Doing business in

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 INTRODUCTION
• FOREIGN EXCHANGE REGULATION
ACT,1973(FERA) WAS REPEALED BY
NEW ACT WHICH IS BEING CALLED
AS FOREIGN EXCHANGE
MANEGEMENT ACT,1999(FEMA)BUT
CAME INTO FORCE FROM JUNE
2000
ABOUT FEMA
 REASON FOR THE ENACT MENT
OF NEW ACT

H LOOK ON IT WILL MAKE US SEE FEEL THAT IT WAS MEANT FOR PROHIBIT
NTROL,& PROHIBITION
NTROL,& PROHIBITION TO
TO A
A NEW
NEW ERA
ERA FOR
FOR CONSOLIDATION
CONSOLIDATION &
&MM
 Difference between FERA
and FEMA
BASIS OF F.E.M.A 1999 F.E.R.A. 1973
DIFFERE
1. PREAMB
NCE AN ACT TO AN ACT TO
LE CONSOLIDATEAND CONTROL
2. STRUCT CONSOLIDATED,SHO
AMEND THE LAW CONTAINING 81
,REGULATE,RESTRICT
URE/CONRTER,CONTAINING
RELATING TO SECTION OF WHICH
OR PROHIBIT 32
FOREIGN
TENT ONLY 49 SECTION
FOREIGN OF ARE
EXCHANGE RELATED
EXCHANGE TO THE
WITH
WHICH 12 ARE
WITH THE OPERATIONAL
VIEW OF PART &
RELATED
OBJECTIVE TOOF OTHER FOR
CONSERVATION
OPERATION PART & PENALITES
FACILITATING ETC.
,PROPER UTILISATION
REST FOR TRADE OF FOREIGN
EXTERNAL
PENALITIES
PROMOTING EXCHANGE KEEPING
ORDERLY IN VIEW THE
DEVOLOPMENT AND INTEREST OF
MAINTENANCE OF ECONOMNIC
FOREX MARKET IN DEVOLOPMENT OF
3. NATURE OF CIVIL LAW DARCONIAN,SEVERE,&
4. ACT
PROHIBATIOONLY SPECIFIED HARSH
ALL ACTS ARE
5. N &
APPLICABIL ACT RELATING
IT DOES TO NORMALLY
NOY APPLY IT APPLIES TO CITIZEN
6. RELAXATIO
CONTRAVE
ITY FORIGN
ONLY EXCHANGE
FINE
TOTO CITIZEN & NOT
OF CONTROLLED
FINE WHO&WERE
& IMPRISONMENT
OF INDIA
7. N
PENALITIES
NTION 3IMPRISONMENT
TIMES
INDIA WHOTHEARE
SUM 5REGULATED
TIMES THE
OUTSIDE SUM
INDIA ,&
INVOLVED INDIA
& IF NOT INVOLVED & IN MOST
8. COMPOUNDIOUTSIDED
SEEKS TO VEST
QUANTIFIABLE
WHETHER
NO SUCH
CASES
OR
POWERNOT
IMPRISONMENT
THEY
WERE
NG OF UNLESS
DIECTORATETHEYARE
OF WERE
PRESENTRESIDENT IN
9. POWER OF THAN MAX 2ASOF NOT
RESTRICTED
ARE RESIDENT INDIABELOW THE RANK
OFFENCES ENFORCEMENT
LAKH .IF THE
SEARCH CONTAINED
INDIA
POWER IN OF D.S.P CAN DO
,SEZIURE CONTINUING
SECTION 37 &THAN
38 OF ANYTHING
ETC 5000/-
THE ACTPER DAY
FROM FIRST DAY
10. NEW CAPITAL ACCOUNT & THESE TERM WERE
TERM CURRENT ACCOUNT NOT USED
11. DEFINATTRANSACTION
AS CON TAINEDETC.
IN WERE EMPHASIS WERE
INTRODUCED
ION OF INCOME TAX THAT IS 182 NOT ONLY ON
RESIDEN DAYS OR MORE CITIZENSHIP BUT
12. PRESUM
T OF NO SUCH PRESUMPTION ACCUSE HAS TO
ALSO INTENTION
PTION
INDIA OF GUILITY MIND UNLESS PROVE THAT HE IS
OF PROSECUTION PROVE IT NOT GUILITY MIND
13. RIGHT
MENS YES LIKE CHARTERED NOT CLEARLY
TO
REATAKE ACCOUNTANT EXPRESSED
LEGAL
PRACTIO
NER
 Short title, extent,
application and
commencement
• (1) This Act may be called the Foreign Exchange
Management Act, 1999.
• (2) It extends to the whole of India.
• (3) It shall also apply to all branches, offices and
agencies outside India owned or controlled by a
person resident in India and also to any contravention
there under committed outside India by any person to
whom this Act applies.
• (4) It shall come into force on such date as the Central
Government may, by notification in the Official
Gazette, appoint:
• Provided that different dates may be appointed for
different provisions of this Act and any reference in
any such provision to the commencement of this Act
shall be construed as a reference to the coming into
force of that provision.
 3.Dealing in foreign
exchange
• Save as otherwise provided in this Act,
rules or regulations made there
under, or with the general or special
permission of the Reserve Bank, no
person shall—
• (a) deal in or transfer any foreign
exchange or foreign security to any
person not being an authorised
person;
• (b) make any payment to or for the
credit of any person resident outside
• (c) receive otherwise through an
authorised person, any payment by
order or on behalf of any person
resident outside India in any
manner;
• d) enter into any financial transaction
in India as consideration for or in
association with acquisition or
creation or transfer of a right to
acquire, any asset outside India by
 4.Holding of foreign
exchange, etc.

