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Exchange control:
In India, foreign exchange business is governed by the foreign
exchange regulation act 1973. The reserve bank of India
administers the exchange control. A study of exchange control
regulations forms a part of the study of foreign. The types of
transaction which are affected by the foreign exchange regulation
act are, in general, all those having international financial
implications. The regulation framed by the reserve bank in regard
to foreign exchange are contain in the exchange control manual.
The manual sets forth the authority granted to banks to buy and
sell foreign exchange and to do other thing incidental there to, as
also the procedures to be followed by them. It also contains
exchange regulation act and notification issued by central
government and reserve bank relating to exchange control.
EXCEPTION:
However where purpose of sale of foreign exchange is for travel
abroad for business etc, cash may be received by Authorized Dealer
from Applicant upto Rs. 50,000/-
Where the rupee equivalent for drawing foreign exchange exceeds
Rs. 50,000 either for any single installment or for more than one
installment reckoned--- together for a single journey / visit it should
be paid by the traveler by means of a gross cheque / demand draft/
pay order as stated above.
Sr.
DIFFERENCES FERA FEMA
No
1 PROVISIONS FERA consisted of 81 FEMA is much simple,
sections, and was more and consist of only
complex 49 sections.
2 FEATURES Presumption of negative These presumptions
intention (Mens Rea ) of Mens Rea and
and joining hands in abatement have
offence (abatement) been excluded in
existed in FEMA FEMA
3 NEW TERMS IN Terms like Capital Terms like Capital
FEMA Account Transaction, Account Transaction,
current Account current account
Transaction, person, Transaction person,
service etc. were not service etc., have
defined in FERA. been defined in detail
in FEMA
4 DEFINITION OF Definition of The definition of
AUTHORISED "Authorised Person" in Authorised person
PERSON FERA was a narrow one has been widened to
( 2(b) include banks, money
changes, off shore
banking Units etc. (2
(c)
5 MEANING OF There was a big The provision of
"RESIDENT" AS difference in the FEMA, are in
COMPARED definition of "Resident", consistent with
WITH INCOME under FERA, and income Tax Act, in
TAX ACT. Income Tax Act respect to the
definition of term "
Resident". Now the
criteria of "In India for
182 days" to make a
person resident has
been brought under
FEMA. Therefore a
person who qualifies
to be a non-resident
under the income Tax
Act, 1961 will also be
considered a non-
resident for the
purposes of
application of FEMA,
but a person who is
considered to be non-
resident under FEMA
may not necessarily
be a non-resident
under the Income
Tax Act, for instance
a business man going
abroad and staying
therefore a period of
182 days or more in
a financial year will
become a non-
resident under FEMA.
6 PUNISHMENT Any offence under Here, the offence is
FERA, was a criminal considered to be a
offence , punishable civil offence only
with imprisonment as punishable with some
per code of criminal amount of money as
procedure, 1973 a penalty.
Imprisonment is
prescribed only when
one fails to pay the
penalty.
7 QUANTUM OF The monetary penalty Under FEMA the
PENALTY. payable under FERA, quantum of penalty
was nearly the five has been
times the amount considerably
involved. decreased to three
times the amount
involved.
8 APPEAL An appeal against the The appellate
order of "Adjudicating authority under FEMA
office", before " Foreign is the special Director
Exchange Regulation ( Appeals)Appeal
Appellate Board went against the order of
before High Court Adjudicating
Authorities and
special Director
(appeals) lies before
"Appellate Tribunal
for Foreign
Exchange.” An
appeal from an order
of Appellate Tribunal
would lie to the High
Court. (sec 17,18,35)
9 RIGHT OF FERA did not contain FEMA expressly
ASSISTANCE any express provision recognises the right
DURING LEGAL on the right of on of appellant to take
PROCEEDINGS. impleaded person to assistance of legal
take legal assistance practitioner or
chartered accountant
(32)
10 POWER OF FERA conferred wide The scope and power
SEARCH AND powers on a police of search and seizure
SEIZE officer not below the has been curtailed to
rank of a Deputy a great extent
Superintendent of
Police to make a search
3. A STEP AHEAD FROM FERA TO FEMA:
Enactment of FEMA has brought in many changes in the dealings of
Foreign Exchange, as compared to FERA. Some of them are
restrictive, and some has widened the scope.
However some of the relevant progresses made, from FERA to
FEMA, are as follows:
DRAWAL OF FOREIGN EXCHANGE
Now, the restrictions on drawal of Foreign Exchange for the purpose
of current Account Transactions, has been removed. However, the
Central Government may, in public interest in consultation with the
Reserve Bank impose such reasonable restrictions for current
account transactions as may be prescribed.
FEMA has also by and large removed the restrictions on
transactions in foreign Exchange on account of trade in goods,
services except for retaining certain enabling provisions for the
Central Government to impose reasonable restriction in public
interest.
EXPORT OF SERVICES
FERA had no provision for export of services. Now, FEMA has
included payment received by an Exporter of Services in its ambit.
Every Exporter, who receives payment from outside India, for his
services rendered is obliged to furnish details of payment to the
'Reserve Bank.
For example; a Doctor, or Engineer or Lawyer or Accountant or any
other professional may give opinions or consultation to people
outside India, via internet or mail, and his fees may be credited to
his credit account. Then he is obliged to furnish details of such
payment to Reserve Bank.
AUTHORISED PERSON
An "Authorised Person" under FEMA, is a person who is authorised
by Reserve Bank to deal in Foreign Exchange.
For being registered as an "Authorised Person", a necessary
application alongwith relevant document has to be furnished to
Reserve Bank.
An "Authorised Person" is also, not given a free hand to deal in
foreign Exchange. He has to furnish details and information, to
Reserve Bank from time to time as may be required by it.
ADJUDICATING AUTHORITY
The inquiry of any contravention of FEMA is conducted by an
Adjudicating Authority appointed by the Central Government.
APPEAL TO SPECIAL DIRECTOR (APPEALS)
The special Director (Appeals) is authorised to hear the
appeals arising out of in order of the Adjudicating Authority.
APPEAL TO THE APPELLATE TRIBUNAL
The Appellate Tribunal is entitled to hear appeals made in
accordance, from an order made by Adjudicating Authority or
special Director (Appeals).
DIRECTOR OF ENFORCEMENT
The Director of Enforcement and other officers has power to
conduct investigation, search and seize any articles.
PROCEDURE
INQUIRY BY ADJUDICATING AUTHORITY (14)
The inquiry of any contravention of FEMA is conducted by an
Adjudicating Authority.
When, an inquiry is to be conducted against a person for any
contravention; the Adjudicating Authority shall issue a notice
to such person.
The notice will also indicate the date on which the offender is
required to appear before authority, and will also mention the
nature of offence committed by him.
Such person (offender) will have a right to give reasons or
explanation, and then a date will be fixed for his appearance.
He can appear either personally or through an Advocate or
chartered accountant.
On the date of appearance, the Adjudicating Authority shall
present its case, and explain the reason and type &
implications of offence committed by offender.
Then in turn, such person will also be given an opportunity to
put up his case, and to produce documents and evidence.
Finally, if Adjudicating Authority is convinced, that the
offender has committed an offence, then it will impose such
fine and penalty, as it thinks fit.
AMOUNT OF PENALTY
Any contravention, under FEMA, may invite following kinds of
penalties:
If, the amount against which offence is quantities, then
penalty will be "THRICE" the sum involved in contravention.
Where the amount cannot be quantified the penalty may be
imposed upto two lakh rupees.
If, the contravention is continuing everyday, then Rs. Five
Thousand for every day after the first day during which the
contravention continues.