FOREIGN EXCHANGE

MANAGEMENT
ACT,1999(FEMA)

Presented by-
Abhishek soni
Ankit pareek
Garima mathur
Hemant sharma
Lokesh khandelwa
Swati sharma
Swapnil karn
 INTRODUCTIO
N TO THE ACT
FEMA is an act to consolidate and among 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´.
It replaces the Foreign Exchange Regulation Act 1973 (FERA)
 Objectives
• to facilitate external trade and payments
• To regulate Foreign companies.
• To regulates dealing in FE and securities.
• To regulate the transactions indirectly affecting
FE.
• To regulate employment of foreign nationals.
• and for promoting the orderly development and
maintenance of foreign exchange market in India.
 FERA
FERA was introduced in 1974 to consolidate and amend
the then existing law relating to foreign exchange.
FERA aimed at having stringent controls to conserve
India's foreign exchange.
FERA was amended in 1993 to bring about certain
changes, as a result of introduction of economic reforms
and liberalisation of the Indian economy.
 DIFFERENCES
• FERA • FEMA

1. Fema, however, all current

account transactions are
permissible by the law itself.

2. Fema is a civil law. The

contravention of provision
under fima will be dealt with
through civil procedure.

3. Fema the prosecution will have

to prove that a person has
1. Prohibits almost all foreign exchange transactions without special permission or general permission
committed an offence.
2. Fera is not a civil law. It is considered criminal in nature.

3. Fera was a presumption of existence of a guilty mind, unless the accused proved otherwise.
 SIMILARITY BETWEEN
FERA AND FEMA

FEMA would also be governed by the notifications to be issued

by the central government/reserve bank of India for granting
general permission as was the case under FERA.
APPLICABILITY OF THE ACT

1. The act extends to the whole of India.

2. It applies to all branches, offices and agencies outside India
owned or controlled by a person resident in India.
3. The act has come into force with effect from June 1,2000.
 SECTION 2 DEFINES
CERTAIN TERMS USED IN THE
ACT
1)Authorised Person- it means person authorised under the act to
deal in foreign exchange or foreign securities.

2) Currency- this expression includes all instrument as may

be notified by the reserve bank.

3) Export- ‘export’ with its we can sending out products or

services to any person outside India.
4) Import- Import means bringing into India any goods or
services.
5) FOREIGN CURRENCY- IT MEANS ANY CURRENCY
OTHER THAN INDIAN CURRENCY.

6) FOREIGN SECURITY- THE EXPRESSION MEANS ANY

SECURITY, DENOMINATED OR EXPRESSED IN FOREIGN CURRENCY
AND INCLUDES SECURITIES EXPRESSED IN FOREIGN CURRENCY
BUT WHERE REDEMPTION OR ANY FORM OF RETURN SUCH AS
INTEREST OR DIVIDIND IS PAYABLE IN INDIAN CURRENCY.
7) Foreign Exchange- It Means Foreign Currency And Includes:

A) Deposits, Credits And Balances Payable in any Foreign Currency.

B) Drafts, travelers cheques, letters of credit or bills of exchange

expressed or drawn in Indian currency but payable in any foreign
currency.

