FEMA: Foreign Exchange Management Act#
What is FEMA?#
FEMA (Foreign Exchange Management Act, 1999) is the primary legislation governing foreign exchange transactions in India. It replaced the older FERA (Foreign Exchange Regulation Act, 1973).
Key Objectives of FEMA#
- Facilitate external trade and payments
- Promote orderly development of foreign exchange market
- Regulate foreign exchange transactions
- Prevent illegal transfer of foreign exchange
Important Definitions#
- Resident: Person residing in India for more than 182 days
- Non-Resident Indian (NRI): Indian citizen residing abroad
- Person of Indian Origin (PIO): Person of Indian origin but foreign national
FEMA vs FERA#
| Aspect | FERA | FEMA |
|---|---|---|
| Approach | Restrictive | Manageable |
| Violation | Criminal | Civil |
| Penalty | Imprisonment | Penalty only |
| Compliance | Prior approval | General permission |
RBI's Role in FEMA#
- Issues directions/circulars
- Regulates foreign exchange transactions
- Monitors compliance
- Takes enforcement action
Key FEMA Provisions#
- Current Account Transactions
- Capital Account Transactions
- NRI Account Regulations
- Export/Import Regulations
- Foreign Direct Investment (FDI)