fema act latest
TRANSCRIPT
Pareen Raval
INTRODUCTION
Since, 1993 significant developments have taken palace relating to foreign trade and investments. The liberalization of foreign investments and the globalization of foreign trade called for a closer interaction with the world economy and as a result the Government took initiatives to review the FERA in 1993 and several amendments were enacted in that Act as a part of ongoing process. However, in the light of subsequent developments, the Government thought that a better course would be to repeal the old Actby enacting a new legislation. As you all aware that the Foreign Exchange Regulation Act, 1973 (FERA)has now been repealed by anew Act called the Foreign Exchange Management Act, 1999 (FEMA). The FEMA was passed by the Lok Sabha in October, 1999, received the assent of the President of India in December, 1999 and came into force with effect from 1st June, 2000.
BROAD STRUCTURE OF FEMA
CHAPTERS MATTERS SECTIONS
I Preliminary, Preamble and Definitions 1 – 2
II Regulation and Management of Foreign Exchange
3 – 9
III Authorized Persons 10 – 12
IV Contravention and Penalties 13 – 15
V Adjudication and Procedure for Appeal 16 – 35
VI Directorate of Enforcement 36 – 38
VII Miscellaneous Provisions 39 – 49
Feature FEMA – 1999 FERA - 1973
PREAMBLE An Act to consolidate and amend the lawrelating to foreign exchange with theobjective ofFacilitating external trade andpayments andPromoting orderly development andmaintenance of forex market in India.
An Act to control, regulate, restrict orprohibit foreign exchange transactionswith a view of conservation, properutilization of foreign exchange keepingin view the interest of economicdevelopment of the country.
NATURE Management of Foreign exchange.
Controlling & regulating Foreign exchange.
STRUCTURE 49 Sections 81 Sections
COMPARISON OF FEMA & FERA
Feature FEMA – 1999 FERA - 1973
NEW TERMS Capital account transactions, Current account transactions, persons,serviceetc. are introduced.
These terms were not defined.
DEFINITION OF AUTHORISED DEALER
Wide (Reason:- Money Changers & off - shore banking units included)
Narrow
POWER OF SEARCH, SEIZURE ETC.
The powers are restricted as contained in Sections 37 and 38 of the Act.
These powers were so blanket that a police officer not below the rank of Deputy Superintendent of Police can do so.
Feature FEMA – 1999 FERA - 1973
NATURE OF THE ACT
Basically a Civil Law. Law was considered as draconian,severe and harsh.
PENALTY Maximum – Three times the sum involved.
Five times the sum involved +imprisonment in most of the cases
RIGHT TO TAKE PERSON FOR LEGALASSISTANCE
appellant has the right to take the assistance of legal practitioner or a chartered accountant..
The Act did not contain any suchexpress provision.
APPELLATE BODY Adjucating AuthoritySpecial directors(appeal)Appellate tribunalHigh court
Foreign exchange regulation appellate boardHigh court
Section - 1PREAMABLE, EXTENT,
APPLICATION AND COMMENCEMENT OF FEMA, 1999
Section - 2DEFINITION
Section - 2DEFINITION
Section - 2DEFINITION
Section - 2DEFINITION
Section - 2DEFINITION
ANALYSIS OF IMPORTANT DEFINITIONS
ANALYSIS OF IMPORTANT DEFINITIONS
(C) ‘Person resident in India’:
ANALYSIS OF IMPORTANT DEFINITIONS
(C) ‘Person resident in India’:
ANALYSIS OF IMPORTANT DEFINITIONS
(C) ‘Person resident in India’:
Section - 3Dealing in foreign exchange,
Section 3 prohibits the following transactions, namely,
dealing in foreign exchangedealing in foreign securitiestransfer of foreign exchange to any person not being an authorized personmaking any payment to or for the credit of a non-resident in any manner
Section - 4Holding of Foreingn exchange etc.
• Person resident in india - shall not acquire / hold / transfer any foreign exchange, foreign security or Immovable property situated outside India.
Section-5 & 6
• Where any amount of foreign exchange is due or has accrued to any person resident in India, such person shall take all reasonable steps to realize and repatriate to India such foreign exchange within such period and in such manner as may be specified by the Reserve Bank.
Section - 8Holding of Foreingn exchange
etc.
On realization of foreign exchange due, a person shall repatriate the same to India, namely bring into, or receive in, India and—(a)sell it to an authorised person in India in exchange for rupees; or
(b) retain or hold it in account with an authorized dealer in India to the extent specified by the Reserve Bank; or
(c) use it for discharge of a debt or liability denominated in foreign exchange to the extent and in the manner specified by the Reserve Bank.
Section - 8Holding of Foreingn exchange
etc.