• Save as otherwise provided in this

Act, no person resident in India
shall acquire, hold, own, possess or
transfer any foreign exchange,
foreign security or any immovable
property situated outside India
 5.Current account
transactions
• Any person may sell or draw foreign
exchange to or from an authorised
person if such sale or drawal is a
current account transaction:
• Provided that the Central
Government may, in public interest
and in consultation with the
Reserve Bank, impose such
reasonable restrictions for current
account transactions as may be
6 . C a p ita l a cco u n t tra n sa ctio n s .
(1) Subject to the provisions of sub-section (2),
any person may sell or draw foreign exchange to or
from an authorised person for a capital account
transaction.
(2) The Reserve Bank may, in consultation with the
Central Government, specify—
(a) any class or classes of capital account
transactions which are permissible;
(b) the limit up to which foreign exchange shall
be admissible for such transactions :
Provided that the Reserve Bank shall not impose
any restriction on the drawel of foreign exchange
for payments due on account of amortization of
loans or for depreciation of direct investments in
the ordinary course of business.
(3) Without prejudice to the generality of the
provisions of sub-section (2), the Reserve Bank may, by
regulations, prohibit, restrict or regulate the
following—
(a) transfer or issue of any foreign security by a
person resident in India;
(b) transfer or issue of any security by a person
resident outside India;
(c) transfer or issue of any security or foreign
security by any branch, office or agency in India of a
person resident outside India;
(d) any borrowing or lending in foreign exchange in
whatever form or by whatever name called;
(e) any borrowing or lending in rupees in whatever
form or by whatever name called between a person
resident in India and a person resident outside India;
(f) deposits between persons resident in India and
persons resident outside India;
g) export, import or holding of currency or currency notes;
(h) transfer of immovable property outside India, other
than a lease not exceeding five years, by a person resident
in India;
(i) acquisition or transfer of immovable property in India,
other than a lease not exceeding five years, by a person
resident outside India;
(j) giving of a guarantee or surety in respect of any debt,
obligation or other liability incurred—
(i) by a person resident in India and owed to a person
resident outside India; or
(ii) by a person resident outside India.
 7 . Export of goods and
services .
(1) Every exporter of goods shall—
(a) furnish to the Reserve Bank or to such other
authority a declaration in such form and in such
manner as may be specified, containing true and
correct material particulars, including the amount
representing the full export value or, if the full
export value of the goods is not ascertainable at
the time of export, the value which the exporter,
having regard to the prevailing market conditions,
expects to receive on the sale of the goods in a
market outside India;
(b) furnish to the Reserve Bank such other
information as may be required by the Reserve Bank
for the purpose of ensuring the realisation of the
export proceeds by such exporter.
(2) The Reserve Bank may, for the purpose of
ensuring that the full export value of the goods
or such reduced value of the goods as the Reserve
Bank determines, having regard to the prevailing
market conditions, is received without any delay,
direct any exporter to comply with such
requirements as it deems fit.
(3) Every exporter of services shall furnish to
the Reserve Bank or to such other authorities a
declaration in such form and in such manner as may
be specified, containing the true and correct
material particulars in relation to payment for
such services.
 40 . Suspension of operation of this
Act .

