FEMA ACT is an Act to consolidate and amend the law relating to foreign exchange with the objective of

facilitating external trade and payments and for promoting the orderly development and maintenance of foreign
exchange market in India.
The law relating to exchange control in India has undergone a substantial change in scope, content and approach
by the substitution of the Foreign Exchange Regulation Act, 1973 ( FERA ) by the Foreign Exchange Management
Act, 1999 ( FEMA ). The most noticeable aspect of FEMA is that there is no imprisonment prescribed for
contraventions of the law, not even as an alternative punishment and for the blatant and deliberate of violations.
The provisions of FEMA displays so much change that one could almost delink FEMA from FERA and concludes that
FEMA is a new law altogether which needs an independent reading and interpretation divorced from the earlier
law and decisions rendered there under

FEMA

The Foreign Exchange Management Act (1999) or in short FEMA has been introduced as a
replacement for earlier Foreign Exchange Regulation Act (FERA). FEMA became an act on the 1st
day of June, 2000. FEMA was introduced because the FERA didn’t fit in with post-liberalisation
policies. A significant change that the FEMA brought with it, was that it made all offenses
regarding foreign exchange civil offenses, as opposed to criminal offenses as dictated by FERA.
The main objective behind the Foreign Exchange Management Act (1999) is to consolidate and
amend the law relating to foreign exchange with the objective of facilitating external trade and
payments. It was also formulated to promote the orderly development and maintenance of foreign
exchange market in India.
FEMA is applicable to all parts of India. The act is also applicable to all branches, offices and
agencies outside India owned or controlled by a person who is a resident of India.

The FEMA head-office, also known as Enforcement Directorate is situated in New Delhi and is
headed by a Director. The Directorate is further divided into 5 zonal offices in Delhi, Mumbai,
Kolkata, Chennai and Jalandhar and each office is headed by a Deputy Director. Each zone is
further divided into 7 sub-zonal offices headed by the Assistant Directors and 5 field units headed
by hief Enforcement Officers

FEMA, which has replaced FERA, had become the need of the hour since FERA had become incompatible
with the pro-liberalisation policies of the Government of India. FEMA has brought a new management
regime of Foreign Exchange consistent with the emerging frame work of the World Trade Organisation
(WTO).

FEMA Rules & Policies

The Foreign Exchange Management Act, 1999 (FEMA) came into force with effect from June 1, 2000. With
the introduction of the new Act in place of FERA, certain structural changes were brought in. The Act
consolidates and amends the law relating to foreign exchange to facilitate external trade and payments, and
to promote the orderly development and maintenance of foreign exchange in India.

Section 3 prohibits dealings in foreign exchange except through an authorised person. Similarly, without the
prior approval of the RBI, no person can make any payment to any person resident outside India in any
manner other than that prescribed by it. The Act restricts non-authorised persons from entering into any
financial transaction in India as consideration for or in association with acquisition or creation or transfer of
a right to acquire any asset outside India.
Section 4 restrains any person resident in India from acquiring, holding, owning, possessing or transferring
any foreign exchange, foreign security or any immovable property situated outside India except as
specifically provided in the Act.

Section 6 deals with capital account transactions. This section allows a person to draw or sell foreign
exchange from or to an authorised person for a capital account transaction. RBI in consultation with the
Central Government has issued various regulations on capital account transactions in terms of sub-sect ion
(2) and (3) of section 6.

Section 7 covers the export of goods and services. All exporters are required to furnish to the RBI or any
other authority, a declaration regarding full export value.

MERITS OF FEMA

FEMA’s mission is to support our citizens and first responders to ensure that as a nation we work
together to build, sustain, and improve our capability to prepare for, protect against, respond to,
recover from, and mitigate all hazards