The Full Form of FEMA is Foreign Exchange Management Act. Foreign Exchange Management Act, 1999 (FEMA) is an Act of the Parliament of India to regulate aspects relating to foreign exchange. FEMA consolidate and amend the law relating to foreign exchange to facilitate external trade and payments in India.
What is FEMA?
FEMA, in simple terms, is the way the government has managed the currency. In 1999, the Congress government was smart and replaced the old tradition of weekly cash withdrawal by cheque with a more electronically friendly method of physical cash withdrawal. All the payments were to be done in chequebooks. The government put in place a complicated set of rules called FEMA in which all the banks were required to keep their money in a certain way. Now, every bank needs a different type of RBI license and can only make chequebook payments. However, since such charges involved some level of secrecy, people began to wonder where all the cash went. So the government created an agency called FEMA in 1999 to look into this and make it transparent and effective. What does FEMA do?
Why was it created?
Before FEMA, many state government bodies and statutory bodies regulated foreign exchange, such as the Reserve Bank of India (RBI), Central Bank of India, and Indian Banks Association (IBA). Thus, there was an increase in complexity, inconsistency in applicable provisions, and poor working capacity for the agencies. It was observed that all these agencies could not discharge their respective responsibilities effectively. So, it was felt that a comprehensive legislative framework for foreign exchange would enable an efficient policy framework for external trade and streamline the agencies’ working. What is FEMA? FEMA (Foreign Exchange Management Act) Act, 1999 is an Act of the Parliament of India.
How does FEMA work?
Under this Act, there are certain restricted areas where foreign currency may not be traded. These areas follow the same domestic regions that may not be traded, only in India and India’s territory. FEMA made this restricted area very limited, where only Indian currency and products can be exchanged. It is not restricted to citizens or residents. Under this Act, a notified Entity must trade only in Indian currency, and the official overseas mode of trade cannot be used. If a notified Entity is found to be trading currency outside the boundaries of India or in the wrong manner, it is liable to pay 10% on the amount. FEMA also has provisions for the surrender of illegally acquired foreign currency. Here the amounts are confiscated and then used for any government purpose.
Main Features of FEMA
- It gives the authority and power to the central government to impose restrictions on all such activities that include payments to or from any person residing outside India.
- All the transactions relating to foreign exchange and trade cannot be carried out without prior permission from FEMA.
- The foreign transactions/trade can be carried out only through an individual registered/authorized under FEMA.
- Deals involving foreign exchange under current account can be prohibited by Central Government, even after being carried out by an authorized person, based on general public interest.
- Indian residents would be allowed to carry out trade in foreign exchange, foreign security, or to possess any immovable property outside India if it was owned while staying abroad or inherited from a person residing outside India.
Rules/Regulations under FEMA
- Foreign Exchange Management (Current Account Transactions) Rule, 2000
- Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000
- Foreign Exchange Management (Transfer or Issue of any Foreign Security) regulations, 2004
- Foreign Exchange Management (Foreign currency accounts by a person resident in India)Regulations, 2000
- Foreign Exchange Management (Acquisition and transfer of immovable property in India) regulations, 2000
- Foreign Exchange Management (Establishment in India of branch or office or another place of business) regulations, 2000
- Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000
- Foreign Exchange Management (Export of Goods and Services) regulations, 2000
- Foreign Exchange Management (Realisation, repatriation, and surrender of Foreign Exchange)regulations, 2000
- Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000
- Foreign Exchange ( Adjudication Procedure and Appeals) rules,
Penalty under FEMA
Suppose any individual/taxpayer fails to follow the rules or regulations directed under FEMA. In that case, they will have to face a penalty which will be equal to thrice the amount on which the default has been done, if the amount of default is computable, and if it is not computable or quantifiable, the amount of penalty would be a sum of Rs 2 lakhs. If the taxpayer fails to come clean and continues with their offence in a worse case, the penalty would be expanded to Rs 5000 per day of default. The assets, including the currency and property of the defaulter, are supposed to be seized under the Central Government authority.
What is the significance of FEMA in India?
A company like FEMA is a vital aspect for every citizen of India. Any fraudulent company or individual, having cash in bank accounts abroad, can buy foreign currency in bulk or buying them at lower rates, cheat the government of India. But FEMA regulatory acts of any country protect the genuine foreign exchange and one’s financial interests. FEMA also provides firm and unbiased investigative powers to FIA, which can impose penalties, fines and even disqualify the individuals involved in any such suspicious and fraudulent transactions. India is not a tax haven; it does not enjoy the right to taxation like the one in the case of Mauritius. This also makes it very difficult to spend money abroad without any form of documentation and without being held accountable.
