SUMMARY
- India has amended Foreign Exchange Management Regulations 2024 to simplify processes for startups opening foreign currency bank accounts.
- The definition of startups has been expanded to include entities up to 10 years old with a turnover threshold of INR 100 Cr, up from 5 years and INR 25 Cr.
- The amendment aligns with DPIIT’s updated startup definition and simplifies foreign exchange rules for over 1.5 lakh registered startups.
The Government of India has notified amendments to the Foreign Exchange Management Regulations 2024, streamlining rules for recognised startups to open foreign currency bank accounts. The changes follow updates in the definition of startups by the Department for Promotion of Industry and Internal Trade (DPIIT) and aim to boost ease of doing business in the country.
Under the new rules, the startup definition has been extended:
- Eligibility increased from 5 years to 10 years from the date of incorporation.
- Turnover cap raised from INR 25 Cr to INR 100 Cr.
This expanded definition is expected to benefit the 1.5 lakh DPIIT-registered startups, enabling them to better access global markets and capital.
The Foreign Exchange Management (Deposit) (Fourth Amendment) Regulations, 2024, introduced by the Reserve Bank of India (RBI), includes the following provisions:
Foreign Currency Bank Accounts:
- Authorised dealers (ADs) in India are empowered to facilitate the opening of foreign currency accounts for startups.
- Simplifies compliance for startups engaged in international transactions or raising foreign funds.
Non-Resident Accounts:
- Allows non-resident individuals to open interest-bearing accounts in Indian Rupees or foreign currencies, enhancing foreign investor participation.
Ambiguity Resolved:
- Clears confusion among authorised dealer banks, ensuring smoother implementation of the rules for DPIIT-recognised startups.
Mayank Arora, Regulatory Director at Nangia Andersen India, welcomed the move, stating, “The amendment harmonises the startup definition with the latest DPIIT notification, removing ambiguity for AD banks while facilitating foreign currency bank accounts for startups.”
The amendment aligns with the Budget 2024-25 announcement, which aimed to harmonise startup definitions for regulatory ease. This effort is part of broader measures to bolster India’s entrepreneurial ecosystem, making it more conducive for innovation and global partnerships.
By updating the foreign exchange rules and redefining startups, the government reinforces its commitment to fostering a thriving startup ecosystem. These changes are expected to reduce barriers to international financial transactions and create a more supportive framework for scaling businesses globally.
