Doing business in India simplified

INTRODUCTION
• FOREIGN EXCHANGE REGULATION ACT,1973(FERA) WAS REPEALED BY NEW ACT WHICH IS BEING CALLED AS FOREIGN EXCHANGE MANEGEMENT ACT,1999(FEMA)BUT CAME INTO FORCE FROM JUNE 2000

ABOUT FEMA

REASON FOR THE ENACT MENT OF NEW ACT

H LOOK ON IT WILL MAKE US SEE FEEL THAT IT WAS MEANT FOR PROHIBIT

NTROL,& PROHIBITION TO A NEW ERA FOR CONSOLIDATION & M NTROL,& PROHIBITION TO A NEW ERA FOR CONSOLIDATION & M

BASIS OF F.E.M.A 1999 F.E.R.A. 1973 DIFFERE 1. PREAMB AN ACT TO AN ACT TO NCE LE CONSOLIDATEAND CONTROL 2. STRUCT CONSOLIDATED,SHO CONTAINING 81 AMEND THE LAW ,REGULATE,RESTRICT URE/CONRTER,CONTAINING SECTION OF WHICH 32 RELATING TO OR PROHIBIT FOREIGN TENT ONLY 49 SECTION OF ARE RELATED TO THE FOREIGN EXCHANGE EXCHANGE WITH WHICH 12 ARE OPERATIONAL PART & WITH THE VIEW OF RELATED TO OTHER FOR OBJECTIVE OF CONSERVATION OPERATION PART & PENALITES ETC. FACILITATING ,PROPER UTILISATION REST FOR TRADE OF FOREIGN EXTERNAL PENALITIES PROMOTING EXCHANGE KEEPING ORDERLY IN VIEW THE DEVOLOPMENT AND INTEREST OF MAINTENANCE OF ECONOMNIC FOREX MARKET IN DEVOLOPMENT OF

Difference between FERA and FEMA

3. 4. 5. 6. 7.

NATURE OF CIVIL LAW DARCONIAN,SEVERE,& ACT HARSH PROHIBATIOONLY SPECIFIED ALL ACTS ARE N& APPLICABIL ACT RELATING TO NORMALLY CITIZEN IT DOES NOY APPLY IT APPLIES TO RELAXATIO FORIGN EXCHANGE CONTROLLED & CONTRAVE ONLY CITIZEN OF FINE & IMPRISONMENT ITY TOTO FINE & NOT OF INDIA WHO WERE N REGULATED SUM PENALITIES 3 TIMES THE SUM 5 TIMES THE NTION IMPRISONMENT INDIA WHO ARE OUTSIDE INDIA ,& INVOLVED INDIA & IF NOT INVOLVEDORIN MOST WHETHER & NOT THEY 8. COMPOUNDIOUTSIDEDVEST SEEKS TO NO SUCH POWER WERE QUANTIFIABLE UNLESS THEYARE CASES RESIDENT IN WERE IMPRISONMENT NG OF DIECTORATE OF PRESENT THAN MAX 2AS 9. POWER OF RESTRICTED OF NOT BELOW THE RANK OFFENCES ARE RESIDENT THE INDIA ENFORCEMENT LAKH .IF SEARCH CONTAINED IN OF D.S.P CAN DO INDIA POWER CONTINUING THAN ANYTHING ,SEZIURE SECTION 37 & 38 OF 5000/- PER DAY ETC THE ACT FROM FIRST DAY

10. NEW CAPITAL ACCOUNT & THESE TERM WERE TERM CURRENT ACCOUNT NOT USED 11. DEFINATTRANSACTION ETC. WERE EMPHASIS WERE AS CON TAINED IN ION OF INTRODUCEDTHAT IS 182 NOT ONLY ON INCOME TAX RESIDEN DAYS OR MORE CITIZENSHIP BUT 12. PRESUM NO SUCH PRESUMPTION ACCUSE HAS TO T OF ALSO INTENTION PTION INDIA OF GUILITY MIND UNLESS PROVE THAT HE IS OF PROSECUTION PROVE IT NOT GUILITY MIND 13. RIGHT YES LIKE CHARTERED NOT CLEARLY MENS TO TAKE ACCOUNTANT EXPRESSED REA LEGAL PRACTIO NER

