fema act latest

Pareen Raval

INTRODUCTION

Since, 1993 significant developments have taken palace relating to foreign trade and investments. The liberalization of foreign investments and the globalization of foreign trade called for a closer interaction with the world economy and as a result the Government took initiatives to review the FERA in 1993 and several amendments were enacted in that Act as a part of ongoing process. However, in the light of subsequent developments, the Government thought that a better course would be to repeal the old Actby enacting a new legislation. As you all aware that the Foreign Exchange Regulation Act, 1973 (FERA)has now been repealed by anew Act called the Foreign Exchange Management Act, 1999 (FEMA). The FEMA was passed by the Lok Sabha in October, 1999, received the assent of the President of India in December, 1999 and came into force with effect from 1st June, 2000.

BROAD STRUCTURE OF FEMA

CHAPTERS MATTERS SECTIONS

I Preliminary, Preamble and Definitions 1 – 2

II Regulation and Management of Foreign Exchange

3 – 9

III Authorized Persons 10 – 12

IV Contravention and Penalties 13 – 15

V Adjudication and Procedure for Appeal 16 – 35

VI Directorate of Enforcement 36 – 38

VII Miscellaneous Provisions 39 – 49

Feature FEMA – 1999 FERA - 1973

PREAMBLE An Act to consolidate and amend the lawrelating to foreign exchange with theobjective ofFacilitating external trade andpayments andPromoting orderly development andmaintenance of forex market in India.

An Act to control, regulate, restrict orprohibit foreign exchange transactionswith a view of conservation, properutilization of foreign exchange keepingin view the interest of economicdevelopment of the country.

NATURE Management of Foreign exchange.

Controlling & regulating Foreign exchange.

STRUCTURE 49 Sections 81 Sections

COMPARISON OF FEMA & FERA


NEW TERMS Capital account transactions, Current account transactions, persons,serviceetc. are introduced.

These terms were not defined.

DEFINITION OF AUTHORISED DEALER

Wide (Reason:- Money Changers & off - shore banking units included)

Narrow

POWER OF SEARCH, SEIZURE ETC.

The powers are restricted as contained in Sections 37 and 38 of the Act.

These powers were so blanket that a police officer not below the rank of Deputy Superintendent of Police can do so.


NATURE OF THE ACT

Basically a Civil Law. Law was considered as draconian,severe and harsh.

PENALTY Maximum – Three times the sum involved.

Five times the sum involved +imprisonment in most of the cases

RIGHT TO TAKE PERSON FOR LEGALASSISTANCE

appellant has the right to take the assistance of legal practitioner or a chartered accountant..

The Act did not contain any suchexpress provision.

APPELLATE BODY Adjucating AuthoritySpecial directors(appeal)Appellate tribunalHigh court

Foreign exchange regulation appellate boardHigh court

Section - 1PREAMABLE, EXTENT,

APPLICATION AND COMMENCEMENT OF FEMA, 1999

Section - 2DEFINITION

ANALYSIS OF IMPORTANT DEFINITIONS

ANALYSIS OF IMPORTANT DEFINITIONS

(C) ‘Person resident in India’:

Section - 3Dealing in foreign exchange,

Section 3 prohibits the following transactions, namely,

dealing in foreign exchangedealing in foreign securitiestransfer of foreign exchange to any person not being an authorized personmaking any payment to or for the credit of a non-resident in any manner

Section - 4Holding of Foreingn exchange etc.

• Person resident in india - shall not acquire / hold / transfer any foreign exchange, foreign security or Immovable property situated outside India.

Section-5 & 6

• Where any amount of foreign exchange is due or has accrued to any person resident in India, such person shall take all reasonable steps to realize and repatriate to India such foreign exchange within such period and in such manner as may be specified by the Reserve Bank.

Section - 8Holding of Foreingn exchange

etc.

On realization of foreign exchange due, a person shall repatriate the same to India, namely bring into, or receive in, India and—(a)sell it to an authorised person in India in exchange for rupees; or

(b) retain or hold it in account with an authorized dealer in India to the extent specified by the Reserve Bank; or

(c) use it for discharge of a debt or liability denominated in foreign exchange to the extent and in the manner specified by the Reserve Bank.

Section - 8Holding of Foreingn exchange

etc.

