Harold g the foremost objective of the fera which is generally known as the foreign exchange regulation act 1973 fera was to safeguard and anticipation of outflow of foreign exchange because of the presence of the unfavorable arrangement of foreign exchange stability present in india. Nris frequently hear the words fera and fema when it comes to dealings the involve india. May, 2001answerthe term current account transaction is defined in section 2j of foreign exchange management act, 1999. Dec 15, 2015 independent study picture of emi campus with emergency management institute sign in foreground and buildings n and o in the background titlethe campus of femas national emergency training center, located in emmitsburg, md. There was a big difference in the definition of resident, under fera, and income tax act. Foreign exchange management act fema features of fema. The provision of fema, are in consistent with income tax act, in respect to the definition of term resident. The bill was referred to the standing committee on finance which submitted its report to the house on. Foreign exchange regulation act and foreign exchange management actpresented by. Foreign exchange management transfer or issue of any foreign.
Binational and multinational collaborations allow for the exchange of best practices and lessons learned. Foreign exchange management act fema areas of law law. Foreign exchange regulation act, 1974 or fera was introduced in the year 1974 with the prime objective of conserving preserving the foreign exchange. Emergency management institute independent study is. Foreign exchange management act fema, 1999 foreign exchange management act fema,1999. It is important to note that at the time of enactment of the legislation, india faced a dearth of foreign exchange. The foreign exchange regulation act fera of 1973 in india was replaced on june. The foreign exchange management act, 1999 fema is an act of the parliament of india to. There is a general misunderstanding among the nris that all restrictions and controls relating to foreign exchange transactions have been abolished and that foreign exchange dealings would be.
Ferafema the foreign exchange management act 1999 or in short fema has been introduced as a replacement for earlier foreign exchange regulation act fera fema was introduced because the fera didnt 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. The foreign exchange management act, 1999 fema, as mentioned earlier, has been in force with effect from 1. This act seeks to make offenses related to foreign exchange civil offenses. Foreign investors, frequently hear the terms fera and fema, when they deal with india. Difference between fema and fera points of comparison fema 2000 fera 1973 1. Fera was repealed from 1 st of june, 2000 and all foreign exchange transactions from.
It was passed in the winter session of parliament in 1999, replacing the foreign. Foreign exchange regulations act, 1973 fera was completely replaced by the foreign exchange management act, 1999 fema which came into force on 1st june, 2000. Foreign exchange and management act, 1999 academike. It is the regulation relating to foreign exchange, external trade and payments in the country. Indian students studying abroad are treated as nonresident. Foreign exchange management act, 1999 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 be it enacted by parliament in the fiftieth year of the republic of india as follows. Foreign exchange management act, 1999 summary bankexamstoday.
This was meant to close all the loopholes and drawback of fera and hence major economic reforms were introduced under this act. The foreign exchange management act, 1999 popularly known as fema act 1999, 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. Aug 12, 2017 fera is an act which is enacted to regulate payments and foreign exchange in india, is fera. States and communities may enforce stricter criteria. Government of india and rbi managed our foreign exchange better than several other countries. In this lecture, we will be discussing the transition from fera a controlling law to fema a managing law. Fema replaced an act called foreign exchange regulation act fera.
The main change that has been brought is that fema is a civil law, whereas the fera was a criminal law. Fera imposed strict regulations on transactions involving foreign exchange and. Foreign institutional investorfii means an entity established or incorporated outside india which proposes to make investment in india and which is registered as a. This act aims to make all the offenses relating to foreign exchange from criminal to civil offenses. Enacted in 1973, in the backdrop of acute shortage of foreign exchange in the country, fera had a controversial 27 year stint during which many bosses of the indian corporate.
Feb 24, 2012 the foreign exchange management act 1999 or in short fema has been introduced as a replacement for earlier foreign exchange regulation act fera. Foreign exchange management act, 1999 fema came into force by an act of parliament. Archived from the original pdf on 9 september 2012. Fema was introduced because the fera didnt fit in with postliberalisation policies. Monetary policy vs fiscal policy indian economy in hindi. Jan 30, 2015 by piyali sengupta, hnlu, raipur editors note. This act of parliament was passed in order to replace the foreign exchange regulation act fera, 1973. It was passed to amend and regulate the laws relating to foreign exchange in order to promote the maintenance of foreign exchange market in india. Fema means the foreign exchange management act, 1999. Foreign exchange management act fema fema is an acronym for the foreign exchange management act, 1999 and is an act of the indian parliament. The scope and objective of fema was mainly to amend the laws related to foreign exchangeto facilitate external trade and payments and to develop the foreign exchange market in india. Act may be called the foreign exchange management act, 1999. The government of india formulated fema or foreign exchange management act to encourage the external payments and across the border trades in india.