40. (1) If the Central Government is satisfied that

circumstances have arisen rendering it necessary that any
permission granted or restriction imposed by this Act
should cease to be granted or imposed, or if it considers
necessary or expedient so to do in public interest, the
Central Government may, by notification, suspend or relax
to such extent either indefinitely or for such period as
may be notified, the operation of all or any of the
provisions of this Act.
(2) Where the operation of any provision of this Act has
under sub-section (1) been suspended or relaxed
indefinitely, such suspension or relaxation may, at any
time while this Act remains in force, be removed by the
Central Government by notification.
• (3) Every notification issued under this section
shall be laid, as soon as may be after it is
issued, before each House of Parliament, while
it is in session, for a total period of thirty days
which may be comprised in one session or in
two or more successive sessions, and if, before
the expiry of the session immediately following
the session or the successive sessions
aforesaid, both Houses agree in making any
modification in the notification or both Houses
agree that the notification should not be issued,
the notification shall thereafter have effect only
in such modified form or be of no effect, as the
case may be; so, however, that any such
( 4 ) A person resident in India may hold , own , transfer or
in ve st in fo re ig n cu rre n cy , fo re ig n se cu rity o r a n y
im m o va b le p ro p e rty situ a te d o u tsid e In d ia if su ch
cu rre n cy , se cu rity o r p ro p e rty w a s a cq u ire d , h e ld o r
o w n e d b y su ch p e rso n w h e n h e w a s re sid e n t o u tsid e In d ia
o r in h e rite d fro m a p e rso n w h o w a s re sid e n t o u tsid e In d ia .
( 5 ) A person resident outside India may hold , own ,
tra n sfe r o r in ve st in In d ia n cu rre n cy , se cu rity o r a n y
im m o va b le p ro p e rty situ a te d in In d ia if su ch cu rre n cy ,
se cu rity o r p ro p e rty w a s a cq u ire d , h e ld o r o w n e d b y su ch
p e rso n w h e n h e w a s re sid e n t in In d ia o r in h e rite d fro m a
p e rso n w h o w a s re sid e n t in In d ia .
( 6 ) Without prejudice to the provisions of this section , the
R e se rve B a n k m a y , b y re g u la tio n , p ro h ib it, re strict, o r
re g u la te e sta b lish m e n t in In d ia o f a b ra n ch , o ffice o r o th e r
p la ce o f b u sin e ss b y a p e rso n re sid e n t o u tsid e In d ia , fo r
ca rryin g o n a n y a ctivity re la tin g to su ch b ra n ch , o ffice o r
o th e r p la ce o f b u sin e ss.
 Contravention & penalties
If any person contravenes any provision of this Act, or
contravenes any rule, regulation, notification, direction or
order issued in exercise of the powers under this Act, or
contravenes any condition subject to which an authorization is
issued by the Reserve Bank, he shall, upon adjudication, be
liable to a penalty up to thrice the sum involved in such
contravention where such amount is quantifiable, or up to two
lakh rupees where the amount is not quantifiable, and where such
contravention is a continuing one, further penalty which may
extend to five thousand rupees for every day after the first
day during which the contravention continues.
Any Adjudicating Authority adjudging any contravention may, if
he thinks fit in addition to any penalty which he may impose
for such contravention direct that any currency, security or any
other money or property in respect of which the contravention
has taken place shall be confiscated to the Central Government
and further direct that the foreign exchange holdings, if any,
of the persons committing the contraventions or any part
thereof, shall be brought back into India or shall be retained
outside India in accordance with the directions made in this
behalf.
.
" Property " in respect of which contravention has
taken place, shall include deposits in a bank,
where the said property is converted into such
deposits, Indian currency, where the said property
is converted into that currency; and any other
property which has resulted out of the conversion
of that property.
If any person fails to make full payment of the
penalty imposed on him within a period of ninety
days from the date on which the notice for payment
of such penalty is served on him, he shall be
liable to civil imprisonment
 37 . Power of search , seizure , etc . of
enforcement director

