It replaced the earlier foreign exchange regulation law known as the fera foreign exchange regulation act. 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. Fera was repealed from 1 st of june, 2000 and all foreign exchange transactions from. 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. Foreign exchange management transfer or issue of any foreign. Any transaction in foreign exchange is now governed by foreign exchange management act 1999fema. Government of india and rbi managed our foreign exchange better than several other countries. Aug 12, 2017 fera is an act which is enacted to regulate payments and foreign exchange in india, is fera. This act seeks to make offenses related to foreign exchange civil offenses. 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. The main change that has been brought is that fema is a civil law, whereas the fera was a criminal law. Fema was introduced to liberalise the restriction on foreign inve.
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. The fera was creating obstacles in the development of the country so. 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. The government of india formulated fema or foreign exchange management act to encourage the external payments and across the border trades in india. Foreign exchange management act, 1999 fema and fera.
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. Archived from the original pdf on 9 september 2012. In view of this change, the title of the legislation has rightly been changed from foreign exchange regulation act to foreign exchange management act. Johnywalker will be nonresident with effect from 21. Foreign exchange management act fema fema is an acronym for the foreign exchange management act, 1999 and is an act of the indian parliament. Taking direction from the fema strategic plan, dhs international strategic framework, the quadrennial homeland security. 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.
Fera was enacted in september 1973 and it came in force from january 1, 1974. Foreign institutional investorfii means an entity established or incorporated outside india which proposes to make investment in india and which is registered as a. Foreign exchange regulation act fera was introduced at a time when foreign exchange forex reserves of the country were low. Fera is an act which is enacted to regulate payments and foreign exchange in india, is fera. Accordingly, the foreign exchange regulation act fera was repealed and replaced by the new foreign. Foreign exchange management act, 1999 fema emerged as a replacement or say an improvement over the old foreign exchange regulation act, 1973 fera. Indian students studying abroad are treated as nonresident. 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. This act seeks to make offences related to foreign exchange civil offences. Difference between fera and fema explained day today gk.
Fera imposed strict regulations on transactions involving foreign exchange and. Foreign exchange and management act, 1999 academike. In this lecture, we will be discussing the transition from fera a controlling law to fema a managing law. The act consolidates and amends the law relating to foreign exchange to facilitate external trade and payments, and to promote the orderly development. Progression of fera to fema and its impact on foreign exchgane in india. Fema means the foreign exchange management act, 1999. Monetary policy vs fiscal policy indian economy in hindi. It is the regulation relating to foreign exchange, external trade and payments in the country. Emergency management institute independent study is. 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. 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. Keeping in view the changed environment, the foreign exchange management act fema was enacted in 1999 to replace fera.
The foreign exchange management act, 1999 fema, as mentioned earlier, has been in force with effect from 1. Any transaction in foreign exchange is now governed by foreign exchange management act 1999 fema. Fera foreign exchange regulation act legislation was passed in 1973. What were the reasons behind enacting fera and fema. Fema consolidate and amend the law relating to foreign exchange facilitating external trade and payments promoting the orderly development and. Fera foreign exchange regulation act was passed in 1947 which was amended in 1973. Difference between fema and fera points of comparison fema 2000 fera 1973 1. This act aims to make all the offenses relating to foreign exchange from criminal to civil offenses. Foreign investors, frequently hear the terms fera and fema, when they deal with india. One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise. All you need to know about rbis fema guidelines drip capital. 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. Bcas 15th intensive study course on dtaa 17 january 2015.
Foreign exchange management act, 1999 fema came into force by an act of parliament. Here is a brief summarized description of what fera and fema mean. This act of parliament was passed in order to replace the foreign exchange regulation act fera, 1973. The central government of india formulated an act to encourage external. The foreign exchange management act fema was an act passed in the winter session of parliament in 1999, which replaced foreign exchange regulation act.
Foreign exchange management act fema areas of law law. May, 2001answerthe term current account transaction is defined in section 2j of foreign exchange management act, 1999. The foreign exchange regulation act of 1973 fera in india was repealed on 1st june, 2000. Foreign exchange regulation act fera, 1973 o foreign exchange regulation act fera o soon after independence, the govt. Foreign exchange regulation act, 1974 or fera was introduced in the year 1974 with the prime objective of conserving preserving the foreign exchange. Be it enacted by parliament in the fiftieth year of the republic of india as follows. 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. Master circulars issued by rbi on 1st july of every year. Fema was introduced because the fera didnt fit in with postliberalisation policies. This was meant to close all the loopholes and drawback of fera and hence major economic reforms were introduced under this act. Foreign exchange management act foreign exchange management. 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. Apr 29, 2018 keeping in view the changed environment, the foreign exchange management act fema was enacted in 1999 to replace fera.
