Skip to main content

An overview of FEMA

                        An Overview of FEMA Act


The Central Government of India formulated an act to encourage external payments and across the border trades in India known as the Foreign Exchange Management Act. FEMA (Foreign Exchange Management Act) was introduced in the year 1999 to replace an earlier act FERA (Foreign Exchange Regulation Act). FEMA was formulated to fill all the loopholes and drawback of FERA (Foreign Exchange Regulation Act) and hence several economic reforms (major reforms) were introduced under the FEMA act. FEMA was basically introduced to de-regularize and have a liberal economy in India.

Objectives of FEMA

The main objective for which FEMA was introduced in India was to facilitate external trade and payments. In addition to this, FEMA was also formulated to assist orderly development and maintenance of the Indian forex market.

         FEMA outlines the formalities and procedures for the dealings of all foreign exchange transactions in India. These foreign exchange transactions have been classified into two categories — Capital Account Transactions and Current Account Transactions.

        Under the FEMA Act, the balance of payment is the record of dealings between the citizen of different countries in goods, services and assets. It is mainly divided into two categories, i.e., Capital Account and Current Account.

         Capital Account comprises all capital transactions whereas Current Account comprises trade of merchandise. Current Account transactions are those transactions that involve inflow and outflow of money to and from the country/countries during a year, due to the trading/rendering of commodity, service, and income.

         The current account is an indicator of an economy’s status. As mentioned above the balance of payment comprises current and capital accounts, the remainder of the Balance of Payment is Capital Account, which consists the movement of capital in the economy due to capital receipts and expenditure. Capital account recognises domestic investment in foreign assets and foreign investment in domestic.

Applicability of FEMA Act

FEMA (Foreign Exchange Management Act) is applicable to the whole of India and equally applicable to the agencies and offices located outside India (which are owned or managed by an Indian Citizen). The head office of FEMA is situated in New Delhi and known as Enforcement Directorate. FEMA is applicable to:

1. Foreign exchange.

2. Foreign security.

3. Exportation of any commodity and/or service from India to a country outside India.

4. Importation of any commodity and/or services from outside India.

5. Securities as defined under Public Debt Act 1994.

6. Purchase, sale and exchange of any kind (i.e. Transfer).

7. Banking, financial and insurance services.

8. Any overseas company owned by an NRI (Non-Resident Indian) and the owner is 60% or more.

9. Any citizen of India, residing in the country or outside (NRI).

The Current Account transactions under the FEMA Act has been categorized into three parts which, namely-

1. Transactions prohibited by FEMA,

2. The transaction requires Central Government’s permission,

3. The transaction requires RBI’s permission.

4. Prohibition on Drawl of Foreign Exchange

5. Any kind of remittance out of winning the lottery.

6. Any kind of remittance from the income on racing/riding etc,

7. Any remittance for buying of a lottery ticket, football pools, sweepstakes, banned/prescribed magazines etc.

8. Commission payment on exports towards equity investment of Indian Companies in Joint ventures/wholly owned subsidiaries abroad.

9. Remittance of dividend by any company. However, this clause is applicable only if the requirement of dividend balancing is applicable.

10. Commission payment on exportation under Rupees State Credit Routes except commission up to 10% of invoice value of export of tea and tobacco.

11. Payment regarding “Call back Services” of telephones.

12. A travel to Bhutan and/or Nepal.

13. Remittance of interest income on funds held in NRSR Account i.e., Non-resident Special Rupees Scheme account.

1. A transaction with a resident of Bhutan or Nepal.

Transactions for which Central Government prior approval is required for Drawl of foreign exchange – 

1 Cultural tours.

2 Advertisement in print media of a foreign country for any purpose other than promoting tourism, international bidding and foreign investments (exceeding 10000 US Dollar) by a State Government and its Public Sector Units.

3 Payment of importation by a Public Sector Unit or a department of government on c.i.f. basis only for importation through ocean transport.

4 Remittance of freight of vessels chartered.

5 Remittance of detention charges of container exceeding the DGS’s (Director General of Shipping) prescribed rate.

6 Remittance of Prize money/sponsorship of any activity of sport outside India by a person other than national/ international/street level sports bodies, if the amount of the prize money/sponsorship exceeds 1,00,000 US Dollars.

