Chapter 1 Chapter

Foreign 1: Foreign
Exchange Exchange
Management Act, 1999 Management Act, 1999
Sec 1: Preamble, Extent, Application & Commencement of FEMA
1. Extends to the whole of India. Came into force in 1999 w.e.f. 1st June 2000.
2. Shall also apply to all branches, offices and agencies outside India owned or controlled by a person resident in India (PRI) and also to any contravention committed
outside India by any person to whom this Act applies.
Bomber
1. Any PROI doing transactions in Rupees in excess of limits specified to countries outside India shall be liable to FEMA.
2. Export and Import of Indian currency and currency notes:
a. Any PRI:
i. Can take outside India currency notes upto Rs. 25,000 per person other than Nepal & Bhutan.
ii. May take outside any commemorative (collectible) coins maximum upto 2.
iii. Going outside India & coming back may bring into India maximum Rs. 25,000.
b. Any PROI, not being a citizen of Pakistan or Bangladesh, and visiting India:
i. May take outside India (including to Nepal & Bhutan) max Rs. 25,000
ii. May bring into India (including from Nepal & Bhutan) max Rs. 25,000 1.1
c. Export and Import of currency to or from Nepal and Bhutan, a person may:
i. Take outside India max. Rs. 25,000 to Nepal & Bhutan other than notes of denomination of Rs. 100.
ii. Any person can bring into India from Nepal & Bhutan any amount without restrictions other than denomination of Rs. 100.
iii. Bring/ take outside India any amount of currency of Nepal & Bhutan.
d. No person shall take or send out of India the Indian coins which are covered by the Antique and Art Treasure Act, 1972.

Sec 2: Definitions
1. ”Foreign currency” means any currency other than Indian currency;
2. “Foreign exchange” means foreign currency and includes,— (i) deposits, credits and balances payable in any foreign currency, (ii) drafts, travellers cheques, letters
of credit or bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency, (iii) drafts, travellers cheques, letters of credit or bills of
exchange drawn by banks, institutions or persons outside India, but payable in Indian currency;
3. “Foreign security” means any security, in the form of shares, stocks, bonds, debentures or any other instrument denominated or expressed in foreign currency and
includes securities expressed in foreign currency, but where redemption or any form of return such as interest or dividends is payable in Indian currency;
4. “Person” includes: i. an individual, ii. a HUF. iii. a company, iv. a firm, v. an AOP or BOI ; vi. AJP; vii. any agency, office or branch owned or controlled by such person;
5. “Person resident in India (PROI)” means a PRI for more than 182 days during the course of the preceding FY but does not include:
a. a person who has gone out of India or who stays outside India, in either case:
i. for employment outside India, or
ii. for carrying on a business or vocation outside India,
iii. for any other purpose, where his intention is to stay outside India for an uncertain period;
b. a person who has come to or stays in India, otherwise than for:
i. employment in India, or
ii. carrying on a business or vocation in India, or

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iii. for any other purpose, where his intention is to stay outside India for an uncertain period;
1.2 Any person or body corporate registered or incorporated in India, an office, branch or agency in India owned or controlled by a person resident outside India, an
office, branch or agency outside India owned or controlled by a person resident in India;

Sec 3-4: Regulation & Management of Foreign Exchange

1. Unless otherwise provided in the Act, rules or regulations or with general or special permission of the RBI, no person shall:
a. deal in or transfer any foreign exchange or foreign security to any person not being an Authorised Person
b. make any payment to or for the credit of any PROI
c. receive otherwise through an AP, any payment by an order or on behalf of any PROI.
2. Further, no PRI shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India unless
otherwise provided in the Act.

Sec 10: Authorised Person

1. Any person can apply to RBI in writing for being appointed as an Authorised Person.
2. The RBI will test if such appointment will be in the Public Interest or Forex Reserve Interest or Compliance of Law or as per conditions or directions.
3. Powers of AP to act as an:
a. Authorised Dealer- To deal in Foreign Security on behalf of Indian Investors.
b. Money Changer - To enable exchange of currency legally as Full-Fledged Money Changer (FFMC) or Restricted Money Changer (RMC).
c. Off Shore Banking Unit- Can be set up in SEZ to give finance to SEZ Developers or Industry or Finance to International Industry. They are free from the
requirement of CRR, SLR, etc. made by RBI.
4. Duties of AP:
a. Compliance - Comply with such general or special directions or orders as the RBI may give from time to time.
b. Permission of RBI – Not engage in any transaction without the previous approval of RBI which is involving any foreign security not in conformity with the terms
of his authorization under this section.
c. While undertaking any transaction:
i. Take such declaration ii. Satisfy himself that the transaction will not involve any contravention
iii. In case of contravention report the matter to the iv. Person refuses to comply the authorised person shall refuse in writing to
RBI. undertake the transaction.
5. Contravention & Consequences:
a. Revocation of authorization – RBI may revoke the authorization granted if it is in:
i. Public interest
ii. Authorised person has failed to comply with the conditions of authorization. The AP shall be given a reasonable opportunity of making representation.
b. Penalty of Rs. 10,000 and Rs. 200 per day when such contravention continues