Section - 9Exemption from realisation and

repatriation in certain cases

The provisions of Sections 4 and 8 shall not apply to the following, namely:(a) possession of foreign currency or foreigners coins by any person up to such limit as the Reserve Bank may specify;(b) foreign currency account held or operated by such person or class of persons and the limit up to which the Reserve Bank may specify;(c) foreign exchange acquired or received before the 8th day of July, 1947 or any income arising or accruing there on which is held outside India by any person in pursuance of a general or special permission granted by the Reserve Bank;(d) foreign exchange held by a person resident in India up to such limit as the Reserve Bank may specify, if such foreign exchange was acquired by way of gift or inheritance from a person referred to in clause (c), including any income arising there from;(e) foreign exchange acquired from employment, business, trade, vocation, service, honorarium, gifts, inheritance or any other legitimate means up to such limit as the Reserve Bank may specify; and

Section - 9Exemption from realisation and

repatriation in certain cases

(f) such other receipts in foreign exchange as the Reserve Bank may specify.

For the purposes of clauses (a) and (e) of Section 9 of the Act, the Reserve Bank specified the following limits for possession or retention of foreign currency or foreign coins, namely:(i) possession without limit of foreign currency and coins by an authorized person within the scope of his authority;(ii) possession without limit of foreign coins by any person;

Section - 7Export of goods and services

Every exporter of goods shall give Declaration to RBI:-

Exporter Declaration with the following contents:

Value of goods expotedOther relevant particulars.

RBI

Can ask such other pertinent

Information from Exporters

Value of goods

known?

Value = value expected to be rec'd on sale of such goods, keeping in mind the current

market value.

Include such value in the declaration

Should make

to

Yes

No

Section - 10AUTHORISED PERSON

(1) TO act an authorized person RBI authorization is necessary.(2) To obtain RBI authorization application should be made to the RBI.(3) RBI may grant authorization subject to terms and conditions as it may impose.(4) The authorized person shall in all his dealing in foreign exchange comply with direction / order of RBI.(5) He shouldn't engage in any transaction, not in conformity with the terms of authorization.(6) If he wants to engage, then RBI permission is required.(7) The authorized person shall before undertaking any transaction in foreign exchange on behalf of any person require such person:To make a declaration that there will be no contravention of Act / Rules / Regulation / Notification / directionTo furnish such information considered necessary to conclude that the transaction dose not involve contravention

Section - 10AUTHORISED PERSON

(8) If such person refuses to comply, the authorized person shall refuse in writing to undertake such transaction.(9) Further the authorized person has duty to report to RBI if such other person co temples contravention.(10) The RBI has got the power to revoke the authorization in following situations:Revocation is necessary in the public interest Authorized person has defaulted in complying with the terms of authorization Has contravened the provisions of the act etc.

Note: before revoking Opportunity of being heard should be given to the authorized person.

Section - 11Reserve Bank’s powers to issue directions to authorised

person(1) In order to secure compliance with the act etc., RBI may give direction to authorized persons and can also require them to furnish such information as it deems fit.(2) If authorized person contravenes the direction or commits default in filling the returns it may impose penalty on them.

Note: Opportunity of being heard should be given.

(1) The RBI may empower any of its officer to inspect the business of authorized person(2) Purpose of inspection:Verifying the correctness of any statement furnished to the RBIObtaining any information which authorized person has failed to furnishSecuring compliance with the provisions of the act etc.(3) Authorized person has got the duty to produce all such books, accounts and documents in his custody and to furnish any information relating to its affairs within such time and in such time and in such manner as the aforesaid officer directs.

SectionNo.

Contravention Quantum of Penalty

Section 11 Of any direction by the authorized person or failure to file any return as directed by RBI

Upto Rs. 10,000.If continuing offence additional penalty upto Rs. 2,000 per day.

Section 13 Of any provision of the Act, or anyrule, regulation notification, direction or order or of any condition subject to which an authorization issued

Upto three times, the sum involved, if it is quantifiable.If not quantifiable upto Rs. 2 lacs.If continuing, further penalty upto Rs.5,000 per day after first day.

Section 14 Failure to pay penalty as above– where demand is of an amountexceeding Rs. 1 crore.– in any other case

Civil imprisonment. Upto 3 years Upto 6 months.

CONTRAVENTIONS AND PENALTIES IN BRIEF

Time limits in BriefSection No. Obligation Time Limit

Section 14 Penalty to be paid Within 90 days from the date onwhich notice for payment of penaltyis served.

Section 15 Compounding of Contravention

Within 180 days of receipt ofapplication by Directorate ofEnforcement.

Section 16 Complaint under Section 16(1) to be dealt by Adjudicated Authority

Within 1 year of receipt ofcomplaint.

Section 17 Appeal to Special Director (Appeals)

Within 45 days from receipt oforder.

Section 19 Appeal to Appellate Tribunal

Within 45 days from receipt oforder.

Section19(5)

Appeal to be dealt with by Appellate Tribunal

Will try to dispose off the appealwithin 180 days from receipt ofappeal.

Section 35 Appeal to High Court Within 60 days of communication oforder or decision.

fema act latest

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