CH:11 FEMA-1999: Foreign Exchange Management Act

CH:11 FEMA-1999
Foreign exchange management act
Introduction
Foreign exchange regulation act came in to force on January 1974. Indias foreign exchange reserve position was not at all satisfactory during that period. Accordingly stringent controls were required on the use of foreign exchange.
Introduction
There was no sign of improvement in the foreign exchange reserve position, in view of poor foreign trade and low accretion to the reserve. With the improvement in reserve position, over time, stringent controls were no longer required. There was a constant demand for modification of FERA, accordingly FERA was repealed and replaced by FEMA IN 1999.
Foreign exchange regulation act

FERA emphasized exchange regulation or exchange control. FERA had 81 sections. The aim was to prevent misuse. Everything that had to do with foreign exchange was controlled. Under FERA it was necessary to obtain RBIs permission in respect of most of transactions.
Foreign exchange management act

FEMA emphasizes exchange management. It has only 49 sections. Aim is to facilitate trade. Only the specified acts, relating to foreign exchange are regulated. Except for section 3 which relates to dealing in foreign exchange, no other provision of FEMA requires RBIs permission.
Objectives of FEMA
To facilitate external trade and payments. Maintenance of foreign exchange market. Proper utilization of foreign exchange. To regulate payments in foreign exchange transactions. To regulate import and export, for the conservation of foreign exchange resources.
Objectives of FEMA
FEMA extends to the whole of India and will also apply to all branches, offices and agencies outside India, owned or controlled by a person, resident of India. Considering relaxation in the regulatory provisions in foreign exchange transactions. Delegated powers vested with the authorized dealers to facilitate external trade and payments, for promoting orderly development and maintenance of foreign exchange market in India.
FEMA-section 3
Dealing with foreign exchange. 1. Section 3 states that no authorized person can deal in or transfer any foreign exchange or foreign security to any other person situated outside India. 2. Authorized person means any bank or other person including authorized money changer, authorized under FEMA to deal in foreign exchange or securities.
FEMA-section 4
Holding of foreign exchange: Section 4 restrains any person resident of India, from acquiring, holding, owning, possessing or transferring any foreign exchange, foreign security or any immovable property, situated outside India, except as specially provided in the act. If provided in the act he can hold.
FEMA section 5
Current account transactions: Section 5 permits dealing in foreign exchange through authorized persons, for current account transactions. But the central government can impose, reasonable restrictions in public interests.
Current account transactions include

Payment due for foreign trade, business and services. Interest on loans as income from investments. Remittances for living expenses of parents, spouse and children, residing abroad. Expenses on foreign travel, education and medical care of parents, spouse and children.
FEMA SECTION 6
Capital account transactions: Section 6 deals with capital account transactions. It means liberalizing capital flows. Capital account transactions include, transfer or issue of any foreign security by a person either in India or outside India.
FEMA section 6- capital a/c

Acquisition or transfer of immovable property outside India, by an Indian resident. Borrowing and lending of foreign exchange, in what ever form, between a person resident in India and person resident outside India.
FEMA section 7
Export of goods and services: Section 7 deals with export of goods and services. Every exporter is required to furnish to the RBI or any other authority, a declaration containing the true and correct material particulars, in relation to payment of such services.
Regulation & management of foreign exchange

All transactions, payment and receipt of foreign exchange, shall be through authorized person only-section 3. A person can acquire, hold, own, possess, transfer foreign exchange or any immovable property, situated outside India, with RBIs approval-section 4.
FEMA regulations
Every exporter of goods and services, has to furnish necessary data, by way of declaration, to RBI. Section 7. There is no bar on a person outside India to hold, own, transfer or invest in foreign currency, foreign security or any immovable property, situated outside India. Section 6.
Contravention, penalties, adjudication and appeals

Under FEMA any violation of provisions of said act will attract, penal provisions, including the right of arrest and detention.
Directorate of enforcement
The central government establishes, a directorate of enforcement, with a director and other officers, called officers of enforcement. They investigate contraventions. They collect and develop intelligence, relating to violations of the provisions of FEMA. They conduct searches of suspected persons.
Enforcement directorate
They adjudicate, cases of violations of FEMA for levying penalties, departmentally. Civil court does not have the jurisdiction to ascertain any proceedings pursued under FEMA.

CH:11 FEMA-1999: Foreign Exchange Management Act

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CH:11 FEMA-1999

Foreign exchange management act

Foreign exchange regulation act

Foreign exchange management act

Current account transactions include

FEMA section 6- capital a/c

Regulation & management of foreign exchange

Contravention, penalties, adjudication and appeals

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