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Sec 11: Powers of RBI Sec 12: Inspection and Investigation

Issue of Directions: The RBI may for the purpose of securing compliance The RBI may at any time inspect the business of any AP by any officer of the RBI
with the provisions, give to the authorised persons (AP) any direction: specially authorised in writing for obtaining information, verifying correctness of any
a. To do any act relating to foreign exchange or foreign security; or statement, information or particulars furnished, securing compliance with the
b. To stop from doing any act relating to foreign exchange or foreign provisions of this Act. The AP shall produce such books, accounts and other
security documents in his custody, furnish any statement or information relating to the affairs
c. Demand any information from AP to ensure compliance. and coordinate and assist in all manner to Inspecting Officer.

Sec 5: Current account transactions

Transactions other than a capital account transaction and includes:
i. payments due in foreign trade, other current business, services, and short-term banking & credit facilities in the ordinary course of business,
ii. payments due as interest on loans and as net income from investments,
iii. remittances for living expenses of parents, spouse and children residing abroad, and
iv. expenses for foreign travel, education and medical care of parents, spouse and children;
Prohibited CUT ( Rule 3 read with Schedule I) 1.3
1. Income from: 2. Remittance for purchase of: 3. Nepal & Bhutan
i. lottery winnings i. Lottery tickets; i. Payment for travel to Nepal and Bhutan
ii. income from racing/ ii. Banned/prescribed magazines, ii. Payment for transactions with persons of Nepal and Bhutan
riding iii. football pools etc.
4. Payment of commission on exports under Rupee State Credit Route, except commission up to 10% of invoice value of exports of tea and tobacco.
5. Payment of commission on exports made towards equity investment in JVs/Wholly Owned Subsidiaries abroad of Indian companies.
6. Remittance of dividend by any company to which the requirement of dividend balancing is applicable.
7. Payment related to “Call Back Services” of telephones.
8. Remittance of interest income on funds held in Non-resident Special Rupee Scheme a/c.

Bomber
Prohibited current account transactions are not illegal but are only prohibited to be executed in foreign currency. So if a person wants to execute them in Rupees or in any
other kind he can do the same but AP will not give him foreign exchange for them.

CUT permissible with approval of CG CUT permissible with approval of RBI

Rule 4 read with Schedule II Rule 5 read with Schedule III
Approving Authority Transaction Exceeding Transaction
Ministry of Human Resource Development USD 5,000 per FY 1. Gift per remitter p.a.; 2. Donation per donor p.a.
Department of Approval for Cultural Tours for any USD 10,000 per FY One or more private visits to any country
Education & Culture amount. USD 1 Lac or amt. For emigration
prescribed by country of

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emigration
1.4 Department of Youth Remittance of prize USD 25,000 per FY 1. Business Travel
Affairs and Sports money/sponsorship of sports activity 2. Attending a conference or specialized training.
abroad by a person other than 3. Maintenance expenses of patient going abroad for medical treatment
International / National / State Level or check up abroad.
sports bodies, if the amount involved 4. Accompanying as attendant to a patient going abroad for medical
exceeds USD 100,000. treatment or check-up.
Ministry of Finance Higher of: Remittance by an entity in India by way of reimbursement of incorporation
Insurance Division Remittance for membership of P& I a. 5% of investment expenses.
Club brought in India or
b. USD 1 Lac
Department of Advertisement in foreign print media Net salary after deduction Maintenance exp. of close relatives abroad, if person resident and not
Economic Affairs for purposes other than promotion of of Tax, PF and other permanently resident in India.
tourism, foreign investments and deductions a. The person is citizen of Foreign Country other than Pakistan.
international bidding (exceeding USD b. The person is citizen of India on deputation to office of Branch or
10,000) by a SG and its PSU. subsidiary or JV in India of such foreign co.
Ministry of Surface i. Remittance of freight of vessel USD 10 Lacs per project Remittance for consultancy service from outside India in respect of
Transport (Chartering chartered by a PSU Infrastructure projects viz.
Wing) ii. Payment of import by a Govt. 1. Power 5. Industrial park
Department or a PSU on C.I.F. basis 2. Telecommunication 6. Sea port and airport
3. Railways 7. Water supply, sanitation &
4. Roads & Bridges sewage
Director General of i. For multi-modal transport Estimate from: Medical Treatment abroad
Shipping operators making remittance to a. A Doctor in India
their agents abroad b. Hospital or Doctor
ii. Of container detention charges abroad
exceeding the rate prescribed by
DG of Shipping
Ministry of Remittance of hiring charges of Higher of: Commission, per transaction, to agents abroad for sale of residential flats
Information & transponders by a. 5% inward remittance or commercial plots in India.
Broadcasting, (a) TV Channels (b) Internet Service b. USD 25000
Communication & IT providers Higher of: Studies Abroad
a. USD 100,000 per
academic year
b. Estimates from
Institutions abroad
USD 100,000 p.a. per a. Maintenance expenses of close relatives abroad in any other case.

