The
Foreign Exchange Management Act (1999) or in short FEMA has been introduced as
a replacement for earlier Foreign Exchange Regulation Act (FERA). FEMA became
an act on the 1st day of June, 2000. FEMA was introduced because the FERA
didn’t fit in with post-liberalisation policies. A significant change that the
FEMA brought with it, was that it made all offenses regarding foreign exchange
civil offenses, as opposed to criminal offenses as dictated by FERA.
The main objective behind the Foreign Exchange Management Act (1999) is to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments. It was also formulated to promote the orderly development and maintenance of foreign exchange market in India.
FEMA is applicable to all parts of India. The act is also applicable to all branches, offices and agencies outside India owned or controlled by a person who is a resident of India.
Differences between FERA and FEMA
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Sr.
No
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DIFFERENCES
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FERA
|
FEMA
|
|
1
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PROVISIONS
|
FERA
consisted of 81 sections, and was more complex
|
FEMA
is much simple, and consist of only 49 sections.
|
|
2
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FEATURES
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Presumption
of negative intention (Mens Rea ) and joining hands
in offence (abatement) existed in FEMA
|
These
presumptions of Mens Rea and abatement have been
excluded in FEMA
|
|
3
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NEW
TERMS IN FEMA
|
Terms
like Capital Account Transaction, current Account Transaction, person,
service etc. were not defined in FERA.
|
Terms
like Capital Account Transaction, current account Transaction person, service
etc., have been defined in detail in FEMA
|
|
4
|
DEFINITION
OF AUTHORIZED PERSON
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Definition
of "Authorized Person" in FERA was a
narrow one ( 2(b)
|
The
definition of Authorized person has been widened to
include banks, money changes, off shore banking Units etc. (2 ( c )
|
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5
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MEANING
OF "RESIDENT" AS COMPARED WITH INCOME TAX ACT.
|
There
was a big difference in the definition of "Resident", under FERA,
and Income Tax Act
|
The
provision of FEMA, are in consistent with income Tax Act, in 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.
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6
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PUNISHMENT
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Any
offence under FERA, was a criminal offence , punishable with imprisonment as
per code of criminal procedure, 1973
|
Here,
the offence is considered to be a civil offence only punishable with some
amount of money as a penalty. Imprisonment is prescribed only when one fails
to pay the penalty.
|
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7
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QUANTUM
OF PENALTY.
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The
monetary penalty payable under FERA, was nearly the
five times the amount involved.
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Under
FEMA the quantum of penalty has been considerably decreased to three times
the amount involved.
|
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8
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APPEAL
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An
appeal against the order of "Adjudicating office", before "
Foreign Exchange Regulation Appellate Board went before High Court
|
The
appellate authority under FEMA is the special Director (
Appeals) Appeal against the order of 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)
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9
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RIGHT
OF ASSISTANCE DURING LEGAL PROCEEDINGS.
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FERA
did not contain any express provision on the right of on impleaded
person to take legal assistance
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FEMA
expressly recognizes the right of appellant to take
assistance of legal practitioner or chartered accountant (32)
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10
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POWER
OF SEARCH AND SEIZE
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FERA
conferred wide powers on a police officer not below the rank of a Deputy
Superintendent of Police to make a search
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The
scope and power of search and seizure has been curtailed to a great extent
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