PRESENTATION

ON

FEMA, 1999

FOREIGN EXCHANGE

Foreign exchange is the system or process of converting one national

currency into another and of transferring money from one country to another.

An introduction to FERA

The FERA deals with laws which relate to foreign exchange in India.

The laws were made to manage foreign investments in India. The FERA has is origin at the time of Indian independence.

In the beginning ,it was a temporary arrangement to control the flow of foreign exchange.In1957 that was made permanent.

In 1973, FERA was amended.

FERA consists of 81 complex sections.

Under FERA any offence was criminal one which included imprisonment as per code of criminal procedure,1973.

Objectives

Prevent the outflow of Indian currency. To regulate dealings in foreign exchange

and securities. To regulate the transaction indirectly

affecting foreign exchange. To regulate import and export currency. To regulate employment of foreign

nationals. To regulate acquisition, holding etc of

immovable property in India by non-residents.

Provisions

Regulation of dealing in foreign exchange . Restrictions on payments. Restrictions regarding assets held by non-

residents and import & export of certain currency.

Duty on person entitled to receive foreign exchange and payment for exported goods.

Restriction on establishment of place of business in India.

Restriction on immovable property.

From FERA To FEMA

With the advent of liberalization and privatization, approach of government towards foreign capital was not restrictive in nature.

The word “management” was used in place of “regulation”

FEMA replaced FERA in 1999.

FOREIGN EXCHANGE MANAGEMENT ACT, 1999

FEMA was enacted in 1999 and was enforced on 1st January 2000.

It is applicable to whole of India. Reasons contributing to enactment of

FEMA. Liberal EXIM Policy Increased inflow of foreign investment Foreign exchange reserves had increased Commitment of government to WTO Penalty provisions of FERA were very strict

Objectives Of FEMA

To facilitate the external trade and payment.

To promote an orderly maintenance of the foreign exchange market in India.

Regulation of foreign capital in India. To regulate employment business and

investment of non-residents.

Salient Features of the Act

Dealing in foreign exchange. Full freedom to person resident in India to

hold or transfer any foreign securities or immovable property situated outside India.

A person resident outside India is also permitted to hold shares, securities and property acquired by him while he was resident in India.

Directorate of Enforcement.

Similarities between FERA and FEMA

The RBI and central government would continue to be the regulatory bodies.

The Directorate of Enforcement continues to be the agency for enforcement of the provisions of the law such as conducting search and seizure.

Difference between FEMA and FERA

Points of Comparison

FEMA-1999 FERA1973

1. Content There are 49 sections out of which 12 section relate to operational part and rest with penal provisions.

There were 81 sections out of which 32 sections related to operational part and rest deals with penalty, appeals etc

2. Nature Basically it is a civil law.

It was considered as a criminal law.

3. Applicability The Act applies to all branches, offices and branches outside India owned or controlled by a person resident in India

The Act applied to all citizens of India and to branches and agencies outsides India and to branches and agencies outside India.

4. New Terms Capital account transactions, current account transactions, persons, services like new terms are introduced.

These terms were not defined.

Points of Comparison

FEMA-1999 FERA 1973

5. Penalty Limited to three times the sum involved if it is quantifiable

Five times at the sum involved+ imprisonment in most of the cases.

6. Object The object is to encourage external trade.

The object was to control, regulate and prohibits foreign exchange transactions.

7. Legal Help The complainant has a full right to take legal help from a lawyer or a chartered accountant.

There was no provision for legal assistance.

8. Definition of ‘authorised person’

It has been extended to include banks, money changes etc

It was limited in case of FERA

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