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The Foreign Exchange Management Act (FEMA), 1999, replaced the Foreign Exchange Regulations Act (FERA), 1973,

which regulated the foreign exchange transactions in India The FEMA, rules was apllied to the whole of India as well as to all branches, offices, and agencies outside India, owned or controlled by a person resident in India. FEMA has brought a new management regime of Foreign Exchange consistent with the emerging framework of the World Trade Organisation (WTO) All current account transactions are free Capital account transactions are deregulated Definition of NRI changed from purpose to residence From Criminal law to Civil Law Less punishment No Imprisonment Compounding powers to RBI Less stringent & more business friendly Liberalised Remittance Scheme of USD 200,000 freely remit up to USD 200,000 per financial year for any permissible current or capital account transaction or a combination of both. Free to acquire and hold immovable property, shares or any other asset outside India without prior approval of RBI using the scheme. Free to open, hold and maintain foreign currency accounts with a bank outside India for remittance but Remittance cannot be made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan Release of Foreign Currency-restrictions No release of foreign exchange for any kind of travel to Nepal and Bhutan or for any transaction with persons resident in Nepal and Bhutan. Travellers allowed to purchase/carry foreign currency notes/coins only up to USD 2000. Balance amount in the form of ravellers cheque or bankers draft. Residents coming to India from abroad -- can bring Foreign Exchange without any limit. If the aggregate value of the foreign exchange (currency notes, bank notes or TCs brought )exceeds USD 10,000/- or the value of foreign currency exceeds USD 5,000/- or its equivalent, then it need to be declared to the Customs Authorities at the Airport in the Currency Declaration Form (CDF), on arrival in India. From the NRI perspective, FEMA broadly covers all matters related to perspective, foreign exchange, investment avenues for NRIs such as immovable property, bank deposits, government bonds, investment in shares, units and other securities, and foreign direct investment in India.

Important differences between FERA and FEMA can be summed up as under: 1. In FEMA, only the specified acts relating to foreign exchange are regulated, while in FERA, anything and everything that has to do with foreign exchange was controlled. The aim of FEMA is facilitating trade as against that of FERA, which was to prevent misuse. In other words, the theme of FERA was: everything that is specified is under control. While the theme of FEMA is everything other than what is expressly covered is not controlled. Thus there is a lot of deregulation 2.FEMA is a much smaller enactment only 49 sections as against 81 of FERA. 3. In the process of simplification, many of the laid downs of the prevoius FERA have been withdrawn. 4. Many provisions of FERA like the ones relating to blocked accounts, Indians taking up employment abroad, employment of foreign technicians in India, contracts in evasion of the act, vexatious search, culpable mental state etc., have no appearance in FEMA DIFFERENCE BETWEEN FERA & FEMA
Sr.No. Point 1 Emphasis 2 Situation FERA On regulation of foreign exchange FEMA On management of foreign exchange

Foreign exchange reserves With the improvement in foreign positions was not satisfactory for exchange reserves such stringent that stringent controls were controls are not required now. required on the use of foreign exchange Need to take permission of RBI in connection with remittances involving external trade No need for seeking the permission of RBI in connection with remittances involving external trade except section3 relates to dealing in foreign exchange



These restrictions on drawals of Section 5, it removes all the restrictions foreign exchange for the purpose on drawals of foreign exchange for the current account transactions papoose of current account transactions Violations of FERA was treated Violations of FEMA treated as civil as criminal offence and burden of offence removes the threat of proof was on the guilty imprisonment compared their illegal acts by paying a fine (not too high)

Violations of Rules