The Foreign Exchange Management Act 1999

Foreign exchange control led to introduction of exchange control law

through Defense of India rules by the Britishers in 1939. Subsequently,
Foreign Exchange Regulation Act (FERA) was enacted in 1947 which
was later replaced with 'the Foreign Exchange Regulation Act, 1973'
(FERA). The Foreign Exchange Management Act, 1999 was enacted
and made effective from 1st June, 2000. This Act enables management
of foreign exchange reserves for the country.

Features
of the Act (Coverage)

posing
- -

[
Regulation of transactions between residents and non-residents
= =

Investments in India by-non-residents and ~ overseas investments by Indian

-

residents
-

-Freely permissible transactions on current

-
account subject to reasonable
Victire
restrictions that may be imposed
-

Reserve Bank of India (RBI) and Central Government control over capital
Res
-

account transactions
-

T &
Requirement for realisation of export proceeds and repatriation to India
= -

Dealing in foreign exchange through 'Authorised Persons' like Authorised

- - -
Dealer/ Money Changer/ Off-shore banking unit
- - -

Adjudication and Compounding of Offences

Enforcement of FEMA Directorate of Enforcement

- -
:
Investigation of offences by Directorate of Enforcement
- - -

Appeal provisions including Special Director (Appeals) and Appellate

Tribunal.

FEMA Structure
MoF Goe

-
,

RBI
C
-

-
↓
com
M2Q >
-
30M .

Dumble Applicationcommencement
tant .

-
↓ 1 June 2000.
of India
This Act aims to consolidate and amend the
whole
law relating to foreign

all branches/agencies/
exchange with the objective of —
(i) facilitating external trade and payments
and
(ii) for promoting the orderly development outside India
and maintenance of foreign offices
exchange market in India.
owned/controlled by person
resident in India .
(PRI)
① contravention os India
any
covered under
by a person
this Act .
DEFINITIONS [SECTION 2]

“Authorised person” means an authorised dealer, money changer, off-shore

banking unit or any other person for the time being authorised under section
10(1) to deal in foreign exchange or foreign securities; [Section 2(c)]

“Capital Account Transaction” means a transaction, which

=
S alters the assets or
-
-
Asset/lb ration

=
liabilities, including contingent liabilities, outside India of persons resident in

·
-

India or assets or liability in India of persons resident outside India, and

> >
-

includes transactions referred to in 1Section 6(3); [Section 2(e)]

- - India

of Persons
RolIndia
RO1
persons
“Currency” includes all currency notes, postal notes, postal orders, money
orders, cheques, drafts, travelers’ cheques, letters of credit, bills of exchange
and promissory notes, credit cards or such other similar instruments, as may
be notified by the Reserve Bank. [Section 2(h)]

“Currency Notes” means and includes cash in the form of coins and bank
notes; [Section 2(i)]

·
“Current Account Transaction” means a transaction other than a capital
account transaction and without prejudice to the generality of the foregoing
such transaction includes,
(i) payments due in connection with foreign trade, other current business,

Post
services, and short-term banking and credit facilities in the ordinary
course of business.
(ii) payments due as interest on loans and as net income from investments. Grocer
(iii) remittances for living expenses of parents, spouse and children residing Transce
Arte As
purchase
a
abroad, and PRIl Ols Indian Cop
(iv) expenses in connection with foreign travel, education and medical care PRI) Audian >
-

of parents, spouse and children; [Section 2(j)] PRO) India Cap

PRO) Ols India

“Export”, with its grammatical variations and cognate expressions means; A($)Ea
(i) the taking out of India to a place outside India any goods. Brother ch You

PRI/
(ii) provision of services from India to any person outside India;[Section PRO)

2(l)]

“Foreign Exchange” means foreign currency and includes:

(i) deposits, credits and balances payable in any foreign currency,
(ii) drafts, travelers’ cheques, letters of credit or bills of exchange,
expressed or drawn in Indian currency but payable in any foreign
currency,
(iii) drafts, travelers’ cheques, letters of credit or bills of exchange
drawn by
banks, institutions or persons outside India, but payable in Indian
currency; [Section 2(n)]
 “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; [Section 2(o)]

②
“Person” includes:
(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether
incorporated or not,
(vi) every artificial juridical person, not falling within any of the preceding
sub-clauses, and;
(vii) any agency, office or branch owned or controlled by such person;
[Section 2(u)]

“Person resident in India” means:

(i) a person residing in India for more than 182 days during the course of
= >
-

the preceding financial year but does not include— Residential Status under FEMA 1999
,
-

(A) a person
> who has gone out of India or who stays outside . India, in
-

-either case—
(a) for or on taking up employment outside India,O or
- -

(b) for carrying on outside India a business or vocation

-
->
outside India, or
-

(c) -
for any other purpose,
---
in such circumstances as would
indicate his intention to stay outside India for an uncertain
-
period;
Y

-
(B) a person who has come to or stays in India, in either case,
-

C otherwise than: S
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in India, or
(c) for any other purpose, in such circumstances as would
indicate his intention to stay in India for an uncertain
period;

(ii) any person or body corporate registered or incorporated in India,

(iii) an office, branch or agency in India owned or controlled by a person
resident outside India,
(iv) an office, branch or agency outside India owned or controlled by a
person resident in India; [Section 2(v)]

PREI
“Transfer” includes sale, purchase, exchange, mortgage, pledge, gift, loan or
any other form of transfer of right, title, possession or lien. [Section 2(ze)]
 Residential Status under FEMA

Person includes :

Co .

