The Reserve Bank of India (RBI) released a statement on February 11 clarifying payment-acceptance rules, especially when it came to foreign currency, for start-ups.

“A start-up in India with an overseas subsidiary is permitted to open foreign currency account abroad to pool the foreign exchange earnings out of the sales made,” the statement read.

It added this overseas subsidiary of the firm can pool revenue earned by both overseas and in-country customers into the foreign currency account held by the international subsidiary. “The balances in the foreign currency account should be repatriated to India within a period as applicable to realisation of export proceeds (currently nine months),” it said.

RBI also stated a start-up was permitted cash in on the receivables of its overseas subsidiary through internet payment gateways but for value not exceeding $10,000. But the RBI warned that before any of that to happen it needed to “appropriate a contractual arrangement between the start-up, its overseas subsidiary and the customers”.

In a separate circular, RBI also that shares could be issues without cash payment through sweat equity. The circular also stated that it allowed companies to issue equity shares against any other funds payable by the investee company.

Payments for use or acquisition of intellectual property rights, for import of goods, payment of dividends, interest payments and consultancy fees were also included on the list.

These clarifications come on the back of the government’s start-up initiative.

Source: Business Standard