Section - 9Exemption from realisation and
repatriation in certain cases
The provisions of Sections 4 and 8 shall not apply to the following, namely:(a) possession of foreign currency or foreigners coins by any person up to such limit as the Reserve Bank may specify;(b) foreign currency account held or operated by such person or class of persons and the limit up to which the Reserve Bank may specify;(c) foreign exchange acquired or received before the 8th day of July, 1947 or any income arising or accruing there on which is held outside India by any person in pursuance of a general or special permission granted by the Reserve Bank;(d) foreign exchange held by a person resident in India up to such limit as the Reserve Bank may specify, if such foreign exchange was acquired by way of gift or inheritance from a person referred to in clause (c), including any income arising there from;(e) foreign exchange acquired from employment, business, trade, vocation, service, honorarium, gifts, inheritance or any other legitimate means up to such limit as the Reserve Bank may specify; and
Section - 9Exemption from realisation and
repatriation in certain cases
(f) such other receipts in foreign exchange as the Reserve Bank may specify.
For the purposes of clauses (a) and (e) of Section 9 of the Act, the Reserve Bank specified the following limits for possession or retention of foreign currency or foreign coins, namely:(i) possession without limit of foreign currency and coins by an authorized person within the scope of his authority;(ii) possession without limit of foreign coins by any person;
Section - 7Export of goods and services
Every exporter of goods shall give Declaration to RBI:-
Exporter Declaration with the following contents:
Value of goods expotedOther relevant particulars.
RBI
Can ask such other pertinent
Information from Exporters
Value of goods
known?
Value = value expected to be rec'd on sale of such goods, keeping in mind the current
market value.
Include such value in the declaration
Should make
to
Yes
No
Section - 10AUTHORISED PERSON
(1) TO act an authorized person RBI authorization is necessary.(2) To obtain RBI authorization application should be made to the RBI.(3) RBI may grant authorization subject to terms and conditions as it may impose.(4) The authorized person shall in all his dealing in foreign exchange comply with direction / order of RBI.(5) He shouldn't engage in any transaction, not in conformity with the terms of authorization.(6) If he wants to engage, then RBI permission is required.(7) The authorized person shall before undertaking any transaction in foreign exchange on behalf of any person require such person:To make a declaration that there will be no contravention of Act / Rules / Regulation / Notification / directionTo furnish such information considered necessary to conclude that the transaction dose not involve contravention
Section - 10AUTHORISED PERSON
(8) If such person refuses to comply, the authorized person shall refuse in writing to undertake such transaction.(9) Further the authorized person has duty to report to RBI if such other person co temples contravention.(10) The RBI has got the power to revoke the authorization in following situations:Revocation is necessary in the public interest Authorized person has defaulted in complying with the terms of authorization Has contravened the provisions of the act etc.
Note: before revoking Opportunity of being heard should be given to the authorized person.
Section - 11Reserve Bank’s powers to issue directions to authorised
person(1) In order to secure compliance with the act etc., RBI may give direction to authorized persons and can also require them to furnish such information as it deems fit.(2) If authorized person contravenes the direction or commits default in filling the returns it may impose penalty on them.
Note: Opportunity of being heard should be given.
(1) The RBI may empower any of its officer to inspect the business of authorized person(2) Purpose of inspection:Verifying the correctness of any statement furnished to the RBIObtaining any information which authorized person has failed to furnishSecuring compliance with the provisions of the act etc.(3) Authorized person has got the duty to produce all such books, accounts and documents in his custody and to furnish any information relating to its affairs within such time and in such time and in such manner as the aforesaid officer directs.
SectionNo.
Contravention Quantum of Penalty
Section 11 Of any direction by the authorized person or failure to file any return as directed by RBI
Upto Rs. 10,000.If continuing offence additional penalty upto Rs. 2,000 per day.
Section 13 Of any provision of the Act, or anyrule, regulation notification, direction or order or of any condition subject to which an authorization issued
Upto three times, the sum involved, if it is quantifiable.If not quantifiable upto Rs. 2 lacs.If continuing, further penalty upto Rs.5,000 per day after first day.
Section 14 Failure to pay penalty as above– where demand is of an amountexceeding Rs. 1 crore.– in any other case
Civil imprisonment. Upto 3 years Upto 6 months.
CONTRAVENTIONS AND PENALTIES IN BRIEF
Time limits in BriefSection No. Obligation Time Limit
Section 14 Penalty to be paid Within 90 days from the date onwhich notice for payment of penaltyis served.
Section 15 Compounding of Contravention
Within 180 days of receipt ofapplication by Directorate ofEnforcement.
Section 16 Complaint under Section 16(1) to be dealt by Adjudicated Authority
Within 1 year of receipt ofcomplaint.
Section 17 Appeal to Special Director (Appeals)
Within 45 days from receipt oforder.
Section 19 Appeal to Appellate Tribunal
Within 45 days from receipt oforder.
Section19(5)
Appeal to be dealt with by Appellate Tribunal
Will try to dispose off the appealwithin 180 days from receipt ofappeal.
Section 35 Appeal to High Court Within 60 days of communication oforder or decision.