Objectives of FEMA

Provision /Rules / Regulation of FEMA

1. Provision regarding dealing in foreign exchange :-

According to section 3 of FEMA 2000 ," only authorized person under the govt. terms can deal in foreign exchange in India . "

2. Provision regarding holding of foreign exchange :-

According to section 4 of FEMA 2000, " All persons which are provided authority only can hold or purchase foreign exchange in India or outside India."

3.Provision regarding current account transactions :-

According to section 5 of FEMA 2000 ," There is no restriction regarding sale or deal foreign exchange , if it is a current account transaction ."

The following transaction are deemed current account transactions under FEMA :-

a) Expenses in connection with foreign travel , education and medical care of parents , spouse and children ( Any body now can send the foreign currency in India for above expenses under current account ) b) Payment due as interest on loan c) Payment due under short term loan for business .

4. Provision regarding capital account transactions :-

Under section six ," RBI will fix the limit of foreign exchange transactions relating to capital account after discussion with Indian govt. "

RBI can restrict following :-

a) transfer of foreign security by Indian resident . b) transfer of foreign security by Indian resident which is now outside India . c) transfer of immovable property .

5. Provision regarding export of goods and services :-

According to section 7 of FEMA 2000 , " It is the duty of exporter to declare the true and correct detail of goods which , he have to sell the market outside India and must send complete report to RBI .

RBI can make particular requirement for any exporter .

RBI can also make rules and regulations for realization of amount earned from foreign country.

6. Provision regarding authorised persons :-

RBI can authorize any body who can deal in money exchange or off shore transaction and foreign exchange .

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He has to follow the rules and guidelines of RBI . RBI can revoke the authorisation granted to any person at any time in public interest . If authorized person will be done contravention the rules of RBI , he will be liable to pay up to Rs. 10000 penalty and Rs. 2000 for every day during which such contravention continue . 7. Provision regarding contravention and penalties :Section 13 to 15

If any body or person contravenes the rules and regulation of FEMA 2000 or RBI direction , he will be liable to a penalty three times of sum involved in contravention . If contravention will continue , then he will pay upto Rs. 5000 per day during the time of contravention . 8. Provision regarding adjucation and appeal :According to section 18, " Central govt. can appoint adjudicating authority who can give the punishment of civil imprisonment of maximum six months if case is less than one crore . If demanded value is more than one crore then punishment of imprisonment may be of three years . the person can appeal to special director against the decisions of adjudicating officer . He can also appeal in appellate tribunal and also in high court with the sixty days of communication of order .

Liberalization Transition from FERA to FEMA Government of India has taken a commendable step towards liberalization by introducing Foreign Exchange Management Act, 1999 (FEMA), which has replaced Foreign Exchange Regulation Act, 1973 (FERA). While the FERA was a law, which sought to control Foreign Exchange transactions, FEMA seeks to regulate the same. The draconian regulations under FERA related to unbridled powers of Enforcement Directorate. These powers enabled Enforcement Directorate to arrest any person, search any premises, seize documents and start proceedings against any person for contravention Foreign Collaborations & Investments in India India Juris - International Law Firm 24 of 70 www.indiajuris.com

of FERA or for preparations of contravention of FERA. The contravention under FERA was treated as criminal offence and the burden of proof was on the guilty.

FEMA has reduced the rigors of exchange control by removing / diluting these provisions. The contravention has been treated as civil offence. Primarily, for an offence, the accused cannot be arrested. He can be arrested only for non-payment of the penalty imposed for contravention. Specific provision has been made by fixing a time limit of twenty-four hours for bringing the arrested person before the Adjudicating Authority.

Similarly, in respect of appeals filed before the Appellate Tribunal, a period of 180 days has been stipulated for final disposal of the appeals. No such time limit was laid down under FERA. The powers of Enforcement Directorate have been substantially reduced and new provisions for Adjudicating Authority and Compounding of cases have been introduced.