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recipient b. Person going abroad for employment

Lower of: Donations by corporate for:
a. 1% of the Forex a. Creation of Chairs in reputed Educational Institutions
earnings during the b. To funds promoted by Educational Institutes (other than Investment
previous 3 FYs of the Fund)
Corporate. c. Technical Institution or Body or Association in the field of activity of the
b. USD 50 Lacs donor employment.

Any CUT requiring CG approval otherwise if done out of RFC or EEFC shall not require CG approval except for remittance for membership of P&I

Liberalised Remittance Scheme

Applicability: Only Resident Individual can avail the facility.
Facility: Is for making remittance upto USD 2,50,000 per FY without any approval of RBI for:
1. Current Account Transaction (CUT) 2. Capital Account Transaction (CAT) 3. Combination of both.
Non-Applicability: Not available for prohibited transactions and transactions requiring approval of CG. Remittances made ‘Non-Cooperative countries and Territories’ by 1.5
Financial Action Task Force (FATF) viz. Cook Islands, Egypt, Guatemala, Indonesia, Myanmar, Neuru, Nigeria, Philippines and Ukraine.
Transactions for Individual Requiring RBI Approval for the following purposes within limit of USD 2,50,000 only need not take RBI approval:
1. Private visits to any country 2. Gift or donation
3. Going abroad for employment 4. Emigration
5. Maintenance of close relatives abroad 6. Studies abroad
7. Expenses in connection with medical treatment abroad 8. Travel for business, or attending a conference or specialized training or medical expenses or
9. Any other current account transaction check up abroad or for accompanying as attendant to a patient going abroad.
Further, for persons who are resident but not permanently resident in India and:
a. is a citizen of a Foreign State other than Pakistan; or
1. is a citizen of India who is on deputation to the office or branch of the Foreign Company or subsidiary or JV in India of such Foreign Company may make remittance up to
his NET SALARY.
Sec 2(e) & Sec 6: Capital Account Transactions (CAT)
Alteration of Assets or Liabilities of PRI situated Alteration of Assets or Liabilities Transactions in Section 6(3) 5 Transactions prohibited in
outside India of PROI situated in India PROI

Transactions Specified u/s 6(3) Schedule I: Permissible to PRI Schedule II: Permissible to PROI Prohibited CAT for PROI
1. Transfer or issue of any Foreign 1. Investment by a PRI in foreign 1. Acquisition & transfer of 1. Business of chit fund
Security by a PRI; securities; immovable property in India by
PROI;
2. Transfer or issue of any security by 2. Foreign currency loans raised in 2. Guarantee by a PROI in favour of, 2. As Nidhi Company
a PROI; India and abroad by a PRI; or on behalf of, a PRI;

