Foreign Exchange Management Act , 2000

Foreign Exchange Management Act , 2000

 Foreign Exchange Management Act , 2000

FEMA replaced FERA in 1999.

•Came into effect from Jan 1, 2000.

•It extends to the whole of India and also

applies to all branches , offices and
agencies outside India , owned or
controlled by a person resident in India
 For eign
Objectives : Exchange Management Act , 2000
•Facilitate external trade and payments.
•Promote the orderly development and

maintenance of Foreign exchange marke

Dealings in Foreign Exchange :

•Section 3 of FEMA imposes restrictions on

dealings in foreign exchange and foreign
security and payments to and receipts
from any person outside India.

•Accordingly except as provided in terms of

the act, or with the general or special
permission of the Reserve Bank , no
person shall :

deal in any foreign exchange or foreign

security with any person other than an
authorized person .

•Make any payment to or for the credit of any person resident outside India
in any manner.

Receive otherwise through an authorized

person , any payment by order or on
behalf of a person resident outside India
in any manner.

•Enter in to any Financial Transaction in

India as a consideration for or in
association with acquisition or creation or
transfer of a right to acquire , any asset
outside India by any person.

•Holding of Foreign Exchange

•Save as otherwise provided in this act , no

person resident in India shall acquire ,
 For
holdeign Exchange
, own , possess Management
or transfer any Act , 2000
foreign exchange , foreign security or any
immediate property situated outside India

Current Account Transactions

•FEMA permits dealings in Foreign

exchange through authorized persons for
current account transactions. However the
central govt. can impose reasonable
restrictions in public interest.

Capital account Transactions

•Any person shall sell or draw foreign

exchange to or from an authorized person
for a capital account Transaction permitted
by the RBI in consultation with the central
govt.

A person resident in India may hold , own,

transfer or invest in foreign currency ,
foreign security or any immovable property
situated outside India if such currency ,
security or property was acquired , held or
owned by such person when he was
resident outside India or inherited from a
person who was resident outside India.A person resident outside India
may hold ,
own , transfer or invest in Indian currency,
security or any immovable property
situated in India if such currency was
acquired , held, or owned by such person
when he was resident in India or inherited
from a person who was resident in India.

•
 For
Theeign Exchangeby
RBI is empowered Management
this act to Act , 2000
prohibit , restrict, or regulate establishment
in India of a branch, office or other place
of business by a person resident outside
India for carrying on any such activity
relating to such branch, office or other
place of business.
•
Export of Goods and services

•Every exporter of goods shall furnish to

RBI or to such other authority a
declaration as specified containing true
and correct material, particulars , including
the amount representing the full export
value.

Contravention and Penalties

•Any kind of contravention under this act is

liable to a penalty up to thrice the amount
involved where it is quantifiable or up to 2
lakhs where it is not quantifiable.

•Further penalty may extend up to five

thousand rupees for every day after the
first day.

In FERA there was provision for

imprisonment and no limit on fine.

In FEMA a person will be liable to civil

imprisonment only if he does not pay the
fine within 90 days from the date of notice.

•Administration of this act

 Foreign provides for
•FEMA Exchange Management of an
the establishment Act , 2000
Enforcement Directorate for investigating
the contraventions under this act.

FERA & FEMA A Comparison

•Anything and everything

that has to do with foreign
exchange was controlled
.

•Aim of FERA is to prevent

misuse of Foreign Trade.
•Theme of FERA was
“Everything that is
specified is under control.
•FERA had 81 sections.

•Only the specified acts

related to foreign
exchange are regulated .

•The aim of FEMA is

facilitating Trade.
•Theme of FEMA is,

“Everything other than

what is expressly covered
is not controlled.”

•FEMA has only 49

sections
Many provisions of FERA like Indians
taking up employment abroad,
employment of foreign technicians in India
etc. have no appearance in FEMA.
Changing Dimensions of these laws
 Foreign
•With the advent ofExchange Management
Liberalization and Act , 2000
privatization , all these laws have
undergone a tremendous change , which
is clearly visible from the amendments that
had been made in these laws from time to
time. The provisions of MRTP Act, 1969
were amended after 1991 to make it more
reform oriented and remove its provisions
related to Monopolies restriction .

The FERA was totally scrapped and it

gave way to FEMA. The Industries
Development and regulation act 1951 had
also undergone through various
amendments to make way for reforms. In
short it can be said that all these laws and
constitutional provisions which earlier
played a regulatory role were transformed
to play a facilitator role for Industrial
development.