C) drafts, travelers cheques, letters of credit or bills of exchange drawn

by banks, institutions or persons outside India, but payable in Indian
currency.
 Person
A 'person' includes:
• an individual
• a Hindu undivided family,
• a company
• a firm,
• an association of persons or a body of individuals,
whether incorporated or not,
• every artificial juridical person, not falling within any of
the preceding sub-clauses
• any agency, office or branch owned or controlled by
such persons.
 PERSON RESIDENT IN
INDIA(PRI)
• A person residing in India for more than one hundred and
eighty two days (182 days)! during the course of the preceding
financial year
• any person or body corporate registered or incorporated in
India;
• an office, branch or agency in India owned or controlled by a
person resident outside India;
• an office, branch or agency outside India owned or controlled
by a person resident m India.
• But PRI does not Includes:
(A) a person who has gone out of India or who
stays outside India, in either case­
– for or on taking up employment outside India or,
– for carrying on outside India a business or
vocation outside India or,
– for any other purpose, in such circumstances as
would indicate his intention to stay outside India
for an uncertain period;
(B) a person who has come to or stays in India,
in either case, otherwise than-
– for or on taking up employment in India or
– for carrying on in India a business or vocation in
India or,
– for any other purpose, in such circumstances as
would indicate his intention to stay in India for an
uncertain period;
 Person resident outside India.
• It means a person who is not resident in India.
 Non-Resident Indian (NRI).
• It means a person resident outside India who
is a citizen of India or is a person of Indian
origin.
 Overseas Corporate Body (OCB).
• The expression means a company, partnership
firm, society and other corporate body owned
directly or indirectly to the extent of at least
60 per cent by non-resident Indians. Further,
the expression includes overseas trusts in
which not less than 60 per cent beneficial
interest is held by non-resident Indians
directly or indirectly but irrevocably.
 Person of Indian Origin (PIO).
• It means a citizen of any country other then
Bangladesh or Pakistan, if
– he at any time held Indian passport; or
– he or either of his parents or any of his
grandparents was a citizen of India by virtue of
the Constitution of India or the Citizenship Act of
1955; or
– the person is a spouse of an Indian citizen or a
person referred to in (a) and (b).
 Regulation and management of
foreign exchange
It prohibits any person other than an authorised person from:
•dealing in or transferring any foreign exchange
•making any payment to or for the credit of any person resident
outside India
•receive otherwise than through an authorised person any payment
by order or on behalf of any person resident outside India
•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 by any person.
 Holding of foreign exchange etc.
• Section 4 provides that except as otherwise
provided in the Act; no person resident in
India shall acquire, hold, own, posses or
transfer any foreign exchange, foreign security
or any immovable property situated outside
India.
 Current Account Transactions.
• Section 5 explains dealings in current account
transactions. This section provides that any
person may sell or draw foreign exchange to
or from an authorised person if such sale or
drawl is a current account transaction. Also it
empowers the central government to impose
reasonable restrictions for current accouting
transaction in the public interest in
consultation with the Reserve Bank of India by
making appropriate rules.
 Regulation of Capital Account
Transactions.
• Section 6 provides that any person may sell or
draw foreign exchange to or from an authorised
person for a capital account transaction.
• However, the Reserve Bank may, in consultation
with the Central Government, specify the
permissible capital account transactions and the
limits up to which foreign exchange will be
allowed for such transactions.
 EXPORT OF GOODS AND
SERVICES

•Every exporter is required to furnish to reserve

bank or any other authority as prescribed, a
declaration containing true and correct
particulars regarding the amount representing
the full export value.
• Every exporter is also required to furnish to
the reserve bank such other information
regarding the realization of the export
proceeds.
 Realization and repatriation of
foreign exchange.
• Section 8 obliges the person resident in India
to take all reasonable steps to realise and
repatriate the foreign exchange due or
accrued within such period and in such
manner as may be specified by the Reserve
Bank.
 CONTRAVENTION AND
PENALTIES
Any person contravenes any provision of the act, rules, regulation
etc. or contravenes any condition subject to which the
authorization is granted by RBI, he shall be liable for penalty upon
adjudication, which may extend up to thrice the sum involved in
such contravention.
 APPEAL TO SPECIAL
DIRECTOR(APPEALS)
Central government appoint one or more
special directors to hear the appeals against the
orders of the adjudicating authorities.
Appellate tribunal to hear appeals against the
orders of adjudicating authorities and special
director (appeals).
 DIRECTORATE OF
ENFORCEMENT
Central government establish a directorate of enforcement with
a director and such other officers or class of officers as it thinks
fit, who shall be called officers of enforcement, for the purposes
of this act.