online channel as directed.
+  - **Attend and receive the order.** The authority examines your case, may call you for a personal hearing, fixes the compounding amount, and passes the compounding order. The order is to be passed within 180 days of a complete application.
+For a Section 3a case, the application goes to the Directorate of Enforcement instead of the RBI.
+===== When compounding is NOT available =====
+Compounding is not a guaranteed escape hatch. It is refused or unavailable where the contravention amount is not quantifiable, because the authority cannot fix a settlement sum it cannot measure. It is also unavailable where the Enforcement Directorate views the contravention as serious, such as cases touching money laundering, terror financing, or national security. In those situations the matter proceeds as an enforcement action, not a settlement.
+If your default is a genuine, quantifiable reporting or repatriation lapse, you are almost always within the compoundable zone. If money was deliberately routed to evade the law, you are not.
+===== Real-life example =====
+Kashvi Pathak, a software professional in Bengaluru, invested in equity shares of a US company under the LRS but forgot to file the Annual Performance Report for two consecutive years. Worried about a notice, she calculated her total overseas investment, found it was well below Rs 60 lakh, and filed a compounding application with her RBI Regional Office. Because the amount fell in the lowest band, an Assistant General Manager handled her file. She paid the Rs 10,000 application fee plus GST, completed the pending APR filings, attended a short hearing, and received a compounding order that closed the matter permanently. Voluntary disclosure turned a looming penalty into a one-time settlement.
+For a fuller walk-through of how citizens use the Right to Information and statutory tools to push government and regulatory bodies for clarity, see [[https://righttoinformation.wiki/book|The RTI Playbook]].
+===== Frequently asked questions =====
+==== Is compounding an admission of guilt? ====
+It is a voluntary admission that a contravention happened, but it is a settlement, not a criminal conviction. Once you compound, the RBI cannot start fresh proceedings against you for that same contravention, so it gives you finality.
+==== What is the fee to file a compounding application? ====
+The application fee is Rs 10,000 plus applicable GST, increased from the earlier Rs 5,000 under the Foreign Exchange Compounding Proceedings Rules 2024. You pay it by demand draft or through NEFT or the prescribed online channel.
+==== How long does the RBI take to pass a compounding order? ====
+The compounding order is to be passed within 180 days from the date the RBI receives a complete application. Submitting full facts and documents at the start avoids back-and-forth that can delay this clock.
+==== Who handles my application inside the RBI? ====
+It depends on the rupee value of your contravention. An Assistant General Manager handles amounts below Rs 60 lakh, a Deputy General Manager below Rs 2.5 crore, a General Manager below Rs 5 crore, and a Chief General Manager handles Rs 5 crore and above.
+==== Can every FEMA violation be compounded? ====
+No. Contraventions under Section 3a of FEMA are dealt with by the Directorate of Enforcement, not the RBI. Cases where the amount is not quantifiable, or which the Enforcement Directorate treats as serious such as money laundering, are not compoundable.
+==== What are the most common defaults people compound? ====
+Late or missed filing of FC-GPR, FC-TRS, ODI or APR returns, delay in allotment of shares or in repatriation of funds, and breaches of the Liberalised Remittance Scheme limit. These reporting and timing lapses make up the bulk of compounding applications.
+===== Sources =====
+  * Foreign Exchange Management Act 1999, Sections 13, 15 and 46
+  * Press Information Bureau, release dated 12 September 2024 on the Foreign Exchange Compounding Proceedings Rules 2024: [[https://www.pib.gov.in]]
+  * Reserve Bank of India, compounding of contraventions under FEMA: [[https://www.rbi.org.in]]
+===== Related =====
+  * [[https://righttoinformation.wiki/nri-bank-account-fema-compliance-india|NRI bank account and FEMA compliance in India]]
+  * [[https://righttoinformation.wiki/lrs-outward-remittance-bank-refusal-form-a2|LRS outward remittance and bank refusal of Form A2]]
+  * [[https://righttoinformation.wiki/act|The RTI and statute reference]]
+{{tag>fema compounding regularise foreign exchange violation}}