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3. Transfer or issue of any security or 4. Transfer of immovable property 3. Import and export of 3. in agricultural or plantation
1.6 Foreign security by any branch, outside India by a PRI; currency/currency notes into/from activities or in agricultural or
office & agency in India of a PROI; India by a PROI; plantation activities or
3. Any borrowing or lending in 4. Guarantees issued by a PRI in 4. Deposits between a PRI and a 4. in real estate business, or
Foreign Exchange; favour of a PROI; PROI; construction of farm houses or
4. Any borrowing or lending in 5. Export, import and holding of 5. Foreign currency accounts in India 5. In trading in Transferable
rupees between a PROI & PRI; currency/currency notes of a PROI; Development Rights (TDRs).
5. Deposits between PRI & PROI. 6. Loans and overdrafts (borrowings) 6. Remittance outside India of capital
by a PRI from a PROI; assets in India of a PROI.
5. Transfer of immovable property 6. Maintenance of foreign currency 7. Investment in India by a PROI viz.
outside India other than a lease accounts in India and outside a. issue of security by a body
not exceeding 5 years by PRI. India by a PRI; corporate or an entity in India and
6. Acquisition or transfer of7. Taking of an insurance policy by a investment therein; and
immovable property in India other PRI from an insurance company b. investment by way of contribution
than a lease ≤ 5 years by a PROI. outside India; to the capital of a firm or a
8. Giving of a guarantee or Surety for 9. Loans and overdrafts by a PRI to a proprietorship concern or an AOP
any debt, obligation or other PROI; in India.
liability of a PRI owed to a PROI.
10. Giving of a guarantee or Surety 11. Remittance outside India of
in respect of any debt, obligation, capital assets of a PRI;
other liability incurred by a PROI. 12. Sale and purchase of foreign
exchange derivatives in India and
abroad and commodity
derivatives abroad by a PRI.
CAT on which restriction cannot be imposed:
i. Amortisation of Loan ii. Depreciation of direct investments in ordinary course of business
iii. Drawing for the purpose of repayment of loan instalments
Real Estate Investment Trust (REIT)
1. The law providing for REITs was enacted by the US Congress in 1960.
2. The law was intended to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.
3. REITs are strong income vehicles must pay out an amount equal to 90% of their taxable income in the form of dividends to shareholders.
4. As of August 2014, India approved creation of REITs in the Country.
5. Indian REITs will help individual investors enjoy the benefits of owning an interest in the securitized real estate market. The greatest benefit will be that of fast and easy
liquidation of investments in the real estate market unlike the traditional way of disposing of real estate.

Acquisition and Transfer of Immovable Property in India

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By PROI who is a citizen of India: Person of Indian origin resident outside India may:
1. Acquire immovable property in India other than agricultural property, etc. from funds received in India through normal banking channels or funds held in
any non-resident account made as per provisions of the RBI. No payment shall be made either by Traveller’s cheque or by foreign currency notes.
2. May transfer any immovable property in India to a PROI.
3. May transfer any immovable property other than agricultural or plantation property to a PROI who is a citizen of India or PROI of Indian origin.
4. Acquire immovable property in India other than agricultural property, etc. as gift from
a PRI or PROI.
5. Acquire immovable property in India in inheritance from a PROI.
6. Sale of any immovable property in India to a PRI.
7. Transfer of residential or commercial property by way of gift to a PRI or PROI

Repatriation of sale proceeds

1. The sale proceeds of any immovable property after approval of RBI can be repatriated outside India.
2. Authorised dealer may allow repatriation if following conditions are satisfied:
a. Property was acquired by seller in accordance with provisions of Foreign Exchange Law. 1.7
b. Amount to be repatriated does not exceed amount paid for acquisition of the immovable property
c. Residential Property – the repatriation of sale proceeds is restricted to not more than 2 such properties.

Acquisition and Transfer of Immovable Property outside India

Restrictions
A PRI shall acquire or transfer any Immovable Property outside India only after general or special permission of the RBI.
This restriction shall not apply to the Property:
a. Held by a PRI who is a national of Foreign State; b. Acquired by a PRI on or before 8th July ’47 & continued to be held with permission of RBI
Permitted
1. A PRI may acquire immovable property outside India:
a. By way of gift or inheritance and continued to be held by him with the permission of RBI.
b. By way of purchase out of foreign exchange held in Resident Foreign Currency (RFC) account maintained.
c. Jointly with a relative who is a PROI (with no outflow of funds from India).
2. A Company incorporated in India having an overseas office may acquire Immovable Property outside India for its business and for residential purposes of its staff with
permission of RBI.
Prohibited
Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau or Hong Kong without permission of RBI cannot acquire or transfer immovable
property in India, other than lease not exceeding 5 years.