• (1) This Act may be called the Foreign Exchange Management Act, 1999. • (2) It extends to the whole of India. • (3) It shall also apply to all branches, offices and agencies outside India owned or controlled by a person resident in India and also to any contravention there under committed outside India by any person to whom this Act applies. • (4) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint: • Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

Short title, extent, application and commencement

3.Dealing in foreign exchange
• Save as otherwise provided in this Act, rules or regulations made there under, or with the general or special permission of the Reserve Bank, no person shall— • (a) deal in or transfer any foreign exchange or foreign security to any person not being an authorised person; • (b) make any payment to or for the credit of any person resident outside

• (c) receive otherwise through an authorised person, any payment by order or on behalf of any person resident outside India in any manner; • d) enter into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire, any asset outside India by

4.Holding of foreign exchange, etc.
• Save as otherwise provided in this Act, no person resident in India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India

5.Current account transactions
• Any person may sell or draw foreign exchange to or from an authorised person if such sale or drawal is a current account transaction: • Provided that the Central Government may, in public interest and in consultation with the Reserve Bank, impose such reasonable restrictions for current account transactions as may be

(1) Subject to the provisions of sub-section (2), any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction. (2) The Reserve Bank may, in consultation with the Central Government, specify— (a) any class or classes of capital account transactions which are permissible; (b) the limit up to which foreign exchange shall be admissible for such transactions : Provided that the Reserve Bank shall not impose any restriction on the drawel of foreign exchange for payments due on account of amortization of loans or for depreciation of direct investments in the ordinary course of business.

6 . C a p ita l a cco u n t tra n sa ctio n s .

(3) Without prejudice to the generality of the provisions of sub-section (2), the Reserve Bank may, by regulations, prohibit, restrict or regulate the following— (a) transfer or issue of any foreign security by a person resident in India; (b) transfer or issue of any security by a person resident outside India; (c) transfer or issue of any security or foreign security by any branch, office or agency in India of a person resident outside India; (d) any borrowing or lending in foreign exchange in whatever form or by whatever name called; (e) any borrowing or lending in rupees in whatever form or by whatever name called between a person resident in India and a person resident outside India; (f) deposits between persons resident in India and persons resident outside India;

g) export, import or holding of currency or currency notes; (h) transfer of immovable property outside India, other than a lease not exceeding five years, by a person resident in India; (i) acquisition or transfer of immovable property in India, other than a lease not exceeding five years, by a person resident outside India; (j) giving of a guarantee or surety in respect of any debt, obligation or other liability incurred— (i) by a person resident in India and owed to a person resident outside India; or (ii) by a person resident outside India.

(1) Every exporter of goods shall— (a) 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, including the amount representing the full export value or, if the full export value of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in a market outside India; (b) furnish to the Reserve Bank such other information as may be required by the Reserve Bank for the purpose of ensuring the realisation of the export proceeds by such exporter.

7 . Export of goods and services .

(2) The Reserve Bank may, for the purpose of ensuring that the full export value of the goods or such reduced value of the goods as the Reserve Bank determines, having regard to the prevailing market conditions, is received without any delay, direct any exporter to comply with such requirements as it deems fit. (3) 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.

40 . Suspension of operation of this Act .
40. (1) If the Central Government is satisfied that circumstances have arisen rendering it necessary that any permission granted or restriction imposed by this Act should cease to be granted or imposed, or if it considers necessary or expedient so to do in public interest, the Central Government may, by notification, suspend or relax to such extent either indefinitely or for such period as may be notified, the operation of all or any of the provisions of this Act. (2) Where the operation of any provision of this Act has under sub-section (1) been suspended or relaxed indefinitely, such suspension or relaxation may, at any time while this Act remains in force, be removed by the Central Government by notification.

