feraandfema-111126120410-phpapp02.pptx

7/23/2019 feraandfema-111126120410-phpapp02.pptx

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F.E.R.A . AND F.E.M.A.(FOREIGN EXCHANGE REGULATION ACT AND

FOREIGN EXCHANGE MANAGEMENT ACT)

Presented by :-

N!"# A$%r&%#

Ne"% G%r$

Ne"% '%#&%#

Me$"% n$"

Me$"% %"%s*%r

N%*dee+ ,%rM"t Gy%#

N!"# C"%dd%

Ntn %/"de*

M"t '%der%


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Hstr/%# '%/!$rnd :

Historical Background The ForeignExchange Regulation Act of 1973 (FERA)Enacted in 1973

n the !ackdro" of acute shortage ofForeign Exchange in the countr#$

FERA had a contro%ersial &7 #ear stint

during 'hich an# !osses of thendian or"orate 'orld foundthesel%es at the erc# of the

Enforceent *irectorate (E$*$)$


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Foreign ExchangeRegulation Act

The Foreign Exchange Regulation Act (FERA) 'as legislation "assed

!# the ndian ,arliaent in 1973 !# the go%ernent of ndira -andhit cae into force 'ith e.ect fro /anuar# 10 197$

FERA i"osed stringent regulations on certain kinds of "a#ents$

t deals in foreign exchange and securities and the transactions'hich had an indirect i"act on the foreign exchange and thei"ort and ex"ort of currenc#$

The "ur"ose of the act0 inter alia0 'as to 2regulate certain "a#ents0dealings in foreign exchange and securities0 transactions indirectl#a.ecting foreign exchange and the i"ort and ex"ort of currenc#0for the conser%ation of foreign exchange resources of the countr#2$

FERA 'as re"ealed in 1999 !# the go%ernent of Atal Biharia4"a#ee$

t re"laced !# the Foreign Exchange 5anageent Act0'hichli!eralised foreign exchange controls and restrictions on foreignin%estent$


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Foreign Exchange5anageent Act

The Fre$n E1/"%n$e M%n%$eent A/t(FE5A) 'as an act

"assed in the 'inter session of ,arliaent in 1999 'hichre"laced Foreign Exchange Regulation Act$

This act seeks to ake o.enses related to foreignexchange ci%il o.enses$

t extends to the 'hole of ndia$

FE5A0 'hich re"laced Foreign Exchange Regulation Act(FERA)$

t had !ecoe the need of the hour since FERA had !ecoeinco"ati!le 'ith the "ro6li!eralisation "olicies ofthe -o%ernent of ndia$

FE5A has !rought a ne' anageent regie of ForeignExchange consistent 'ith the eerging frae'ork ofthe orld Trade 8rganisation(T8)$

t is another atter that the enactent of FE5A also !rought'ith it the ,re%ention of 5one# aundering Act &::&0 'hichcae into e.ect fro 1 /ul# &::;$


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Ob2e/t*e O3 F.E.R.A 4F.E.MA

1) To hel" RB in aintaining exchange rate sta!ilit#$

&) To conser%e "recious foreign exchange$

3) To "re%ent) The draconian "ro%isions 'ere dro"ed out in ne'enactent$

7) The si?e of the !are act got reduced to 9 sections

in "lace of @1 sections in FERA


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8!4ecti%es

@) To facilitate external trade and"a#ents

9) To "roote the orderl#de%elo"ent and aintenance offoreign exchange arket


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DIFFERENCE 'ET5EEN FERA AND FEMA :

1)6The o!4ecti%e of FERA 'as toconser%e forex and to "re%ent itsisuse$

The o!4ecti%e of FE5A is to facilitateexternal trade and "a#ents andaintenance of forex arket in india$


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&6iolation of FERA 'as a criinal o.ence

'hereas %iolation of FE5A is a ci%il o.ence$

36 8.ences under FERA 'ere not co"ounda!le

8.ences under FE5A are co"ounda!le$

6 iti?enshi" 'as a criteria to deterine theresidential status of a "erson underFERA$

'hile sta# of ore than 1@& da#s in ndia is the

criteria to decide residential status underFE5A$

;6 Alost all current account transactions are

free0 exce"t a fe'$


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9

FERA FE5A

8!4ect to conser%eand "re%entisuse

iolation 'asriinal 8.enceand 'as non

co"ounda!le

t 'as a draconian"olice la'

To facilitateexternal trade and"a#ents

iolation is a ci%ilo.ence and is

co"ounda!le

t is a ci%il la'


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Crrent A//nt %nd C%+t%#A//nt tr%ns%/tns

nder the FE5A regie0 the thrust 'as onregulation and control of the scarce foreignexchange0 'hereas under the FE5A0 the e"hasis is

on the anageent of foreign exchange resources$

nder FERA it 'as safe to "resue that an#transaction in foreign exchange or 'ith a non6

resident 'as "rohi!ited unless it 'as generall# ors"eciall# "eritted$

FE5A has forall# recognised the distinction!et'een current account and ca"ital accounttransactions$


