FEMA: Foreign Exchange Management Act

Foreign Exchange Management Act’s abbreviation is FEMA


  • It was passed to replace the previous Foreign Exchange Regulation Act (FERA), which was incompatible with post-liberalization policy.
  • FERA came into force with effect from 1st January, 1974. In the winter session of Parliament in 1999, FEMA was passed. On June 1, 2000, it became law. All offences involving foreign exchange are classified as civil offences under this statute, rather than criminal charges under FERA.

  • Head office: Known as Enforcement Directorate is situated in New Delhi.
  • Five zonal offices which are located as below,
  1. Delhi,
  2. Mumbai,
  3. Chennai,
  4. Kolkata and
  5. Jalandhar.
  • The Deputy Director is in charge of each zonal office. Each Zone is divided further into 7 (seven) sub-zonal offices and five field units.
  • The sub-zonal office is in charged by Assistant Director and the field unit is headed by Chief Enforcement Officer (CEO).
  • The FEMA’s main goal is to unify and alter foreign exchange legislation in order to facilitate international trade and payments.
  • Another goal is to encourage the orderly development and preservation of India’s foreign exchange market.
  • FEMA applies to the entire country of India. It also applies to any offices and agencies that are located outside of India but are owned or controlled by an Indian citizen.

Main Features of FEMA

  • It allows you sell or draw foreign exchange without prior permission from RBI, you can later inform the RBI.
  • It is consistent with current account convertibility and offers provisions for progressive liberalization of capital account transactions.
  • It lays down the areas which require permission of RBI or Govt. of India regarding acquisition or holding of foreign exchange.
  • It has classified the foreign exchange transactions in two categories; capital account transaction and current account transaction.
  • The currencies included under FEMA are ATM cards, debit cards and credit cards.
  • The money transactions in rupees with Bhutan and Nepal will not fall under FEMA as these countries accept Rupees.
  • It allows a person who is a resident in India at present, but was a resident outside India in the past, to hold, own or transfer any foreign security or immovable property situated outside India that he or she acquired when he or she was a resident of that country.

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