Sec 7: Export of goods and services

Approval of RBI & Procedure

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1. Every exporter of goods shall:

1.8 a. Furnish to the RBI a declaration of all material particulars, including full export value. Where value of export is not ascertainable, an amount which the exporter
expects can be declared.
b. Furnish to the RBI such other information for ensuring realisation of export proceeds by such exporter.
2. RBI shall direct any exporter to comply with such requirements as it deems fit to ensure export value is realised by the exporter having regard to prevailing market
conditions.
3. Every exporter of services shall furnish to RBI or to such other authorities a declaration in such form and in such manner as may be specified.
Declaration of exports
1. In case of exports taking place through Customs Manual Ports, every exporter of goods or software in physical or any other form (other than to Nepal and Bhutan), shall
furnish to a specified authority a declaration in a form set out in the schedules containing true and correct material particulars including amount representing full value
of export or if value is not ascertainable, then an expected value by the exporter.
2. Declarations shall be executed in sets of such number as specified.
3. Realisation of export proceeds in respect of export from third party should be duly declared by the exporter in the appropriate declaration form.
4. The Importer-exporter code number allotted by the Director General of Foreign Trade shall be indicated in all copies of the declaration forms.
Exemptions from Declaration
a. Trade samples of goods supplied free of cost b. Goods listed at items 1,2 and 3 of clause (i) to be re-exported by units in SEZ
c. Personal effects of travellers d. Replacement goods exported free of charge as per EXIM Policy
e. Ship’s stores, transhipment cargo and goods supplied under the orders of CG f. Following goods permitted by the Development Commissioner viz.:
or military, naval or air force. i. Imported goods found defective
g. By way of gift not more than Rs. 5 Lakhs ii. Goods imported from foreign suppliers/ collaborators on loan basis
h. Aircrafts or aircraft engines and spare parts for overhauling and/ or repairs iii. Goods imported from foreign suppliers/ collaborators free of cost, found
subject to re-import within 6 months surplus after production
i. Goods imported free of cost on re-export basis j. Goods sent out for testing subject to re-import
k. Exports permitted by RBI l. Defective goods sent outside India for repairs and re-import
Authority to whom declaration is to be furnished and manner of dealing with the same
Declaration in EDF (Goods) Declaration in SOFTEX (Software and Audio/ Video/ Television)
i. Shall be submitted in Duplicate to the Commissioner of Customs. i. Shall be submitted in triplicate to the designated official of Ministry of IT, GOI at
ii. Post verification and authentication, the Commissioner of Customs shall forward the Software Technology Parks of India (STPIs) or the Free Trade Zones (FTZs) or
the original declaration form/data to the nearest office of the RBI and handover Special Economic Zones (SEZs) in India.
to the exporter for being submitted to the authorised dealer. ii. After certification, the designated officer shall forward the original copy to the
nearest office of RBI and return the duplicate to the exporter. The Triplicate shall
be retained by the designated official for record.
iii. On realisation of the export proceeds, duplicate copies of the Declaration Form and Exchange Control Copies of the shipping bills shall be retained by the Authorised
Dealers.

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Evidence in support of declaration

Authority to whom the declaration form is submitted may require such evidence to establish that:
a. the exporter is a PRI and has a place of business in India; b. the destination stated on the declaration is the final place of the destination of the goods exported;
c. the value stated in the declaration represents: i. the full export value of the goods or software; or ii. where it is not ascertainable, the value which the exporter expects
to receive based on the prevailing market conditions in the overseas markets.

Period within which export value of goods/software/ services to be realized

1. Full export value shall be realized and repatriated to India within 9 months from the date of export, provided:
a. Goods are exported to a warehouse established outside India with the permission of RBI, the full export value of goods exported shall be paid to the authorised dealer as
soon as it is realised and in any case within 15 months from the date of shipment of goods;
b. RBI or the authorised dealer subject to the directions issued by RBI may for a sufficient and reasonable cause shown, extend the period of 9 months or 15 months.
2. Where the export has been made by Units in SEZ/ Status Holder exporter / EOUs and units in EHTPs, STPs and BTPs, the full export value of goods or software shall be
realised and repatriated to India within 9 months from the date of export. (RBI or authorised dealer may, for a sufficient and reasonable cause shown, extend the period of
9 months) 1.9
Explanation: “Date of export” in relation to the export of software in other than physical form, shall be deemed to be the “Date of invoice” covering such export.

Submission of export documents

Documents pertaining to export shall be submitted to the authorised dealer mentioned in the relevant export declaration form, within 21 days from the date of export or
21 days from the date of certification of the SOFTEX form. Authorized dealer may accept the documents pertaining to export submitted after the expiry of the specified
period for reasons beyond the control of the exporter.

Payment for export

In respect of export for which a declaration is required to be furnished, no person shall except with the permission of the RBI or subject to the directions of the RBI, with
permission of an authorised dealer, do or refrain from doing anything or take any action which has the effect of securing:
i. that the payment for the goods or software is made otherwise than in the specified manner; or
ii. that the payment is delayed beyond the period specified under these Regulations; or
iii. that the proceeds of sale of the goods or software exported do not represent the full export value subject to such deductions, if any, as may be allowed by the RBI or,
subject to the directions of the RBI, by an authorised dealer.

