The FEMA, also denoted to as the Foreign Exchange Management Act was presented in the year 1999. The act was a changeover of the FERA or Foreign Exchange Regulation Act. FEMA came into force on 1st of June, 2000. FEMA was passed because FERA did not fulfill the requirements of the policies that were implemented post-liberalization. FEMA presented a noticeable change in the system by letting all the wrong doings relating to foreign exchange as the ‘civil offenses’, in the place of criminal offenses (earlier pertinent in the case of FERA).
When it comes to FEMA, 1999, it basically has a main objective at consolidating and amending the foreign exchange law with a view to enable external trading as well as proper payments. The act was designed for encouraging the development as well as upkeep of the Indian Foreign Exchange Market in a well-ordered manner. Currently, FEMA can be operated across India as well as across all the offices, agencies and branches outside of India controlled or held by an individual who is an Indian resident. FEMA’s head office, also denoted to as Enforcement Directorate is situated in New Delhi and led by its Directors.
Check out the main features of Foreign Exchange Management Act, 1999:
- FEMA holds power to the central government for putting restriction on activities such as doing payments to an individual located outside of the country or acceptance of money through them. Apart from this, foreign exchanges as well as foreign security transactions are also restricted by FEMA 1999 in Mumbai.
- Transactions rotating around foreign security or exchange in addition to payments made from any foreign country to India can’t be made prior to taking specific or general permission of FEMA 1999. All transactions ought to be executed through an individual who has received authorization for the same.
- The central government can limit an authorized person to carry out foreign exchange deals within the existing account, on the basis of general interest of the public.
- Even though buying or selling of foreign exchange is carried out through an authorized person, the FEMA act 1999 allows the Reserve Bank of India to place a sum of restrictions on the transactions of the capital account.
- Under the act, the Indian residents have the permission to manage foreign exchange and foreign security transactions or the authority to hold or own immobile property in a foreign country in case the security, property or currency was attained or owned when the person was grounded outside of the country, or when they accede to the property from another individual staying outside the country.
- The act is not valid on the resident (of an Indian citizen) based outside India.