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DIFFERENCES BETWEEN FERA AND FEMA Sr.

No DIFFERENCES FERA FEMA 1 PROVISIONS FERA consisted of 81 sections, and was more complex FEMA is much simple, and consist of only 49 sections. 2 FEATURES 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 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 AUTHORISED PERSON Definition of "Authorised Person" in FERA was a narrow one ( 2(b) The definition of Authorised person has been widened to include banks, money changes, off shore banking Units etc. (2 ( c ) 5 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 therefor a period of 182 days or more in a financial year will become a non-resident under FEMA. 6 PUNISHMENT 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. 7 QUANTUM

OF PENALTY. The monetary penalty payable under FERA, was nearly the five times the amount involved. Under FEMA the quantum of penalty has been considerably decreased to three times the amount involved. 8 APPEAL 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) 9 RIGHT OF ASSISTANCE DURING LEGAL PROCEEDINGS. FERA did not contain any express provision on the right of on impleaded person to take legal assistance FEMA expressly recognises the right of appellant to take assistance of legal practitioner or chartered accountant (32) 10 POWER OF SEARCH AND SEIZE FERA conferred wide powers on a police officer not below the rank of a Deputy Superintendent of Police to make a search The scope and power of search and seizure has been curtailed to a great extent

A STEP AHEAD FROM FERA TO FEMA Enactment of FEMA has brought in many changes in the dealings of Foreign Exchange, as compared to FERA. Some of them are restrictive, and some has widened the scope. However some of the relevant progress made, from FERA to FEMA, are as follows: RAWAL OF FOREIGN EXCHANGE Now, the restrictions on drawal of Foreign Exchange for the purpose of current Account Transactions, has been removed. However, the Central Government may, in public interest in consultation with the Reserve Bank impose such reasonable restrictions for current account transactions as may be prescribed. FEMA has also by and large removed the restrictions on transactions in foreign Exchange on account

of trade in goods, services except for retaining certain enabling provisions for the Central Government to impose reasonable restriction in public interest. 2. OMISSION OF CRIMINAL PROCEEDINGS Under FERA, any contravention was a criminal offence and the proceedings were governed by the code of Criminal Procedure. Moreover the Enforcement Directorate had powers to arrest any person, search any premises, seize documents, initiate proceeding. Now all these have been done away with, and contravention of FEMA is no more a Criminal offence, and only monetary penalty, i.e. civil proceedings are applicable. Civil imprisonment is provided, only in case of default to pay fine. 3. RESIDENTIAL STATUS The definition of "Residential Status" under FEMA has gone through considerable change. It has now been made compatible with the definition provided under "Income Tax" Act. The residential status is now based on the physical stay of the person in the country. The period of 182 days as provided, indicates that it is not necessary that there should be a continuos period of stay. The period of stay would be calculated by adding up all the days of stay of the individual in the country. An Indian resident becomes a non-resident when he goes abroad and takes up a job or engages in business. A major change in the definition of residential status of partnerships and firms in worth noticing. Earlier, under FERA, a branch was considered a resident of a place where it was situated. Now, under FEMA, an office, branch or agency outside India owned or controlled by a person resident in India will be considered a resident in India for the purposes of this Act. For example, a person residing in India has a branch in Maurtius; such branch will be considered a resident in India. 4. IMMOVABLE PROPERTY OUTSIDE INDIA

Earlier, under FERA, there was no restriction placed on foreign citizens who were residents of India, for acquiring immovable property outside India. Now FEMA prohibits a resident to acquire, own process, hold or transfer any immovable property situated outside India. This restriction applies irrespective of whether the resident is an Indian citizen or foreign citizen. With this provision being effective a foreign citizen who is a resident in India has to take approval of Reserve Bank of India for selling or buying any immovable property situated outside India. 5. IMMOVABLE PROPERTY IN INDIA Earlier, under FERA, a foreign citizen could acquire or transfer immovable property in India only after seeking permission from the Reserve Bank. Now, under FEMA, the control of Reserve Bank is determined by the residential status of a person. Only a non-resident as defined within the meaning of FEMA would require permission of the Reserve Bank to acquire or transfer an immovable property in India. The distinction based on citizenship has been abolished and that based on residentship has been introduced. 6. EXPORT OF SERVICES FERA had no provision for export of services. Now, FEMA has included payment received by an Exporter of Services in its ambit. Every Exporter, who receives payment from outside India, for his services rendered is obliged to furnish details of payment to the 'Reserve Bank. For example; a Doctor, or Engineer or Lawyer or Accountant or any other professional may give opinions or consultation to people outside India, via internet or mail, and his fees may be credited to his credit account. Then he is obliged to furnish details of such payment to Reserve Bank. 7. INCLUSION OF NEW TERMS Some new terms like "Capital Account Transactions, Current Account Transactions"; have been included in FEMA. Reserve Bank has been confirmed with powers and with consultation with

central government to specify maximum permissible limit upto which exchange is admissible for such transactions.