(1) The Director of Enforcement and other officers of

Enforcement, not below the rank of an Assistant Director,
shall take up for investigation the contravention referred
to in section 13.
(2) Without prejudice to the provisions of sub-section (1),
the Central Government may also, by notification, authorise
any officer or class of officers in the Central Government,
State Government or the Reserve Bank, not below the rank of
an Under Secretary to the Government of India to
investigate any contravention referred to in section 13.
(3) The officers referred to in sub-section (1) shall
exercise the like powers which are conferred on income-tax
authorities under the Income-tax Act, 1961 (43 of 1961) and
shall exercise such powers, subject to such limitations
laid down under that Act.
Empowering other officers .
41 . Power of Central Government to give
directions .

For the purposes of this Act, the Central

Government may, from time to time, give to
the Reserve Bank such general or special
directions as it thinks fit, and the Reserve
Bank shall, in the discharge of its
functions under this Act, comply with any
such directions.
 43 . Death or insolvency in certain
cases .

Any right, obligation, liability, proceeding or appeal

arising in relation to the provisions of section 13 shall
not abate by reason of death or insolvency of the person
liable under that section and upon such death or
insolvency such rights and obligations shall devolve on
the legal representative of such person or the official
receiver or the official assignee, as the case may be :
Provided that a legal representative of the deceased shall
be liable only to the extent of the inheritance or estate
of the deceased.
 44 . Bar of legal proceedings .
No suit, prosecution or other legal proceeding shall lie
against the Central Government or the Reserve Bank or any
officer of that Government or of the Reserve Bank or any
other person exercising any power or discharging any
functions or performing any duties under this Act, for
anything in good faith done or intended to be done under
this Act or any rule, regulation, notification, direction or
order made there under.
45 . Removal of difficulties .
(1) If any difficulty arises in giving effect to the
provisions of this Act, the Central Government may, by
order, do anything not inconsistent with the provisions of
this Act for the purpose of removing the difficulty:
Provided that no such order shall be made under this
section after the expiry of two years from the
commencement of this Act.
(2) Every order made under this section shall be laid, as
soon as may be after it is made, before each House of
Parliament.
 INVESTIGATION
The Directorate of Enforcement investigate to prevent
leakage of foreign exchange which generally occurs through
the following malpractices :
Remittances of Indians abroad otherwise than through
normal banking channels, i.e. through compensatory payments.
Acquisition of foreign currency illegally by person in
India.
Non-repatriation of the proceeds of the exported goods.
Unauthorised maintenance of accounts in foreign countries.
Under-invoicing of exports and over-invoicing of imports
and any other type of invoice manipulation.
Siphoning off of foreign exchange against fictitious and
bogus imports.
Illegal acquisition of foreign exchange through Hawala.
Secreting of commission abroad.
 8 . Realisation and repatriation of foreign
exchange .