Transition from foreign exchange regulation act fera to foreign exchange management act fema has been a significant manoeuvre in moving towards a more open economy, according to reserve bank of in. Foreign exchange management act was enactedin1999 with 25 original notifications came into force with effect from june 1, 2000. This act seeks to make offences related to foreign exchange civil offences. Bcas 15th intensive study course on dtaa 17 january 2015. Enacted in 1999, replaced the earlier foreign exchange regulation act fera, 1973. Provisions of foreign exchange management act fema provides free transaction on current account subject to the guidelines by the rbi. In view of this change, the title of the legislation has rightly been changed from foreign exchange regulation act to foreign exchange management act. Foreign exchange management act foreign exchange management. Fema an act initiated to facilitate external trade and payments and to promote orderly management of the forex market in the country.
Foreign exchange management act, 1999 fema emerged as a replacement or say an improvement over the old foreign exchange regulation act, 1973 fera. Main features of the foreign exchange management act fema. The fera was creating obstacles in the development of the country so. Master circulars issued by rbi on 1st july of every year. There was a demand for substantial modification in fera owing to economic liberalization and improving foreign exchange reserve positions, which lead to new act, foreign exchange management act, 1999. Under fera, all transactions in foreign exchange and dealings. Fera foreign exchange regulation act legislation was passed in 1973. Be it enacted by parliament in the fiftieth year of the republic of india as follows. Basics of fema 3 historical perspective fera fema fera 1947 introduction of exchange control in india fera 1973 new act focused on corporate sector and restricted foreign investment introduced concept of fera companies 40% foreign ownership violation a criminal offence fera amendment act 1993 liberalisation to. Accordingly, the foreign exchange regulation act fera was repealed and replaced by the new foreign. The foreign exchange regulation act fera was legislation passed in india in 1973 that. New era under fema the foreign exchange regulation act, 1973 fera the foreign exchange management act 1999 fema object conservation of foreign exchange resources criminal law type provisions severe penal provisions all acts controlled and regulated applied to indian citizens inoutside india and foreign citizens. Johnywalker will be nonresident with effect from 21. Oct 31, 20 picture of emi campus with emergency management institute sign in foreground and buildings n and o in the background titlethe campus of femas national emergency training center, located in emmitsburg, md.
The foreign exchange regulation act, 1973 hereinafter fera came into force in 1974 and aimed to regulate all indian exchanges and transactions with foreign countries. We must move much faster towards foreign exchange management act. Ferafema the foreign exchange management act 1999 or in short fema has been introduced as a replacement for earlier foreign exchange regulation act fera fema was introduced because the fera didnt 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. Apr 29, 2018 keeping in view the changed environment, the foreign exchange management act fema was enacted in 1999 to replace fera. Fema or foreign exchange management act was introduced in the year 1999 to replace fera foreign exchange regulations act. Foreign exchange management act the foreign exchange management act fema was an act passed in the winter session of parliament in 1999 which replaced foreign exchange regulation act. With the introduction of the new act in place of fera, certain structural changes were brought in.
Mar 09, 2020 fema foreign exchange management act, 1999. Fema is applicable to a person resident in india as opposed to feras citizenship criteria which means if the status of any person, who is a citizen of india or not, is resident he or she shall be covered under the fema for any forex transaction as per the. The difference between the title, fera and fema of legislation. Nikhil agarwalneha gargneha baliwalmegha singhmegha mahasvarinavdeep kaurmohit goyalnikhil chaddanitin sachdevmohit badera 2. 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. April 14, 2015 dear all welcome to the refurbished site of the reserve bank of india. Foreign exchange management act defines a nri as an individual who stays in india for more than one hundred and eighty two days during the course of the preceding financial year will be treated as a person resident in india.
The goal of the international affairs program is to strengthen the agency through engagement with the international emergency management community. Foreign exchange regulation act fera was introduced at a time when foreign exchange forex reserves of the country were low. This legislation was passed by the indian parliament by the government of indira gandhi but it came into force with effect from january 1, 1974. Any overseas company owned by an nri nonresident indian and the owner. Fema act 1999 foreign exchange management act, 1999 fema. Fema stands for foreign exchange management act which was introduced in the year 1999 and it acts as a replacement for the fera foreign exchange regulation act. Fipb means the foreign investment promotion board constituted by the government of india. Fema has been a civil law, which is more precise and comparatively easy to understand and implement. Fera that fourletter acronym for the foreign exchange regulation act has for close to a decade signified the governments determination to bring foreign companies to heel. Fera is an act which is enacted to regulate payments and foreign exchange in india, is fera. Foreign exchange management act, 1999 fema a bill based on the recommendations of the task force, was introduced in the lok sabha on 4 august, 98. As their name specifies, fera lays emphasis on the regulation of currencies, whereas the fema manages foreign exchange, i. Progression of fera to fema and its impact on foreign exchgane in india.
