19687295 Foreign Exchange Management Act 2000

7/29/2019 19687295 Foreign Exchange Management Act 2000

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Foreign Exchange Management Act , 2000

Foreign Exchange transactions were earlierregulated in India by the Foreign ExchangeRegulation Act, 1973.

It was widely described as a draconian andobnoxious law.

After Liberalization in 1973, some amendmentsto FERA were affected in 1991.

The main objective of FERA was conservationand proper utilization of the foreign exchangeresources of the country.


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FEMA replaced FERA in 1999.

Came into effect from Jan 1, 2000.

It extends to the whole of India and alsoapplies to all branches , offices and

agencies outside India , owned or

controlled by a person resident in India.


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Objectives :

Facilitate external trade and payments.

Promote the orderly development andmaintenance of Foreign exchange market


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Dealings in Foreign Exchange :

Section 3 of FEMA imposes restrictions ondealings in foreign exchange and foreign

security and payments to and receiptsfrom any person outside India.

Accordingly except as provided in terms of

the act, or with the general or specialpermission of the Reserve Bank , noperson shall :


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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.


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Receive otherwise through an authorizedperson , any payment by order or onbehalf of a person resident outside India

in any manner. Enter in to any Financial Transaction in

India as a consideration for or inassociation with acquisition or creation ortransfer of a right to acquire , any assetoutside India by any person.


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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.


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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.


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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 aperson who was resident outside India.


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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 wasacquired , held, or owned by such person

when he was resident in India or inherited

from a person who was resident in India.


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The RBI is empowered by this act to

prohibit , restrict, or regulate establishment

in India of a branch, office or other place of

business by a person resident outsideIndia for carrying on any such activity

relating to such branch, office or other

place of business.


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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.


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Contravention and Penalties

Any kind of contravention under this act isliable to a penalty up to thrice the amountinvolved 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 thefirst day.

In FERA there was provision forimprisonment and no limit on fine.


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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

FEMA provides for the establishment of an

Enforcement Directorate for investigating

the contraventions under this act.


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FERA & FEMA A Comparison

Anything and everythingthat has to do with foreignexchange was controlled.

Aim of FERA is to preventmisuse of Foreign Trade.

Theme of FERA wasEverything that isspecified is under control.

FERA had 81 sections.

Only the specified actsrelated to foreignexchange are regulated .

The aim of FEMA isfacilitating Trade.

Theme of FEMA is,Everything other thanwhat is expressly coveredis not controlled.

FEMA has only 49sections.


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Many provisions of FERA like Indians

taking up employment abroad,

employment of foreign technicians in India

etc. have no appearance in FEMA.


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Changing Dimensions of these laws

With the advent of Liberalization and

privatization , all these laws have

undergone a tremendous change , which

is clearly visible from the amendments thathad been made in these laws from time to

time. The provisions of MRTP Act, 1969

were amended after 1991 to make it morereform oriented and remove its provisions

related to Monopolies restriction .


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The FERA was totally scrapped and itgave way to FEMA. The IndustriesDevelopment and regulation act 1951 had

also undergone through variousamendments to make way for reforms. Inshort it can be said that all these laws andconstitutional provisions which earlier

played a regulatory role were transformedto play a facilitator role for Industrialdevelopment.

Documents

19687295 Foreign Exchange Management Act 2000