Professional Documents
Culture Documents
FEMA
FEMA
ACT, 1999
• Even after the legislation came into force from 25th March 1947, with
regulating/controlling bodies RBI and GOI, the BOP was still with her
Majesty.
• Imports of food clothing etc grew faster than exports, there was great
dominance of multinational companies in India, there was adverse
balance of payment and the need was for a more strict regulation of
foreign exchange.
FERA
Broadly, all Current Account Transactions are free, however Central Government
can impose reasonable restrictions by issuing rules (section 3 FEMA)
FEMA envisages that RBI shall have a controlling role in management of foreign exchange.
Since RBI cannot directly handle foreign exchange transactions, it authorizes
“Authorised Persons” to deal in foreign exchange as per directions issued by RBI.
(Section 10 FEMA)
The FEMA 1999 contains only basic legal framework. The practical aspects are
covered in Rules made by Central Government and Regulations made by RBI.
11
Mechanism under FEMA
Passed by the Parliament
–
the Legislature
Rules –
Current A/C
AP Dir Circulars
Notifications to APs
Regulations-
Capital A/C
Notified in the
Gazette – by the All aspect of Forex
Executive transactions
by the RBI
Capital Account by the
RBI
OVERALL SCHEME
13
7 Chapters and 49 Sections
CHAPTER I – Preliminary (Sec 1&2)
Section Description
2 Definitions
39 to 49 Miscellaneous Provisions
15
Extent, Application and Commencement
Includes
An individual,
HUF,
Company,
Firm,
AOP or a BOI, whether incorporated or not,
Every artificial juridical person, not falling within any of the preceding sub-
clauses, and
Any agency, office or branch owned or controlled by such persons
16
Important Definitions
Person residing in India > 182 days during preceding financial year but does not include: –
Person who has gone out of India or who stays outside India, in either case
o For/on taking up employment outside India, or
o Carrying on outside India a business or vocation outside India, or
o For any purpose, indicating intention to stay outside India for an uncertain period.
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 in India.
17
Important Definitions
NRI has been defined under FEMA Regulation 2(vi) of the FEMA - 5 (Deposit) Regulations 2000 as follows:
“An NRI is a person resident outside India who is a citizen of India or is a Person of Indian Origin”
It is possible that you may be an NRI under FEMA, yet you may be a resident under the Income tax laws.
18
Important Definitions
Section 2(e) – Capital Account Transaction Section 2(j) – Current Account Transaction
A transaction which alters the assets or liabilities A transaction other than a capital account transaction
which include:
Outside India of persons resident in India, (including
Contingent Liabilities); Payments due in connection with foreign trade,
other current business, services, short- term
In India of persons resident outside India; and banking and credit facilities in the ordinary course
of business;
Includes transactions specified in Section 6(3).
o Foreign security by resident; Payments due as interest on loans and as net
o Any Security by non-resident; income from investments;
o Transfer or issue of any security or foreign security
by any branch, office or agency in India of a non- Remittances for living expenses of parents,
resident; spouse and children residing abroad; and
o Borrowing / Lending in Foreign Exchange;
o Borrowing / Lending in rupees between residents Expenses on foreign travel, education and medical
and non-residents; care of parents, spouse and children.
o Deposits between residents and non residents;
o Holding of currency or currency notes;
o Acquisition / transfer of immoveable property in
India / outside India (except those on lease for
less than five years);
o Giving of guarantee / surety by resident / non-
residents.
19
Extent, Application and Commencement (contd….)
Restricts person resident in India to hold, own or possess or transfer any foreign exchange, foreign security
or immovable property situated outside India.
20
Extent, Application and Commencement (contd….)
Exporter of goods/services under obligation to furnish to RBI or specified authority prescribed declaration.
Common form called ‘Export Declaration Form’ devised to declare all exports from Non-EDI ports and
common ‘Softex’ forms for single/bulk exports.
Directions by RBI to Exporter of goods for ensuring receipt of export proceeds.
Person resident in India obliged to take all reasonable steps to realize and repatriate to India all foreign
exchange due or accrued.
21
Extent, Application and Commencement (contd….)
RBI to authorize persons to act as authorized dealer, money changer or off-shore banking unit or in any other
manner.
22
FEMA - Current Account Transactions Rules, 2000
23
Current Account Transactions
24
Current Account Transactions – Illustrative Transactions
--Schedule III read with Rule 5
Sr. No. Transaction Limits without any RBI approval
1 Private Visit (except Nepal & Bhutan) USD 10,000 per Financial Year (FY)
USD 1,00,000
5 % of investment brought into India
* Remittance of gift and donation are subsumed under the LRS scheme
25
FOREIGN DIRECT
Foreign Direct INVESTMENT
Investment
Diagrammatic presentation
Foreign Investments
PROI
27
CHAPTER IV CONTRAVENTION AND PENALTIES
28
Picture abhi baaki hai mere dost, Refer
Next power point
29