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T'o golden rules or "rinci"les in FE5A areentioned as follo'sC

all current account transactions are"eritted unless other'ise "rohi!ited$

all ca"ital account transactions are"rohi!ited unless other'ise "eritted$


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1&

urrent AccountTransactions

An# "erson a# sell or dra' foreign exchangeto or fro an authori?ed "erson if such sale ordra'al is a current account transaction$

The entral -o%ernent a#0 in "u!licinterest and in consultation 'ith the Reser%eBank0 i"ose such reasona!le restrictions for

current account transactions as a# !ereDuired fro tie to tie$

i


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13

urrent Account Transactionsontd$

The denition is inclusi%e and an# ex"enditure 'hich isnot a ca"ital account transaction 'ill !e currentaccount transaction$ t includesC

"a#ents due in connection 'ith foreign trade0 othercurrent !usiness0 ser%ices0 and short6ter !anking andcredit facilities in the ordinar# course of !usiness

"a#ents due as interest on loans and as net incoefro in%estents

reittances for li%ing ex"enses of "arents0 s"ouse andchildren residing a!road0 and

ex"enses in connection 'ith foreign tra%el0 education

and edical care of "arents0 s"ouse and children


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1

urrent Account TransactionsFe' Exa"les

,a#ent for i"orts of goods

Reittance of interest on in%estentade and funds !orro'ed fro a!road

after tax deductions Reittance of *i%idend if the in%estent

'as allo'ed 'ithout an# condition

Booking 'ith Airlines


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1;

a"ital AccountTransactions

2ca"ital account transaction2 eans a transaction 'hichalters the assets or lia!ilities0 including contingentlia!ilities0 outside ndia of "ersons resident in ndia orassets or lia!ilities in ndia of "ersons resident outsidendia0 and includes transactions likeC

hanges in Assets< ia!ilitiesTransfer< issue of securit# Borro'ing< ending Ex"ort0 i"ort or holding of currenc# or currenc# notes -i%ing guarantee

a"ital Account Transaction are deeed to !e "rohi!itedunless "eritted and urrent Account Transactions aredeeed to !e "eritted unless "rohi!ited


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1>

,enalties for ontra%ention underFE5A

The ,enalt# could !e u" to thrice the suin%ol%ed 'here aount is Duantia!le

f the Aount is not Duantia!le 0 "enalt#u"to Rs & lacs can !e i"osed

f contra%ention is of continuing nature0

further "enalt# u" to Rs ;::: "er da#during 'hich the contra%ention continuescan !e i"osed


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17

Re"atriation

Re"atriate to ndia2 eans !ringing into ndia thereali?ed foreign exchange and6

the selling of such foreign exchange to an

authori?ed "erson in ndia in exchange forru"ees0 or

the holding of reali?ed aount in an account 'ithan authori?ed "erson in ndia to the extentnotied !# the Reser%e Bank0

t includes use of the reali?ed aount fordischarge of a de!t or lia!ilit# denoinated inforeign exchange


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1@

5anner of Re"atriation

t can !e done in the follo'ing annerC

=ell it to Authori?ed ,erson in ndia in

exchange for Ru"ees

Retain in an account 'ith an authori?ed dealer

se it for discharge of a de!t or lia!ilit#denoinated in foreign exchange in theanner s"ecied !# RB


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Adinistration 8f The Act

- The rules regulations and nors "ertaining to

an# sections are laid do'n !# RB in consultation'ith central -o%ernent$

6 The Act reDuires central -o%ernent to a""oint0 Adjudicating Authorities for holding enquires

related to the contravention of the Act one or more Special Directors (appeals) to hear

appeals against the order of the Adjudicatingauthorities

- entral -o%ernent shall ha%e to esta!lish1. An Appellate Tribunal for foreign !change to hear

appeals against the order of the AdjudicatingAuthorities and the Special Directors

". A Director of nforcement #ith a Director and such


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Export of goods and services

E%er# ex"orter of goods shallC (a) Furnish to the Reser%e !ank or to such other

authorit# a declaration in such for as a# !es"ecied0 containing true and correct aterial0

including the aount re"resenting the full ex"ort%alue0 if the full ex"ort %alue of goods is notascertaina!le at the tie of ex"ort 0 the %alue 'hichthe ex"orter0 ha%ing in regard to the "re%ailing

arket conditions0 ex"ects to recei%e on the sale ofthe goods in the arket outside ndiaG

(!) Furnish to the Reser%e !ank all inforation as a#

!e reDuired !# the reser%e !ank for the "ur"ose of


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The Reser%e a#0 for the "ur"ose ofensuring that the full ex"ort %alue of the

goods as the Reser%e !ank deterines0ha%ing regard to the "re%ailing arketconditions0 is recei%ed 'ithout an#dela#$

E%er# ex"orter of ser%ices shall furnishto the Reser%e !ank a declaration in such

for as a# !e s"ecied0 containing thetrue and correct aterial "articulars inrelation to "a#ent for such ser%ices$


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Realization and Repatriationof Foreign Exchange

hen an# aount of foreign exchange is dueor has accrued to an# "erson shall take allreasona!le ste"s to reali?e and re"atriate to

ndia such foreign exchange 'ithin such"eriod and in such anner as a# !es"ecied !# the Reser%e !ank$


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THAN, 6OU

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