Rules 8 and 10 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Once an application for compounding is in, the Rules say what the compounding authority may ask for, how long it has to pass an order, how and when the sum compounded is to be paid, what happens if it is not paid, what the order must contain and who gets a copy. This article reads rules 8 and 10 to 14. If an application of yours is already in, our FEMA compounding team can help you manage the dates.
Under rule 8(2) of the Foreign Exchange (Compounding Proceedings) Rules, 2024 (as notified on 12 September 2024), the compounding authority passes the order as expeditiously as possible but not later than one hundred and eighty days from receipt of an application complete in all respects, after hearing the applicant. Under rule 10 the sum must be paid within fifteen days of the order, and under rule 11 a failure to pay means the applicant is deemed never to have applied, so the Act's provisions on contravention apply again.
Which text is being explained
The Rules are G.S.R. 566(E) dated 12th September, 2024, made by the Central Government under clause (b) of sub-section (2) of section 46 read with sub-section (1) of section 15 of the Foreign Exchange Management Act, 1999; see our articles on section 15 and section 46. Later amendments should be checked on the Gazette site. Rules 1 to 3 are in the first article of this series; rules 4 and 5 in the articles on the Reserve Bank and the Directorate of Enforcement.
Rule 8: procedure
Rule 8(1). The compounding authority may, in addition to the particulars provided in the prescribed Form, call for any information, record or other documents relevant to the proceeding to be placed before it and may, if necessary, require the applicant to take such action as may be necessary "with respect transactions involved in the contravention". (A word is missing in the notification: it prints "with respect transactions", and the sense is "with respect to the transactions".)
Rule 8(2). The compounding authority shall, on receipt of the application in the prescribed Form complete in all respects at the Reserve Bank or, as the case may be, the Directorate of Enforcement, after affording an opportunity of being heard to the applicant, pass a compounding order as expeditiously as possible but not later than one hundred and eighty days from the date of receipt of such application.
Three features matter. The clock starts when the application is received "complete in all respects"; an incomplete application does not start it. There must be a hearing of the applicant before the order. And "not later than one hundred and eighty days" is an outer limit, with "as expeditiously as possible" as the standard. The Rules do not say what follows if the authority misses the period; the text is silent.
Rule 10: payment of the sum compounded
The sum for which the contravention is compounded, as specified in the compounding order under sub-rule (2) of rule 8, shall be paid by demand draft, or National Electronic Fund Transfer (NEFT), or Real Time Gross Settlement (RTGS), or such other permissible electronic or online modes of payment, in favour of the compounding authority within fifteen days from the date of the compounding order.
Note that the period of fifteen days is counted from the date of the order, not from receipt of the order.
Rule 11: failure to pay
If a person fails to pay the sum compounded in accordance with rule 10 within the time specified, he shall be deemed to have never made an application for compounding of any contravention under the Rules, and the provisions of the Act for contravention shall apply to him. The consequence is serious: not only does the compounding fall away, but the application is treated as never made, so the contravention goes back to the ordinary track of the Act, including adjudication under section 16. See our articles on adjudication under section 16 and contravention and penalties under section 13.
Rule 12: contents of the order
- 12(1). Every compounding order shall specify the provisions of the Act, or the rules, regulations, directions, requisitions or orders made under it, in respect of which the contravention has taken place, along with details of the alleged contravention. (The notification prints "detailsof" as one word.)
- 12(2). Every compounding order shall be dated and signed by the compounding authority under his seal.
Rule 13: copies
One copy each of the compounding order passed under rule 8(2) shall be provided to the applicant and the Adjudicating Authority. The copy to the Adjudicating Authority links to rules 6 and 7, covered in the article on contraventions that cannot be compounded, under which compounding stops or discharges adjudication.
Rule 14: pending applications
Any compounding application pending before the compounding authority on the date of commencement of the Rules is governed by the Foreign Exchange (Compounding Proceedings) Rules, 2000, "superseded herein". The 2024 Rules came into force on the date of publication, so applications pending on that date stay under the 2000 Rules.
Step-by-step view
| Step | Rule | Timing or rule of thumb as printed |
|---|---|---|
| Application in the prescribed Form with fee | 4(4) or 5(4) | Fee: ten thousand rupees plus goods and services tax, as applicable |
| Authority may ask for more information or documents | 8(1) | At any time it considers necessary |
| Hearing and compounding order | 8(2) | Not later than one hundred and eighty days from receipt of a complete application |
| Order specifies provisions and details; dated and signed under seal | 12 | With the order |
| Copy to applicant and Adjudicating Authority | 13 | With the order |
| Payment of the sum compounded | 10 | Within fifteen days from the date of the order |
| If not paid | 11 | Deemed never to have applied; the Act's provisions on contravention apply |
The Reserve Bank's own timeline
The Reserve Bank's Master Direction on compounding, updated as on April 24, 2025, adds practice for applications made to it. For that, read our article on where and how to apply for compounding and for amounts the article on the compounding amount matrix.
Example
Harbour Steel Ltd files a complete compounding application with the Reserve Bank on 1 March. The authority hears Harbour Steel and passes the compounding order on 10 July, which is within one hundred and eighty days. The order specifies the provisions contravened and the details of the contravention, is dated and signed under seal, and a copy goes to Harbour Steel and the Adjudicating Authority. Harbour Steel must pay the sum within fifteen days from 10 July, that is by 25 July, by demand draft, NEFT, RTGS or another permissible electronic mode. If it pays on 30 July, rule 11 treats it as never having applied.
A second illustration: had the application of 1 March been incomplete, for example missing a document the Form requires, the one hundred and eighty days would not start until the application was complete in all respects.
Common mistakes
- Counting the one hundred and eighty days from the first filing even if the application is incomplete.
- Counting the fifteen days from receipt of the order instead of from its date.
- Paying by an instrument that is not in rule 10. Rule 10 lists demand draft, NEFT, RTGS and other permissible electronic or online modes.
- Forgetting that failure to pay reverses the whole application (rule 11).
Need help with a compounding order or its payment?
The calendar after the order is short, and a missed payment undoes the entire exercise. Our FEMA compounding team can track the dates, prepare the payment and respond to requests under rule 8(1).
Key takeaways
- The compounding authority may call for information under rule 8(1).
- The order follows a hearing and is due within one hundred and eighty days of a complete application.
- Payment is due within fifteen days of the order, by the modes in rule 10.
- Non-payment means the applicant is deemed never to have applied (rule 11).
- Orders specify the provisions and details, are dated and signed under seal, and are copied to the applicant and the Adjudicating Authority.
Read next
- Compounding application form and fee
- Contraventions that cannot be compounded: rules 6, 7 and 9
- How to apply for FEMA compounding
- FEMA compounding application: draft template
Disclaimer: Based on the rules, regulations and Reserve Bank Master Directions under the Foreign Exchange Management Act, 1999 that this article names, each in the version and up to the date stated in the article, as consulted on 2 October 2026. Some texts are third-party copies or older prints and are identified as such. Limits, forms and time limits change by amendment and circular; later changes should be checked on the Reserve Bank and Gazette sites. This article is general information, not legal advice; check the official text before acting.