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.
the NRI perspective, FEMA broadly covers all matters related
to foreign exchange, investment avenues for NRIs such as
immovable property, bank deposits, government bonds,
investment in shares, units and other securities, and foreign
direct investment in India.
vests with the Reserve Bank of India, the sole authority to
grant general or special permission for all foreign exchange
related activities mentioned above.
2 - The Act here provides clarity on several definitions and
terms used in the context of foreign exchange. Starting with
the identification of the Non-resident Indian and Persons of
Indian origin, it defines "foreign exchange" and "foreign
security" in sections 2(n) and 2(o) respectively of the Act.
It describes at length the foreign exchange facilities and
where one can buy foreign exchange in India. FEMA defines an
authorised dealer, and addresses the permissible exchange
allowed for a business trip, for studies and medical treatment
abroad, forex for foreign travel, the use of an international
credit card, and remittance facility
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.
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.
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.
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.
8 puts the responsibility of repatriation on the persons
resident in India who have any amount of foreign exchange due
or accrued in their favour to get the same realised and
repatriated to India within the specific period and in the
manner specified by the RBI.
duties and liabilities of the Authorised Dealers have been
dealt with in Sections 10, 11 and 12, while Sections 13 to 15
cover penalties and enforcement of the orders of the
Adjudicating Authority as well as the power to compound
contraventions under the Act.
36 and 37 deal with the establishment of an Enforcement
Directorate, and empowers it to investigate the violation of
any provisions of the Act, rules, regulations, notifications,
directions or order issued under this