Foreign Exchange Management Act, 1999 (FEMA) : Submitted by Submitted To

FOREIGN EXCHANGE MANAGEMENT ACT,
1999 (FEMA)
Submitted by Submitted to
KESHAV YOGI Dr. Komal Mam
210101040012
INDEX
 Introduction
 History
 Overview
 Authorities governing the enforcement of FEMA
 Regulation and management of foreign exchange
 Transaction covered under FEMA
 Conclusion
Introduction
The Foreign Exchange Management Act, 1999 (FEMA), is an act of the Parliament

of India 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". It was passed in
the 29th December 1999 in parliament, replacing the Foreign Exchange Regulation
Act (FERA).
FEMA provides:
 Free transactions on current account subject to reasonable restrictions that may be imposed
 RBI control over Capital Account Transactions
 Control over realization of export proceeds Dealings in Foreign Exchange through Authorized
Person (e.g. Authorized Dealer/ Money Changer/ Off-shore Banking Unit)
 Adjudication of Offences
 Appeal provisions including Special Director (Appeals) and Appellate Tribunal Directorate of
Enforcement
History
The Foreign Exchange Regulation Act (FERA) was legislation passed

in India in 1973 that imposed strict regulations on certain kinds of payments,
the dealings in foreign exchange (forex) and securities and the transactions
which had an indirect impact on the foreign exchange and the import and
export of currency. The bill was formulated with the aim of regulating
payments and foreign exchange.
FERA came into force with effect from January 1, 1974.
Switch from FERA
The purpose of FERA act, was to “regulate certain payments, dealing in
foreign exchange and securities, transactions indirectly affecting foreign
exchange and import and export of currency, for the conservation foreign
exchange resources of countries.”
FERA was repealed in 1998 by the government of Atal Bihari Vajpayee and
replaced by the Foreign Exchange Management Act, which
liberalised foreign exchange controls and restrictions on foreign investment.
Overview
FEMA contains 7 chapters divided into 49 section of which 12 section cover operational part and
the rest contravention, penalties, appeals, enforcement directorate, etc.
CHAPTER 1 Preliminary ( Sec 1&2 )
CHAPTER 2 Regulation and management of foreign exchange ( Sec 3-9 )
CHAPTER 3 Authorized person ( Sec 10-12 )
CHAPTER 4 Contravention and Penalties ( Sec 13-15 )
CHAPTER 5 Adjudication and Appeal ( Sec 16-35 )
CHAPTER 6 Directorate of enforcement ( Sec 36-38 )
CHAPTER 7 miscellaneous ( Sec 39-49 )
Authorities governing the enforcement of
FEMA
 Enforcement Directorate
 Adjudicating Authorities
Regulation and management of foreign
exchange
Section 2(n) of FEMA states that “foreign exchange” means foreign currency and includes -
 Deposits, credits and balances payable in foreign currency.
 Drafts, travelers cheques, letter of credit or bills of exchange, expressed or drawn in
Indian currency but payable in foreign currency.
 Drafts, travelers cheques, letter of credit or bills of exchange drawn by banks, institutions
or person outside in India, but payable in Indian currency.
 FEMA prohibits: Dealing in or transfer of Foreign Exchange or Foreign
Security to any person other than Authorised Person Make any payment
otherwise through an authorized person to or for the credit of any person
resident outside India in any manner receive otherwise through an
authorized person, any payment by order or on behalf of any person
resident outside India in any manner. enter 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
Manner of receipt in Foreign Exchange.
 Payment for Export can be received: in form of Draft, cheque, foreign currency
notes/travelers cheque etc. provided the foreign currency so received is surrendered
within the specified time period by debit to FCNR /NRE Account In rupees from the
credit card servicing bank in India where payment is made via credit card From a
rupee account held in the name of exchange house with an authorized dealer if the
amount does not exceed Rs 2 lacs In the form of precious metals Payment can be
received in cash from Foreign Travelers in India if the same foreign exchange is
duly surrendered RBI also permits offsetting of export proceeds against import
payables etc. after obtaining prescribed certificate from CA/Cost Accountant in this
regard Payment shall be made in a currency appropriate to the country of shipment
of goods Drawl of Foreign Currency means drawl from an authorized person and
includes opening of letter of credit, use of international credit card etc. which has an
effect of creating foreign exchange liability
Transaction covered under FEMA
 Current account transactions

 Release of exchange for travel
Conclusion
The Indian foreign exchange market has operated in a liberalized

environment for more than a decade. A cautious and well-calibrated
approach was followed while liberalizing the foreign exchange market with
an emphasis on the need to safeguard against potential financial instability
that could arise due to excessive speculation. Besides, with the Indian
economy moving towards further capital account liberalization, the
development of a well-integrated foreign exchange market also becomes
important as it is through this market that cross-border financial inflows and
outflows are channeled to other markets. Replacing of FERA, 1973 by
FEMA, 1999 helped removing the flaws and overcoming the hurdles posed
by it.
Q&A:-
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FOREIGN EXCHANGE MANAGEMENT ACT,

The Foreign Exchange Management Act, 1999 (FEMA), is an act of the Parliament

The Foreign Exchange Regulation Act (FERA) was legislation passed

 Current account transactions

The Indian foreign exchange market has operated in a liberalized

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