The Central Government of India made an act to encourage external payments and across the border trades in India mentioned because the exchange Management Act. FEMA (Foreign Exchange Management Act) was introduced within the year 1999 to exchange an earlier act FERA (Foreign Exchange Regulation Act). It had been made to fill all the loopholes and drawback of FERA (Foreign Exchange Regulation Act) and hence several economic reforms (major reforms) were introduced under this act. It had been basically introduced to de-regularize and have a liberal economy in India.
Objectives of FEMA:
- It facilitate external trade and payments.
- It was composed to help orderly development and maintenance of the Indian forex market.
- It makes the protocols and procedures for the dealings of all exchange transactions in India.
- Under this Act, the balance of payment is that the record of dealings between the citizen of different different countries in goods, services and assets. it is mainly divided into t, i.e. Capital Account and accounting .
- Capital Account comprises all capital transactions whereas accounting comprises trade of merchandise. accounting transactions are those transactions that involve inflow and outflow of cash to and from the country/countries during a year, because of the trading/rendering of commodity, service, and income. this account is indicates the economic status of the state.
Applications of FEMA :
- External exchange.
- External security.
- Shipping of any commodity and/or service from India to a state outside India.
- Bringing of any commodity and/or services from outside India.
- Securities as defined under debt Act 1994.
- Buying, sale and exchange of any kind (i.e. Transfer).
- Banking, financial and insurance services.
- Any overseas company owned by an NRI (Non-Resident Indian) and thus owner is 60% or more.
- Any citizen of India, residing within the country or outside (NRI).
The Current Account transactions under the FEMA Act has been divided into three:
- Transactions prohibited by FEMA,
- The transaction requires Central Government’s permission,
- The transaction requires RBI’s permission.
# the PRINCIPLE office of FEMA is situated in CAPITAL OF INDIA and mentioned as Enforcement Directorate.
Prohibition on Drawal of exchange:
- Any quite remittance out of winning the lottery.
- Any quite remittance from the income on racing/riding etc.
- Any settlement for purchasing of a lottery ticket, football pools, sweepstakes, banned/prescribed magazines etc.,
- Commission payment on shipping towards equity investment of Indian Companies in Joint ventures/wholly owned subsidiaries abroad.
- Settlement of dividend by any company. However, this clause is applicable as long because the necessity of dividend balancing is applicable.
- Commission payment on shipping under Rupees State Credit Routes excluding commission up to 10% of invoice value of export of tea and tobacco.
- Payment regarding “ Call back Services” of telephones.
- A citizen of Bhutan and/or Nepal.
- Settlement of interest income on funds held in NRSR Account i.e. Non-resident Special Rupees Scheme account.
- A transaction with a citizen of Bhutan or Nepal.
Route for Drawal of exchange
According to the Federal Reserve Bank of India, exchange are often drawn from any authorized dealer by the Prior Approval Route or General Permission Route.
Transactions that Central Government prior approval is required for Drawl of exchange –
- Cultural tours.
- Advertisement in medium of a faraway country for any purpose excluding promoting tourism, international bidding and foreign investments (exceeding 10000 US Dollar) by a Government and its Public Sector Units.
- Payment of importation by a Public Sector Unit or a department of state on c.i.f. basis just for importation through ocean transport.
- Settlement of freight of vessels chartered.
- Settlement of detention charges of container exceeding the DGS’s (Director General of Shipping) prescribed rate.
- Settlement of Prize money/sponsorship of any activity of sport outside India by a private except for national/ international/street level sports bodies, if the amount of the prize money/sponsorship exceeds 1,00,000 US Dollars.
- Settlement of hiring charges of transponders.
- Internet Service Providers.
- TV channels.
- Settlement for P&I Club ministry’s membership.
- Settlement by Multi-model transport operators to their agents in abroad.
Penalties Under FEMA
If a non public contravenes the provisions of FEMA or any rule, direction, regulation, order or notification issued under FEMA, he shall be at a risk of to pay a fine up to thrice the sum involved in such contravention or up to Rs.2 lakh. Where such contravention could even be a unbroken one, he shall be liable to pay a further fine which may reach to Rs.5,000 for each day during which the contravention continues.
References:
- THE HINDU
- WIKIPEDIA
- HINDUSTAN TIMES