|
Trade Regulations
FEMA
The Foreign Exchange Management Act, 1999 has come into effect on June
1, 2000 and has replaced the Foreign Exchange Regulation Act, 1973
(FERA). FEMA is a civil law. FEMA defines capital account and current
account transactions, while power is delegated on Reserve Bank of India
to regulate capital account transactions.
FERA was a criminal law and the act was very drastic. It provided
imprisonment for even a minor offense. Under this Act a person was
presumed guilty unless he proved himself innocent. With liberalization,
an urgent need was felt to remove the drastic measures of FERA and hence
a liberal act FEMA was enacted to replace FERA.
Objectives of FEMA
- Facilitate external trade and payments
- Promote orderly maintenance of the foreign exchange market in
India.
- Relax controls on joint ventures, collaborations, subsidiary
establishments and the like both in India by foreigners and abroad
by Indians.
The FEMA, is applicable-
- To the whole of India.
- Any Branch, office and agency, which is situated outside India,
but is owned or controlled by a person resident in India.
- Any contravention of provisions of FEMA, by all those, who are
covered under above two aspects committed outside India.
FEMA contains definition of certain terms which have
been used throughout the ACT
- Authorized Person : It includes an authorized dealer,
money changer, off-shore banking unit or any other person for the
time being authorized to deal in foreign exchange,
- Capital Account Transaction :It means a transaction which
alters the assets or liabilities outside India of persons resident
in India. It also includes transactions that alters assets or
liabilities in India of persons resident outside India.
- Currency : It is an assortment of currency notes, postal
notes, postal orders, money orders, cheques, drafts, travelers
cheques, letter of credit, bills of exchange and promissory notes.
- Currency Notes : It includes cash in the form of coins
and bank notes.
- Current Account Transactions : It means a transaction
other than capital account transaction.
- Export : It simply means exporting of any goods or
provision of services from India to any person outside India.
- Financial Transaction : It means making any payment to,
or for the credit of any person, or receiving any payment for, by
order or on behalf of any person, or drawing, issuing or negotiating
any bill of exchange or promissory note, or transferring any
security or acknowledging any debt.
- Foreign Currency : It denotes any currency other than the
Indian currency.
- Foreign Exchange :Money instruments used to make payments
between countries.
- Foreign Security : Any security in the form of shares,
stocks, bonds, debentures or any other instrument denominated or
expressed in foreign currency . It is only applicable where
redemption or any form of return such as interest or dividends is
payable in Indian currency.
- Import : It simply defines a process that facilitates
bringing of goods or services into India.
- Indian Currency : Currency expressed in Indian rupee.
- Person : It includes an individual, a Hindu undivided
family, a company, a firm, an association of persons or a body of
individuals, whether incorporated or not, every artificial juridical
person and any agency, office or branch owned or controlled by such
person.
- Person Resident in India : He is a person who lives a
minimum of 182 days in India during the preceding financial year.
- Repatriate to India : It means bringing into India the
realized foreign exchange and selling of such foreign exchange to an
authorized person in India.
- Security : It means shares, stocks, bonds and debentures,
Government securities, savings certificates, deposit receipts in
respect of deposits of securities and units of the Unit Trust of
India or of any mutual fund and includes certificates of title to
securities, but does not include bills of exchange or promissory
notes other than Government promissory notes or any other
instruments which may be notified by the Reserve Bank as security
for the purposes of this Act .
- Service : It means service of any description which is
made available to potential users and includes the provision of
facilities in all terms.
- Transfer : It includes sale, purchase, exchange,
mortgage, pledge, gift, loan or any other form of transfer of right,
title, possession or lien.
Regulations and Management of Foreign Exchange
Without the permission of Reserve Bank of India no person can:
- Deal or transfer any foreign exchange or foreign security to any
unauthorized person
- Make any payment in any manner to any person who resides outside
India. No payments can even be made for the credit of the particular
person.
- Receive any payment on behalf of a person residing outside India
through an authorized person.
- Enter into any sort of financial transaction in India to acquire
any asset outside India by any person.
- Acquire, hold, own, possess or transfer any foreign exchange,
foreign security or any immovable property situated outside India.
Powers of Reserve Bank Of India
- Transfer or issue of any foreign security by a person resident in
India;
- Transfer or issue of any security by a person resident outside
India;
- Transfer or issue of any security or foreign security by any
branch, office or agency in India of a person resident outside
India;
- Any borrowing or lending in foreign exchange in whatever form
- Any borrowing or tending in rupees in whatever form or by
whatever name called between a person resident in India and a person
resident outside India;
- Deposits between persons resident in India and persons resident
outside India;
- Export, import or holding of currency or currency notes;
- Transfer of immovable property outside India, other than a lease
not exceeding five years, by a person resident in India;
- Acquisition or transfer of immovable property in India, other
than a lease not exceeding five years, by a person resident outside
India;
- Giving of a guarantee or surety in respect of any debt,
obligation or other liability incurred by a person resident in India
and owed to a person resident outside India or by a person resident
outside India.
Powers of Individual
- A person resident in India may hold, own, transfer or invest in
foreign currency, foreign security or any immovable property
situated outside India if such currency, security or property was
acquired, held or owned by such person when he was resident outside
India or inherited from a person who was resident outside India.
- A person resident outside India may hold, own, transfer or invest
in Indian currency, security or any immovable property situated in
India if such currency, security or property was acquired, held or
owned by such person when he was resident in India or inherited from
a person who was resident in India.
- Any person may sell or draw foreign exchange to or from an
authorized person for a capital account transaction. For this RBI
may specify the limit and class of transactions.
Export of Goods and Services
- Exporter should furnish to the Reserve Bank or to such other
authority a declaration in such form and in such manner as may be
specified, containing true and correct material particulars.
- RBI ensures the realization of the export proceeds by exporters,
so the exporters shouls furnish to the bank all the relevant
information required.
- Every exporter of services shall furnish to the Reserve Bank or
to such other authorities a declaration in such form and in such
manner as may be specified, containing the true and correct material
particulars in relation to payment for such services.
|