Latest Full Forms
|Full Form of UTF-8||Full Form of ISI|
|Full Form of NATO||Full Form of ATS|
|Full form of IMF||Full Form Of OIC|
|Full form of ACF||Full of CA|
|Full form of NOIDA||Full Form of CBI|
Difference between FERA and FEMA
When FERA was introduced in 1973, the Indian economy suffered from an all-time low of foreign exchange (Forex) reserves. To rebuild these reserves, the government took a stance that all Forex earned by Indian residents — living within India or abroad — belonged to the Government of India and had to be surrendered to the Reserve Bank of India (RBI). FERA, thus, severely regulated all forex transactions that had a direct or indirect impact on India’s forex reserves, which included the import and export of currency.
However, the objective of FERA did not quite have the effect that was envisioned, and the Indian economy continued to decline. To compound matters, the strict regulatory environment created under the ‘License Raj’ dampened the Indian economy further. To mitigate the downturn, then-Finance Minister Manmohan Singh unleashed economic liberalization in 1991. As a result, the government had to make concessions to FERA’s stipulations under the new rules. These concessions made FERA largely irrelevant under the new economic regime. Eventually, the government moved from “currency regulation” to “currency management” and set up FEMA. And so FERA in India was replaced by FEMA.
How does FEMA protect Indian exporters?
This is a straightforward question that has no definite answer. The protection mechanism under FEMA includes blocklisting. This is very serious as blacklisting consists of restricting the movement of funds/goods and the personal information of exporters. It is believed that the risks are only about foreign trade and not domestic trade. Hence, Indian exporters’ personal information is safe. However, restrictions and blacklisting does not mean that protection for Indian exporters is entirely secure. Is it a type of blacklist? No. Any government agency can blacklist any company or industry, or any person. Being the business owner is enough to bring your company and other persons under the black list.
How does FEMA protect Indian importers?
FEMA protects Indian importers against the excessive flow of funds and makes them spend in a controlled manner. FEMA also covers Indian exporters and assists them in securing money from Indian banks. How does FEMA protect Indian exporters? FEMA protects Indian exporters by ensuring that Indian Banks send the excess funds they received as working capital to the designated bank only. This protects Indian exporters against an excessive outflow of funds. Thus, better management of funds on the country’s external account and elimination of dependence on foreign banks for finance of the export and trade activities. For the third time, the Indian government gives vast benefits to Indian exporters by enhancing the working capital limit.
Full Form of FEMA as it is known as the “Hard Act.” Good to be on the lookout if you are hiring someone for a good purpose of work. Get a Proof of Work Wallet is quite essential. If any of the people are looking for FHA, this is that Act, and if they are not a lawyer and just starting to work in their career, they must take this matter seriously. If you have not taken this matter seriously, then stay safe and if you are looking for an excellent job, proceed forward with this problem.
FERA Full Form
The Full Form of FERA is Foreign Exchange Regulation Act. The Foreign Exchange Regulation Act (FERA) was enacted in India in 1973 that forced strict directions on particular sorts of instalments, the dealings in remote trade (Forex) and securities, and the exchanges that indirectly affected the outside trade and the import and fare of currency. The bill was defined with the point of controlling instalments and outside exchange. FERA came into power with impact from January 1, 1974. FERA was presented when remote trade (Forex) stores of the nation were low; Forex is a rare item.FERA principally restricted all exchanges not allowed by RBI. Coca-Cola was India’s driving soda pop until 1977 when it cleared out India after another administration requested the organization to turn over its mystery equation for Coca-Cola and weaken its stake in its Indian unit as required by the Foreign Exchange Regulation Act (FERA). In 1993, the organization (alongside PepsiCo) returned after the presentation of India’s Liberalization policy.
A Quick FAQ to FEMA
What is the full form of FEMA?
FEMA Full Form Stands for Foreign Exchange Management Act.
What is FEMA explain?
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”.
What is RBI FEMA?
Foreign Exchange Management Act (“FEMA”) envisages that the Reserve Bank of India (“RBI”) will have a key role in the management of foreign exchange. The main functions of RBI under FEMA are as follows: … b) RBI cannot impose any restrictions on current account transactions.
Where is FEMA applicable?
FEMA is applicable to all parts of India. The act is also applicable to all branches, offices and agencies outside India owned or controlled by a person who is a resident of India. The FEMA head office, also known as Enforcement Directorate is situated in New Delhi and is headed by a Director.
What are FEMA rules?
The Foreign Exchange Management Act (FEMA) is a law enacted by the Government of India in 1999 to control this flow of foreign currency across Indian borders.
What is the Full Form of FERA?
FERA Full Form Stands for Foreign Exchange Regulation Act.
What is the difference between FEMA and FERA?
FERA was an act promulgated, to regulate payments and foreign exchange in India, on the contrary FEMA is an act to promote orderly management of the foreign exchange in India.