Certain exports requiring prior approval

Export under trade agreement/ rupee credit, etc.
i. Export of goods under special arrangement between the CG and Government of Foreign State or under Rupee Credits extended by the CG to Government of a Foreign
State by the terms and conditions set out in the Relative Public Notice issued by the Trade Control Authority in India and the instructions issued from time to time by RBI.
ii. An expert under the line of credit extended to a Bank or a Financial Institution operating in Foreign State by the EXIM Bank governed by the terms and conditions of RBI
to the Authorised Dealer from time to time.

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Delay in receipt of payment

1.10 Where in relation to goods or software export the specified period has expired and the payment thereof has not been made as aforesaid, the RBI may give such directions
as appears to it to be expedient for the purpose of securing:
a. the payment thereof if the goods or software has been sold and
b. the sale of goods and payment thereof or re-import into India, if goods or software has not been sold, within such period as the Reserve Bank may specify in this behalf ;
Provided that omission of the Reserve Bank to give directions shall not have the effect of absolving the person committing the contravention from the consequences
thereof.

Advance payment against export

Where an exporter receives advance payment, from a buyer / third party named in the export declaration made by the exporter, the exporter shall be under an obligation
to ensure that: (i) the shipment of goods is made within 1 year from the date of receipt of advance payment; [However an export agreement can itself duly provide for
shipment beyond the period of one year] (ii) the rate of interest, if any, payable on the advance payment does not exceed [London Inter-Bank Offered Rate (LIBOR) + 100
basis points] and (iii) the documents covering the shipment are routed through the authorised dealer through whom the advance payment is received; In the event of the
exporter's inability to make the shipment, within one year from the date of receipt of advance payment, no remittance towards refund of unutilized portion of advance
payment or towards payment of interest, shall be made after the expiry of the period of one year, without the prior approval of the Reserve Bank.

Sec 8: Realisation and Repatriation of Foreign Exchange (FE)

Repatriation
Means bring into, or receive in India and use in following manner:
1. Cash: Sell it to an authorised person in India in exchange for rupees; Disclose the transaction from which it is earned.
2. Deposit: Retain or hold it in account with an authorised dealer in India to the extent specified by the Reserve Bank; Disclose the transaction from which it is earned
3. Set-Off: Use it for discharge of a debt or liability denominated in foreign exchange to the extent and in the manner specified by the RBI; Disclose the transaction from
where it is earned and expended.
Time period for surrender of Foreign Exchange
Within 7 days:
i. Remuneration for services rendered ii. Settlement of any lawful obligation iii. Income on assets held outside India
Within 60 days: unused portion of foreign exchange from the date of its acquisition or purchase
Within 90 days: Any unspent balance on FE acquired for the purpose of foreign travel, from the date of return of the travel to India if the unspent amount is in the form of
foreign currency notes and coins; OR in other cases of receipts, from such date of receipts.
Within 180 days: Any unspent balance on FE acquired for the purpose of foreign travel, from the date of return to India if the unspent amount is in the form of traveller’s
cheque.

Sec 9: Exemption from realization and repatriation in certain cases

The provisions of section 4 and 8 shall not apply to the following, viz.:
Upto the limit specified by RBI As per General or Special permission granted by RBI
a. Possession of foreign currency or foreign coins by any person, e. Foreign exchange acquired or received before the 8.07.1947 or any

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income arising or accruing there on which is held outside India by any

person
b. Foreign currency account held or operated by such person or class of f. Foreign exchange held by a person resident in India, if such foreign
persons exchange was acquired by way of gift or inheritance from a person
referred to in clause (e) including any income arising therefrom
c. Foreign exchange acquired from employment, business, trade, vocation,
service, honorarium, gifts, inheritance or any other legitimate means.
d. Such other receipts in foreign exchange as the specified by RBI
Possession and retention of Foreign Exchange
The RBI has specified the following persons with the limits for possession and retention of foreign currency by a person resident in India:
Person Limit
Any person may possess foreign coins No limit
Any PRI is permitted to retain in aggregate foreign currency not exceeding USD 2,000 or its equivalent in the form of
currency notes/bank notes or traveller’s cheques
Any PRI but not permanently resident, if the foreign currency was acquired when he was No limit 1.11
resident outside India and was brought into India and declared to the custom authorities.
Authorised Person Within limits specified by RBI

