The F#re'," E+3a",e Ma"a,e!e" A+ (FEMA) was an act passed in the winter session of Parliament in 1999 which replaced Foreign Exchange Regulation Act Act This act see!s to ma!e offenses related to foreign exchange ci"il offenses offenses #t extends to the whole of #ndia #ndia FEMA$ which replaced Foreign Exchange Regulation Act(FERA)$ Act (FERA)$ had %ecome the need of the hour hour since FERA had %ecome incompati%le incompati%le with the pro&li%eralisation policies policies of the'o"ernment the 'o"ernment of #ndia #ndia FEMA has %rought a new management regime of Foreign Exchange consistent with the emerging framewor! of the orld Trade rganisation (T) rganisation (T) #t is another matter that the enactment of FEMA also %rought with it the Pre"ention of Mone* +aundering Act ,--,$ Act ,--,$ which came into effect from 1 .ul* ,--/ 0nli!e other laws where e"er*thing is permitted unless specificall* prohi%ited$ under this act act e"er*thing was prohi%ited prohi%ited unless specificall* permitted ence the tenor tenor and tone of the Act was "er* drastic #t re2uired re2uired imprisonment e"en for minor offences 0nder FERA a person was presumed guilt* unless he pro"ed himself innocent$ whereas under other laws a person is presumed innocent unless he is pro"en guilt*
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The introduction of Foreign Exchange Regulation Act was done in 1934$ a period when #ndia5s #ndia5s foreign exchange reser"e position position wasn5t at its %est A new control in place to impro"e this position was the need of the hour FERA did not succeed in restricting acti"ities$ especiall* the expansion of T67s (Transnational 7orporations) The concessions made to FERA in 1991&1998 showed that FERA was on the "erge of %ecoming redundant 1:
After the amendment of FERA in 1998$ it was decided that the act would
%ecome the FEMA This was done in order to relax the controls on foreign exchange in #ndia$ as a result of economic li%erali;ation li%erali;ation FEMA ser"ed to ma!e transactions for external trade ( exports and imports) imports) easier < transactions in"ol"ing current account for external trade no longer re2uired R=#5s permission The deals in Foreign Exchange were to %e >managed5 instead of >regulated5 The switch to FEMA shows the change on the part of the go"ernment in terms of foreign capital
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MAIN FEATURES
Acti"ities such as pa*ments made to an* person outside #ndia or receipts from them$ along with the deals in foreign exchange and foreign securit* is restricted #t is FEMA that gi"es the central go"ernment the power to impose the restrictions &
Restri Restricti ctions ons are are impose imposed d on peopl peoplee li"ing li"ing in in #ndia #ndia who who carr* carr* out transactions in foreign exchange$ foreign securit* or who own or hold immo"a%le propert* a%road
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ithout ithout genera generall or or speci specific fic permis permissio sion n of the Reser"e =an! of #ndia$ #ndia $ FEMA restricts the transactions in"ol"ing foreign exchange or foreign securit* and pa*ments from outside the countr* to #ndia < the transactions should %e made onl* through an authorised person
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?eal ?ealss in fore foreig ign n exch exchan ange ge unde underr the the current account %* account %* an authorised person can %e restricted %* the 7entral 'o"ernment$ %ased %ased on pu%lic interest
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Although Although selling selling or or drawing drawing of foreign foreign exchange exchange is done done through through an an authorised person$ the R=# is empowered %* this Act to su%@ect the capital account transactions account transactions to a num%er of restrictions
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People People li"ing li"ing in #ndia #ndia will %e permit permitted ted to carr* carr* out out transac transactions tions in foreign exchange$ foreign securit* or to own or hold immo"a%le propert* a%road propert* a%road if the currenc*$ securit* or propert* was owned or ac2uired when heshe was li"ing outside #ndia$ or when it was inherited to himher %* someone li"ing outside #ndia
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Exporters Exporters are are needed needed to furnish furnish their their export export details details to R=# R=# To To ensure ensure that the transactions are carried out properl*$ R=# ma* as! the exporters to compl* to its necessar* re2uirements
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E/HANGE /ONTO*(FEMA) /ONTO*(FEMA)
The Reser"e =an! of ##ndiaBs ndiaBs Exchange 7ontrol ?epartment$ administers Foreign Exchange Management Act$ 1999$ (FEMA) which has replaced the earlier act$ FERA$ with effect from .une 1$ ,--- The new legislation is for Cfacilitating external tradeC and Cpromoting the orderl* de"elopment and maintenance of foreign exchange mar!et in #ndiaC FEMA extends to the whole of #ndia 0nder FEMA an #ndian compan* with foreign e2uit* participation is treated at par with other locall* locall* incorporated companies companies Accordingl*$ Accordingl*$ the exchange control laws and regulations for residents appl* to foreign&in"ested companies as well
DIFFEREN/E BET;EEN FERA AND FEMA
The o%@ect of FERA 1938 was to conser"e foreign exchange and pre"ention of lea!age of it due to ad"erse position of foreign exchange %alance in #ndia After li%eralisation in 199,$ "arious sectors for opened for F?# time to time which radicall* changed the foreign exchange position #nstead of negati"e %alance$ there was su%stanital su%stanital foreign exchange reser"e so it was felt necessar* to drop out the draconian law of FERAThe o%@ect of FEMA which replaced FERA from 1st .une$ ,--- wasD To consolidate and amend the law relating to foreign exchange with the o%@ect to facilitating external trade and pa*ments and for promoting the foreign exchange mar!et in #ndiao the new law is for the management of foreign exchange instead of regulation of foreign exchange The draconian pro"isions were droped out in new enactment