8. Save as otherwise provided in this Act, where any amount

of foreign exchange is due or has accrued to any person
resident in India, such person shall take all reasonable
steps to realise and repatriate to India such foreign
exchange within such period and in such manner as may be
specified by the Reserve Bank.
Exemption from realisation and repatriation in
certain cases .
Procedural Provisions
For enforcing the provisions of various sections of FEMA, 1999, the officers of
Enforcement Directorate of the level of Assistant Director and above will have
to undertake the following functions
Collection and development of intelligence/information.
Keeping surveillance over suspects.
Searches of persons/vehicles by provisions of Income-tax Act, 1961.
Searches of premises as per provisions of Income-tax Act, 1961.
Summoning of persons for giving evidence and producing of documents as per
provisions of Income-tax Act, l96l.
Power to examine persons as per provisions of Income-tax Act,1961.
Power to call for any information/document as per provisions of Income-tax Act,
1961.
Power to seize documents etc. as per provisions of Income-tax Act, 1961.
Custody of documents as per Income-tax Act, 1961.
Adjudication and appeals - Officers of and above the rank of Dy Director of
Enforcement, are cases of contravention of the provisions of the Act; these
proceedings which are quasi-judicial in nature, start with the issuance of show
cause notice; in the event of cause shown by the Notice-not being found
satisfactory, further proceedings are held, vis. personal hearing, in which the
noticee has a further right to present his defence, either in person or
through any authorised representative; on conclusion of these proceedings, the
adjudicating authority has to examine and consider the evidence on record, in
its entirety and in case the charges not being found proved, the noticee is
acquitted, and in the event of charges being found substantiated, such penalty,
as is considered appropriate as per provisions of section 13 of the Act can be
imposed, besides confiscation of amounts involved in these contraventions.
Organisational Set Up and Functions Of Enforcement Directorate
Directorate of Enforcement has to detect cases of violation and also perform
substantially adjudicatory functions to curb above malpractices.
The Enforcement Directorate, with its Headquarters at New Delhi has seven
zonal offices at Bombay, Calcutta, Delhi, Jalandhar, Madras, Ahmedabad and
Bangalore. The zonal offices are headed by the Deputy Directors. The
Directorate has nine sub-zonal offices at Agra, Srinagar, Jaipur, Varanasi,
Trivandrum, Calicut, Hyderabad, Guwahati and Goa, which are headed by the
Assistant Directors. The Directorate has also a Unit at Madurai, which is
headed by a Chief Enforcement Officer. Besides, there are three Special
Directors of Enforcement and one Additional Director of Enforcement.
The main functions of the Directorate are as under:
To collect and develop intelligence relating to violation of the provisions of
Foreign Exchange Regulation Act and while working out the same, depending upon
the circumstances of the case:
To conduct searches of suspected persons, conveyances and premises for seizing
incriminating materials (including Indian and foreign currencies involved)
and/or.
To enquire into and investigate suspected violations of provisions of the
Foreign Exchange Management Act.
To adjudicate cases of violations of Foreign Exchange Management Act for
levying penalties departmentally and also for confiscating the amounts
involved in contravent ions;
To realise the penalties imposed in departmental adjudication.
9. The provisions of sections 4 and 8 shall not apply to
the following, namely:—
(a) possession of foreign currency or foreign coins by
any person up to such limit as the Reserve Bank may
specify;
(b) foreign currency account held or operated by such
person or class of persons and the limit up to which the
Reserve Bank may specify;
(c) foreign exchange acquired or received before the 8th
day of July, 1947 or any income arising or accruing
thereon which is held outside India by any person in
pursuance of a general or special permission granted by
the Reserve Bank;
(d) foreign exchange held by a person resident in India
up to such limit as the Reserve Bank may specify, if such
foreign exchange was acquired by way of gift or
inheritance from a person referred to in clause (c),
including any income arising therefrom;
(e) foreign exchange acquired from employment, business,
trade, vocation, services, honorarium, gifts, inheritance
or any other legitimate means up to such limit as the
Reserve Bank may specify; and
(f) such other receipts in foreign exchange as the
Reserve Bank may specify.
 The End

Thank You

Ato Ghartey