Firm

Huf

Individuals
Aup

AJP

Offices
Branches

Agencies &

- Vocation

Residential Status
Note :
for
is NOT
year .
a
>
-

It is
from a
particular date
.

Please Note the basis

of deciding PRO1/PR17 for different persons

Individuals Check the

of
= >
-

concept 182 days

.

>
Person) Body Corporate ->
Should be
Reg / Incorporated
-

inAndia (then
only PRI)

Branch/Ag
=
offic ,

2
. byI
Eg
- - -

- -

i =

&

=>

Pro PRI

O
-
-

- - -

G
- - - -

- - -
-

PRIl PROl
- -

Regulation and Management of Foreign Exchange

=>
Dealing in FOREX (Sec3)
No on that
(a) deal
in/transfes any foreign exchange/foreign security
to NOT AP
any person being ;

(b) make
any payment
to
/for the credit of any PROI ;

() receive otherwise than

from an AP,

any payment by order/on behalf of

PRO

enteintoany Financialtrueindiaquottan/toacquire a
(d) an
 Subject >
-
Law
Data >
-

161/24
Lecture No -
38/22
kI1
Batch Name >
-

Chapter No >
-

03 /Module 3)

Chapter Name >

-
FEMA 1999 .

=>
Holding of FOREX (Seck)

Except when allowed

by this Act
,
No PRII shall Acquire ,
hold ,
own
, possess otransfor
any
FOREX
,
For. Security ,
Ammorable
Property os India .

=> Current Alc Transactions (SecS)

“Current Account Transaction” means a transaction other than a capital
account transaction and without prejudice to the generality of the foregoing
such transaction includes,
(i) payments due in connection with foreign trade, other current business,
services, and short-term banking and 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 in connection with foreign travel, education and medical care
of parents, spouse and children; [Section 2(j)]

0
PRI)
-
-

- -

PRI) PROl

- -

- -
-

·
 woods w

Normally Current
freely
Alc transactions Restricted. Byes
are
permitted unless

in
,

Normally , Capital All transactions are restricted unless

permitted .
-

Fi
·
Foreign Exchange Management (Current Account Transactions) Rules, 2000

Sch I Sch Sch

which which
Transactions
for Transactions
for Facilities
for Individuals
drawal
of FOREX drawal
of FOREX Can arrange
of
FOREX
facility up to

is
prohibited. requires G01 permission .
USD 250 , 000 only for following :
-

get nbud a
(i) Private visits to any country (except Nepal and Bhutan)
an

S
(ii) Gift or donation.
(iii) Going abroad for employment
C (iv) Emigration

in
(v) Maintenance of close relatives abroad

skv permission (vi) Travel for business or attending a conference or specialised training or
Indian 10.

S
is
for meeting expenses for meeting medical expenses, or check-up
abroad, or for accompanying as attendant to a patient going abroad for
medical treatment/ check-up.
Also
if any
-- -
-

ant (vii) Expenses in connection with medical treatment abroad

- ,
(viii) Studies abroad

=>
-
(ix) Any other current account transaction
remitted Fy
during under
Any additional remittance in excess of the said limit for the said purposes
shall require prior approval of the Reserve Bank of India.
LRS then sub out to
, ,

-
be reduced
from USD 260k.

>
-

Resident but
permanently resident India
in
Note : For a not
k
,

#
--
Foreign Citizen Indian Citizen
o
(except Pakistan) on
deputation to
office/
branch
f foreign 10/

↓
a

Subsidiary) TV in
Indian
of such Foreign Co .

&

&
Such status to be obtained when PRI is stationed

in India
for not
<3yrs .

② facilities for person other thanAndividuals

offer approval of RBI

I
/1 %
Creation
of chairs in
reputed
Donations
of
·

=
educated institutes
Forex
earnings during
3 PYs O USD 50 00 , ,
000
· Contribution to
fund /not being
whichever is dower.
on investment
fund) promoted by
ed. inst

inst/body in the

S
·
cont to
a
tech,

field of activity of donor

the

(Protection and
Indemnity Insurance
 S
~

=> Commission
23000/3finwadi
exceeding
whicheves is MORE
:. Procedure
for Drawal)Remittance of Forex under
Scht
.

shall be some as LRS .

for Residential Flut/Commercial Plots India

of
sale in

to
Agents Abroad.
Approval for SchI andI not
required
·

where remittance is
from :-

=> Remittances OIs Radia .

for consultarily procured from (a) Resident Foreign (weency Al
-1 (b) Easner's Foreign Currency Al
Exchange
Infrastructure
other

consultancy (except P& 1 club +

payment commission +
investment)
consultancy to
t
> I Million Dolors
> 10 Million Dollars.

per project Subject >

-
Law
per project
Cate I
KI1
Batch Name- >

(Module 3)
E Remittances exceeding five per cent of investment brought into India Chapter No 03
>
-

or USD 100,000 whichever is higher, by an entity in India by way of Chapter Name >
-
FEMA 1999

reimbursement of pre-incorporation expenses.