Sec 11-14: Contravention and Penalties

Sec No. Contravention Penalty
11 Authorised Person contravenes any direction by RBI or failure to file i. Upto Rs. 10,000
any return as directed by RBI. ii. If continuing offence additional penalty upto Rs 2,000 per day.
13 Of any provision of the Act, or any rule, regulation, notification, i. Upto 3 times the sum involved, if it is quantifiable
direction or order or of any condition subject to which an ii. If not quantifiable, upto Rs. 2 Lacs
authorization is issued. iii. If continuing, further penalty upto Rs. 5000 per day after 1st day
13(1A) & If any person is found to have acquired any foreign exchange, foreign Penalty:
(1C) security or immovable property, situated outside India, of the i. 3 times sum involved &
aggregate value exceeding the threshold prescribed under the proviso ii. Confiscation of value equivalent situated in India, the Foreign
to sub-section (1) of Sec 37A exchange, Foreign Security or immovable property &
iii. Jail upto 5 years.
14 Failure to pay penalty as above within 90 days: Civil Imprisonment:
i. Where demand is of an amount exceeding Rs. 1 crore. i. Upto 3 years
ii. in any other case ii. Upto 6 months

Sec 14: Orders of adjudicating authority

i.Penalty imposed is required to be paid within 90 days of receipt of notice.

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ii. If such payment is not made, such person is liable to civil imprisonment. If demand is for less than Rs. 1 crore then such civil imprisonment can be upto 6 months and if
1.12 demand exceeds Rs. 1 crore, civil imprisonment can be upto 3 years.
iii.On payment of penalty amount, he shall be released.
iv.Order for arrest and detention cannot be made unless a show cause notice is issued to the defaulter. However, arrest can be made without show cause notice, if
adjudicating authority is satisfied:
a. that the defaulter has dishonesty transferred, concealed or removed his property or he is refusing or neglecting to pay even if he has means to pay and;
b. he is likely to abscond the local limits.
v.If a person to whom show cause notice is issued does not appear before Adjudicating authority, warrant of arrest can be issued.

Sec 15: Compounding of Contravention

Compounding: process of voluntarily admitting the contravention, pleading guilty and seeking redressal.
Compounding Authority: Persons authorized by CG under section 15 i.e. classes of officers of the Enforcement Directorate and classes of officers of the RBI can act as
Compounding Authority.
1. Any contravention under section 13 may, on an application made by the person committing such contravention, be compounded within 180 days from the date of receipt
of application by the Compounding Authority in such manner as may be prescribed.
2. Where a contravention has been compounded no proceeding or further proceeding, shall be initiated or continued, against the person committing such contravention in
respect of the contravention so compounded.

Sec 16: Power of adjudicating authority to impose penalty

i. Persons committing an offence under FEMA are liable to penalty. An Adjudicating Authority (AA) appointed by the CG under FEMA can impose any penalty for violation
of any provision of FEMA or contravention of any rule, regulation, directions or orders issued under the powers conferred by the Act. Their jurisdiction will be
prescribed by the Central Government.
ii. The AA can hold inquiry only on receiving a complaint from an authorised officer.
iii. They have to follow principles of natural justice by giving opportunity of making representation.
iv. The AA should endeavour to dispose off the complaint within one year.
v. The AA can impose penalty:
a. if the amount is quantifiable - upto thrice the sum involved in such contravention
b. if the amount is not quantifiable - penalty upto Rs. 2 lakhs can be imposed.
c. If contravention is of continuing nature, further penalty upto Rs 5,000 per day during which the default continues can be imposed.
vi. The AA adjudicating the contravention can also order confiscation of any currency/ security/ other money/ property w.r.t. which the contravention has taken place.
vii. He can also direct that foreign exchange holdings of any person committing the contravention shall be brought back to India or retained outside as per directions.

Sec 17 & 19: Appeals

1. Appointment of SD: The CG shall by notification appoint one or more Special Directors (Appeals) and specify the Jurisdiction to hear appeals against the orders of the AA.
2. Appeals to SD: Appeals against the order of AA shall be made only if the AA is Assistant Director or Deputy Director of Enforcement. Appeal shall be made within 45 days
and there shall be no time limit for disposal.