WHAT TYPE OF OFFENCES? Although under FEMA, offences pertain to transactions in foreign Exchange only. However relevant offences are as follows: DETAILS IN FOREIGN EXCHANGE: * Only a person Authorised by Reserve Bank can deal in foreign Exchange * No one can make a payment to a person resident outside India, without permission of Reserve Bank. * No one receives any payment from a person resident outside India, without permission of Reserve Bank. * A person resident in India cannot deal in foreign exchange, foreign security or any immovable property situated outside India, without permission of Reserve Bank. (sec 4) * Similarly a person resident outside India, cannot acquire immovable property in India without permission. EXPORTER OF GOODS AND SERVICES Every exporter of goods and services is under an obligation, to give details to Reserve Bank regarding value of export, mode of payment, amount of payment received etc. REPATRIATION OF FOREIGN EXCHANGE

Where any amount of foreign exchange has become due or accrued to any person who is a resident in India, he shall realise and repatriate (Bring Back) such amount, within the time specified by Reserve Bank. AUTHORISED PERSON An "Authorised Person" under FEMA, is a person who is authorised by Reserve Bank to deal in Foreign Exchange. For being registered as an "Authorised Person", necessary application alongwith relevant documents has to be furnished to Reserve Bank. An "Authorised Person" is also, not given a free hand to deal in foreign Exchange. He has to furnish details and information, to Reserve Bank from time to time as may be required by it. PROSECUTION OF OFFENCES COMMITTED Before detailing the procedure for prosecution, it is important to mark out the Adjudicating Agencies. They are: ADJUDICATING AUTHORITY The inquiry of any contravention of FEMA is conducted by an Adjudicating Authority appointed by the Central Government. APPEAL TO SPECIAL DIRECTOR (APPEALS) The special Director (Appeals) is authorised to hear the appeals arising out of in order of the Adjudicating Authority. APPEAL TO THE APPELLATE TRIBUNAL The Appellate Tribunal is entitled to hear appeals made in accordance, from an order made by Adjudicating Authority or special Director (Appeals). DIRECTOR OF

ENFORCEMENT The Director of Enforcement and other officers has power to conduct investigation, search and seize any articles. PROCEDURE INQUIRY BY ADJUDICATING AUTHORITY (14) The inquiry of any contravention of FEMA is conducted by an Adjudicating Authority. * When, an inquiry is to be conducted against a person for any contravention; the Adjudicating Authority shall issue a notice to such person. * The notice will also indicate the date on which the offender is required to appear before authority, and will also mention the nature of offence committed by him. * Such person (offender) will have a right to give reasons or explanation, and then a date will be fixed for his appearance. He can appear either personally or through an Advocate or chartered accountant. * On the date of appearance, the Adjudicating Authority shall present its case, and explain the reason and type & implications of offence committed by offender. * Then in turn, such person will also be given an opportunity to put up his case, and to produce documents and evidence. * Finally, if Adjudicating Authority is convinced, that the offender has committed an offence, then it will impose such fine and penalty, as it thinks

fit. APPEAL TO SPECIAL DIRECTOR (APPEALS) (17) Appeal from an order of "Adjudicating Authority" lies before" special Director (appeal)" * The appeal shall be made in "Form No. 1", alongwith three copies of the order appealed against and the requisite fees. * The appeal should be filed within 45 days, from the date of receipt of receipt of impugned order. * On the date of hearing the appeal the applicant may appoint a legal practitioner or a chartered accountant to appear, plead and act on their behalf before the special Director (Appeal) * The order of the special Director (Appeals) made at the conclusion of the proceedings shall be in writing and shall state briefly the grounds for the decision. APPEAL TO THE APPELLATE TRIBUNAL (19) "Appellate Tribunal" is entitled to hear appeal arising out of an order from "Adjudicating Authority" and "special Director (appeal)." * The appeal shall be made in Form No. 2, alongwith three copies of the impugned order and requisite fees. * The appeal shall be made within 45 days, from the date on which copy of the impugned order is received.

* A copy of the order and appeal shall be sent to the opposite party, i.e. "Director of Enforcement," and a date shall be fixed for hearing of the appeal. * The appellant shall have the right to present his case / appeal through a legal practitioner or chartered Accountant. * On the fixed date of hearing, the "Appellate Tribunal" shall pass its order in writing and the reasons therefore. APPEAL TO HIGH COURT (35) * An appeal from the decision of "Appellate Tribunal" lies before High Court. * The appeal shall be filed within "60 days" from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law arising from the impugned order. AMOUNT OF PENALTY Any contravention, under FEMA, may invite following kinds of penalties: * If, the amount against which offence is quantities, then penalty will be "THRICE" the sum involved in contravention. * Where the amount cannot be quantified the penalty may be imposed upto two lakh rupees. * If, the contravention is continuing everyday, then Rs. Five Thousand for every day after the first day during which the contravention continues. Further in addition to the penalty, any currency, security or other money or property involved in the contravention may also be confiscated.