The provision of fema, are in consistent with income tax act, in respect to the definition of term resident. Fera imposed strict regulations on transactions involving foreign exchange and controlled the import and export of currency. 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. Fera was passed to regulate the financial transactions concerning foreign exchange and securities. Reserve bank of india foreign exchange management act. 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. Foreign exchange management act fema, 1999 foreign exchange management act fema,1999. 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. States and communities may enforce stricter criteria. It was passed in the winter session of parliament in 1999, replacing the foreign.
Foreign exchange management act was enactedin1999 with 25 original notifications came into force with effect from june 1, 2000. Enforcement of foreign exchange management act fema is entrusted to a separate directorate, which undertakes investigations on contraventions of the act. With the introduction of the new act in place of fera, certain structural changes were brought in. Fema actually has a predecessor a stricter, meaner and a draconian predecessor, popularly called the fera. Act was introduced in the year 1999 to replace an earlier act fera foreign. 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. Fema or foreign exchange management act was introduced in the year 1999 to replace fera foreign exchange regulations act. Any overseas company owned by an nri nonresident indian and the owner. The difference between the title, fera and fema of legislation.
Practical issues in foreign transactions fema an overview. Fema has been a civil law, which is more precise and comparatively easy to understand and implement. Binational and multinational collaborations allow for the exchange of best practices and lessons learned. Fema replaced an act called foreign exchange regulation act fera. It was replaced by the foreign exchange management act fema, which was passed in the winter session of parliament in 1999. Fema was formulated to fill all the loopholes and drawback of fera. It is important to note that at the time of enactment of the legislation, india faced a dearth of foreign exchange. The policy of consistent devaluation of rupee is counter productive and harmful. Keeping in view the objective of promoting ease of doing business, a need was felt toconsolidatethe. Difference between fera and fema with comparison chart. Foreign exchange management act fema features of fema. Enacted in 1999, replaced the earlier foreign exchange regulation act fera, 1973.
The paper deals with the foreign exchange and management act, 1999 comprehensively. 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. 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. We must move much faster towards foreign exchange management act. 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.
Foreign exchange regulation act fera was introduced with the aim of regulating payments and foreign exchange. The goal of the international affairs program is to strengthen the agency through engagement with the international emergency management community. April 14, 2015 dear all welcome to the refurbished site of the reserve bank of india. Foreign exchange management act, 1999 summary bankexamstoday. The foreign exchange regulation act fera was legislation passed in india in 1973 that. Foreign exchange regulation act and foreign exchange management actpresented by. The bill was referred to the standing committee on finance which submitted its report to the house on. Fema was intoduced because the fera did not fit in with the postliberalization. In the backdrop of acute shortage of foreign exchange in the country, the foreign exchange regulation act of 1973 fera was enacted. 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. 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 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. 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.
Transactions in foreign exchange were absolutely prohibited excepting in. This act may be called the foreign exchange management act, 1999. 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. 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 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. Mar 09, 2020 fema foreign exchange management act, 1999. Jan 30, 2015 by piyali sengupta, hnlu, raipur editors note. What is the fera act, and how is it different than the. Fema came out as an extension of the earlier foreign exchange act fera. 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. Main features of the foreign exchange management act fema. There was a big difference in the definition of resident, under fera, and income tax act. The foreign exchange management act 1999 or in short fema has been introduced as a replacement for earlier foreign exchange regulation act fera.
Fera was a draconian police law, where violation was a criminal offence. 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. Fema an act initiated to facilitate external trade and payments and to promote orderly management of the forex market in the country. The foreign exchange regulation act fera of 1973 in india was replaced on june. Now the criteria of in india for 182 days to make a person resident has been brought. Since it was drafted in 1999, the foreign exchange management act fema. The foreign exchange management act, 1999 fema is an act of the parliament of india to. However the cases under fera can be initiated with in 2 years from repeal of fera i. As their name specifies, fera lays emphasis on the regulation of currencies, whereas the fema manages foreign exchange, i. 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.
Act may be called the foreign exchange management act, 1999. This new act is in consonance with the frameworks of the world trade organisation wto. Fipb means the foreign investment promotion board constituted by the government of india. Nris frequently hear the words fera and fema when it comes to dealings the involve india. An analysis of the regulation of foreign exchange by rbi. Foreign exchange management act fema with effect from june 2000. In 1998, fera was replaced by foreign exchange management act fema. Nikhil agarwalneha gargneha baliwalmegha singhmegha mahasvarinavdeep kaurmohit goyalnikhil chaddanitin sachdevmohit badera 2. Foreign exchange management act 1999 summary of key points. 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. 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. 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. Fera applied to all citizens of india, all over india.
What is fera, what is fema, brief explanation for nris. Also law violators under fema were treated as civic offenders rather than as criminals 5as under fera. Foreign direct investment difference between fera and fema. Jul 30, 2010 the foreign exchange management act, 1999 fema came into force with effect from june 1, 2000.
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