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3. Appeals to AT: Appeal against the order of SD or against the order of AA if AA is other than: a. Assistant Director; b. Deputy Director of Enforcement. Appeal shall be
made within 45 days and there shall be disposed within 180 days.
4. Penalty: The penalty determined by AA or SD shall be deposited. The AT has the discretion to dispense with the payment of the penalty if AT is of the opinion that,
accused shall cause undue hardship is caused to the accused for deposit of such penalty.
5. Common Provisions: The opportunity of being heard shall be given to accused. Accused can appoint CA, Lawyer for representing him.
6. Appeal to High Court (Sec 35): Against order of AT, only on question of law within 60 days of order. Delay can be condoned on sufficient cause by CG or accused. No
further appeal can be made to Supreme Court under FEMA.

Time Limits (Summary)

Sec No. Obligation Time Limits
14 Full penalty to be paid Within 90 days from the date on which notice for payment of penalty is served.
15 Compounding of contravention u/s 13 Within 180 days of receipt of application by Directorate of Enforcement.
16 Complaint u/s 16(1) to be dealt by AA Within 1 year of receipt of complaint.
17 Appeal to SD(Appeals) Within 45 days from receipt of order.
19 Appeal to Appellate Tribunal (AT) Within 45 days from receipt of order. 1.13
19(5) Appeal to be dealt with by AT Will try to dispose of the appeal within 180 days from receipt of appeal.
35 Appeal to High Court Within 60 days of communication of order or decision.

Sec 34: Jurisdiction of Civil Court

Civil Court shall not have jurisdiction to entertain any suit or proceeding in respect of any matter which an AA or AT or SD (Appeals) is empowered to determine and no
injunction shall be granted by any Court or other Authority in respect of any action in pursuance of power conferred.

Sec 36: Directorate of Enforcement Sec 37: Power of search, seizure, etc. Sec 38: Empowering other
officers
1. CG shall establish a Directorate of Enforcement with a Director and such other 1. Officers of Enforcement not below the 1. The CG may impose,
officers or class of officers as it thinks fit to be called the Officers of rank of Assistant Director shall investigate authorise any officer of
Enforcement. in case of contraventions u/s 13. customs or any central excise
2. The CG may authorise the Director or Additional or Special Director of 2. CG may also authorise any officer or class officer or any police officer
Enforcement to appoint Officers of Enforcement below the rank of an Assistant of officers in the CG, SG, or RBI, not below or other officer of the CG or
Director of Enforcement. the rank of an Under Secretary to the GOI SG to exercise such powers
3. An Officer of Enforcement may exercise the powers and discharge such duties to investigate in case of contraventions u/s and discharge such duties.
conferred or imposed on him under this Act. 13. 2. Powers shall be similar to
3. The officers shall exercise powers similar those conferred on Income
to those conferred on Income Tax Tax Authorities under
Authorities under Income Tax Act, 1961 Income Tax Act, 1961 subject
subject to such limitations. to such conditions and

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limitations as the CG may

1.14 impose.

Sec 40: Suspension of operation of this Act

1. If CG is satisfied that circumstances rendering a restriction or permission granted under this Act to be ceased or suspended, in Public Interest, the CG shall by notification
do so indefinitely or for such definite period as notified.
2. Such suspension or relaxation shall be removed only by a notification issued by CG.
3. Every notification issued under this section shall be laid before both Houses of Parliament while it is in session for a period of 30 days. The notification shall have effect
or no effect from the date of modification or annulment as decided by both Houses of Parliament. The modification or annulment shall not affect the validity of the acts
done before such modifications or annulment.

Sec 42: Contravention by Companies

1. In case a Company commits a contravention of any of the provisions of this Act or any rule thereunder, every person responsible for conduct of business of the Company
shall be deemed to be guilty of contravention and be proceeded against and punished accordingly. He shall however not be punished if he proves that the contravention
took place without his knowledge and that he exercised due diligence to prevent such contravention.
2. If it is proved that the contravention was conducted with the consent or connivance of any director, manager, secretary or other officer of the company shall be deemed
to be guilty and be held liable to be proceeded against and punished accordingly.

Sec 43: Death or Insolvency in certain cases

1. Any right, obligation, liability, proceeding or appeal arising in relation to the provisions of section 13 shall not be withdrawn by reason of death or insolvency of the
person liable.
2. On death or insolvency, such rights and obligations shall devolve on the legal representative of such person or the official receiver or assignee, as the case may be.
3. The legal representative, however, shall be liable only to the extent of the inheritance or estate of the deceased.

Sec 44: Bar Legal proceedings

No suit, prosecution or other legal proceeding shall lie against the CG or the RBI or any officer of CG or of the RBI or any other person exercising any power or discharging
any functions or performing any duties under this Act, in good faith.

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