7 Remittance of hiring charges of transponders.

8 Internet Service Providers.

9 TV channels.

10 Remittance for P&I Club ministry’s membership.

11 Remittance by Multi-model transport operators to their agents in abroad.

Penalties Under FEMA

If any person contravenes the provisions of FEMA or any rule, direction, regulation, order or notification issued under FEMA, he shall be liable to pay a penalty up to thrice the sum involved in such contravention or up to Rs.2 lakh. Where such contravention is a continuing one, he shall be liable to pay a further penalty which may extend to Rs.5000 for   every day during which the contravention continues.
Labels:

Comments

Post a Comment

Popular posts from this blog

Section 58B of The Advocates Act - Special provision relating to certain disciplinary proceedings

 Section 58B The Advocates Act Description (1) As from the 1st day of September, 1963, every proceeding in respect of any disciplinary matter in relation to an existing advocate of a High Court shall, save as provided in the first proviso to sub-section (2), be disposed of by the State Bar Council in relation to that High Court, as if the existing advocate had been enrolled as an advocate on its roll. (2) If immediately before the said date, there is any proceeding in respect of any disciplinary matter in relation to an existing advocate pending before any High Court under the Indian Bar Councils Act, 1926 (38 of 1926), such proceeding shall stand transferred to the State Bar Council in relation to that High Court, as if it were a proceeding pending before the corresponding Bar Council under clause (c) of sub-section (1) of section 56: Provided that where in respect of any such proceeding the High Court has received the finding of a Tribunal constituted under section 11 of the Indian B
Post a Comment
Read more

Case Laws related to Defamation in favour of ClaimantCase Laws related to Defamation in favour of Claimant. TOLLEY Vs, J.S FRY & SONS LTD – (1931) Facts The defendants were owners of chocolate manufacturing company. They advertised their products with a caricature of the claimant, who was a prominent amateur golfer, showing him with the defendants’ chocolate in his pocket while playing golf. The advertisement compared the excellence of the chocolate to the excellence of the claimant’s drive. The claimant did not consent to or knew about the advertisement. Issue The claimant alleged that the advertisement suggested that he agreed to his portrait being used for commercial purposes and for financial gain. He further claimed that the use of his image made him look like someone who prostituted his reputation for advertising purposes and was thus unworthy of his status. At trial, several golfers gave evidence to the effect that if an amateur sold himself for advertisement, he no longer maintained his amateur status and might be asked to resign from his respective club. Furthermore, there was evidence that the possible adverse effects of the caricature on the claimant’s reputation were brought to the defendants’ attention. The trial judge found that the caricature could have a defamatory meaning. The jury then found in favor of the claimant. Held The House of Lords held that in the circumstances of this case – as explained by the facts – the caricature was capable of constituting defamation. In other words, the publication could have the meaning alleged by the claimant. The Lords also ordered a new trial limited to the assessment of damages. NEWSTEAD V LANDON EXPRESS NEWSPAPER LTD, (1939) Facts: A newspaper published a defamatory article about Harold Newstead. However, another person with this name brought an action in libel. He claimed that the article had been misunderstood as leading to him. The defendant newspaper recognised that they published the article. Also, they denied that they had the intention of being defamatory of him. Consequently, the claimant argued that the newspaper was under a duty. The duty was to give a clear and complete description of the correct person. Moreover, the claimant argued that the defendants were in breach of the duty. Issues: The issue in Newstead v London Express Newspaper, was if the reasonable persons would have understood the words complained of to refer to the plaintiff. Held: The Court of Appeal stated that in accordance with the current law on libel, liability for libel does not depend on the intention of the defamer; but on the fact of the defamation. Accordingly, a reasonable man, in this case a newspaper publisher, must be aware of the possibility of individuals with the same name and must assume that the words published will be read by a reasonable man with reasonable care.

  Case Laws related to Defamation in favour of Claimant.  TOLLEY  Vs,  J.S FRY & SONS LTD – (1931) Facts The defendants were owners of chocolate manufacturing company. They advertised their products with a caricature of the claimant, who was a prominent amateur golfer, showing him with the defendants’ chocolate in his pocket while playing golf. The advertisement compared the excellence of the chocolate to the excellence of the claimant’s drive. The claimant did not consent to or knew about the advertisement.   Issue The claimant alleged that the advertisement suggested that he agreed to his portrait being used for commercial purposes and for financial gain. He further claimed that the use of his image made him look like someone who prostituted his reputation for advertising purposes and was thus unworthy of his status. At trial, several golfers gave evidence to the effect that if an amateur sold himself for advertisement, he no longer maintained his amateur status and might be aske
1 comment
Read more

Rules as to delivery of goods

                             Rules as to delivery of goods Section 2(2) of Sale of Goods Act defines ‘delivery’ as a ‘voluntary transfer of possession from one person to another.’ Thus, if the transfer of goods is not voluntary and is taken by theft, by fraud, or by force, then there is no ‘delivery. Moreover, the ‘delivery’ should have the effect of putting the goods in possession of the buyer. The essence of the delivery is a voluntary transfer of possession of goods from one person to another. There is no delivery of goods where they are obtained at pistol point or theft. 1. Mode of Delivery: According to Section 33, delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorized to hold them on his behalf. Delivery of goods may be actual, symbolic or constructive. 2. Expenses of Delivery: According to Section 36(5), unless otherwise agree
Post a Comment
Read more