Since it was drafted in 1999, the foreign exchange management act fema. The foreign exchange regulation act of 1973 fera in india was repealed on 1st june, 2000. Advocate, high court, bangalore the foreign exchange regulation act of 1973 fera repealed on 1 june, 2000, replaced by the foreign exchange management act fema, passed in the winter session of parliament in 1999 enacted in 1973, in the backdrop of acute shortage of foreign exchange in the country fera had a. A person is deemed to be a pio if he or either of his parents or any of his grandparents, was born in undivided india. Jul 30, 2010 the foreign exchange management act, 1999 fema came into force with effect from june 1, 2000. Difference between fera and fema explained day today gk.
Fema was introduced to liberalise the restriction on foreign inve. In 1998, fera was replaced by foreign exchange management act fema. Foreign exchange management act, 1999 fema and fera. The foreign exchange management act 1999 or in short fema has been introduced as a replacement for earlier foreign exchange regulation act fera. The foreign exchange regulation act fera is legislation that was passed by the indian parliament in 1973 and came into effect as of january 1, 1974. Any transaction in foreign exchange is now governed by foreign exchange management act 1999fema.
This act may be called the foreign exchange management act, 1999. Content there are 49 sections out of which 12 section relate to operational part and rest with penal provisions there were 81 sections out of which 32 sections related to operational part and rest deals with penalty, appeals etc. Fera proceeded on presumption that all foreign exchange earned by indian residents rightfully belonged to the government of india and had to be collected and surrendered to the reserve bank of india rbi. The policy of consistent devaluation of rupee is counter productive and harmful. 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. Practical issues in foreign transactions fema an overview. Fera foreign exchange regulation act was passed in 1947 which was amended in 1973. Transactions in foreign exchange were absolutely prohibited excepting in.
This new act is in consonance with the frameworks of the world trade organisation wto. Fema was formulated to fill all the loopholes and drawback of fera. Any transaction in foreign exchange is now governed by foreign exchange management act 1999 fema. What is the fera act, and how is it different than the.
Case study and notes on fema act 1999 question 1explain the meaning of the term current account transaction and the right of a citizen toobtain foreign exchange under the foreign exchange management act, 1999. Difference between fera and fema with comparison chart. The act consolidates and amends the law relating to foreign exchange to facilitate external trade and payments, and to promote the orderly development. Fema was intoduced because the fera did not fit in with the postliberalization. It replaced the earlier foreign exchange regulation law known as the fera foreign exchange regulation act. Foreign exchange regulation act fera was introduced with the aim of regulating payments and foreign exchange. The paper deals with the foreign exchange and management act, 1999 comprehensively. Foreign direct investment difference between fera and fema. Foreign exchange management act fema mba knowledge base. What were the reasons behind enacting fera and fema. It was replaced by the foreign exchange management act fema, which was passed in the winter session of parliament in 1999. Act was introduced in the year 1999 to replace an earlier act fera foreign. Here is a brief summarized description of what fera and fema mean. All you need to know about rbis fema guidelines drip capital.
What is fera, what is fema, brief explanation for nris. Taking direction from the fema strategic plan, dhs international strategic framework, the quadrennial homeland security. However the cases under fera can be initiated with in 2 years from repeal of fera i. Fera applied to all citizens of india, all over india. Fera was enacted in september 1973 and it came in force from january 1, 1974. Foreign exchange management act fema with effect from june 2000. Keeping in view the changed environment, the foreign exchange management act fema was enacted in 1999 to replace fera. It was amended by the foreign exchange regulation amendment act 1993 and later in 2000, was replaced by fema. In the backdrop of acute shortage of foreign exchange in the country, the foreign exchange regulation act of 1973 fera was enacted. Fema consolidate and amend the law relating to foreign exchange facilitating external trade and payments promoting the orderly development and. Now the criteria of in india for 182 days to make a person resident has been brought.
Foreign exchange management act 1999 summary of key points. One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise. The foreign exchange management act fema was an act passed in the winter session of parliament in 1999, which replaced foreign exchange regulation act. It was formulated in the year 1999 while it replaced fera foreign exchange regulation act. The foreign exchange management act, 1999 was enacted 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. Also law violators under fema were treated as civic offenders rather than as criminals 5as under fera. Fera was a draconian police law, where violation was a criminal offence. Keeping in view the objective of promoting ease of doing business, a need was felt toconsolidatethe.
Enforcement of foreign exchange management act fema is entrusted to a separate directorate, which undertakes investigations on contraventions of the act. For that reason, it has invariably signalled dread in the hearts of these companies, among them some of the countrys best known firms in fields as diverse as drugs and. Isp courses fema emergency management institute emi. The central government of india formulated an act to encourage external. Fema came out as an extension of the earlier foreign exchange act fera. Fera was passed to regulate the financial transactions concerning foreign exchange and securities. Fema actually has a predecessor a stricter, meaner and a draconian predecessor, popularly called the fera.
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