• (3) Every notification issued under this section shall be laid, as soon as may be after it is issued, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification or both Houses agree that the notification should not be issued, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such

( 4 ) A person resident in India may hold , own , transfer or i ve st i fo re i n cu rre n cy , fo re i n se cu ri o r a n y n n g g ty i m o va b l p ro p e rty si a te d o u tsi e I d i i su ch m e tu d n a f cu rre n cy , se cu ri o r p ro p e rty w a s a cq u i d , h e l o r ty re d o w n e d b y su ch p e rso n w h e n h e w a s re si e n t o u tsi e I d i d d n a o r i h e ri d fro m a p e rso n w h o w a s re si e n t o u tsi e I d i . n te d d n a ( 5 ) A person resident outside India may hold , own , tra n sfe r o r i ve st i I d i n cu rre n cy , se cu ri o r a n y n n n a ty i m o va b l p ro p e rty si a te d i I d i i su ch cu rre n cy , m e tu n n a f se cu ri o r p ro p e rty w a s a cq u i d , h e l o r o w n e d b y su ch ty re d p e rso n w h e n h e w a s re si e n t i I d i o r i h e ri d fro m a d n n a n te p e rso n w h o w a s re si e n t i I d i . d n n a ( 6 ) Without prejudice to the provisions of this section , the R e se rve B a n k m a y , b y re g u l ti n , p ro h i i , re stri , o r a o b t ct re g u l te e sta b l sh m e n t i I d i o f a b ra n ch , o ffi o r o th e r a i n n a ce p l ce o f b u si e ss b y a p e rso n re si e n t o u tsi e I d i , fo r a n d d n a ca rryi g o n a n y a cti ty re l ti g to su ch b ra n ch , o ffi o r n vi a n ce o th e r p l ce o f b u si e ss. a n

Contravention & penalties
If any person contravenes any provision of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorization is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues. Any Adjudicating Authority adjudging any contravention may, if he thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government and further direct that the foreign exchange holdings, if any, of the persons committing the contraventions or any part thereof, shall be brought back into India or shall be retained outside India in accordance with the directions made in this behalf. .

" Property " in respect of which contravention has taken place, shall include deposits in a bank, where the said property is converted into such deposits, Indian currency, where the said property is converted into that currency; and any other property which has resulted out of the conversion of that property. If any person fails to make full payment of the penalty imposed on him within a period of ninety days from the date on which the notice for payment of such penalty is served on him, he shall be liable to civil imprisonment

37 . Power of search , seizure , etc . of enforcement director
(1) The Director of Enforcement and other officers of Enforcement, not below the rank of an Assistant Director, shall take up for investigation the contravention referred to in section 13. (2) Without prejudice to the provisions of sub-section (1), the Central Government may also, by notification, authorise any officer or class of officers in the Central Government, State Government or the Reserve Bank, not below the rank of an Under Secretary to the Government of India to investigate any contravention referred to in section 13. (3) The officers referred to in sub-section (1) shall exercise the like powers which are conferred on income-tax authorities under the Income-tax Act, 1961 (43 of 1961) and shall exercise such powers, subject to such limitations laid down under that Act. Empowering other officers .

41 . Power of Central Government to give directions . For the purposes of this Act, the Central Government may, from time to time, give to the Reserve Bank such general or special directions as it thinks fit, and the Reserve Bank shall, in the discharge of its functions under this Act, comply with any such directions.

43 . Death or insolvency in certain cases .

Any right, obligation, liability, proceeding or appeal arising in relation to the provisions of section 13 shall not abate by reason of death or insolvency of the person liable under that section and upon such death or insolvency such rights and obligations shall devolve on the legal representative of such person or the official receiver or the official assignee, as the case may be : Provided that a legal representative of the deceased shall be liable only to the extent of the inheritance or estate of the deceased.

No suit, prosecution or other legal proceeding shall lie against the Central Government or the Reserve Bank or any officer of that Government or of the Reserve Bank or any other person exercising any power or discharging any functions or performing any duties under this Act, for anything in good faith done or intended to be done under this Act or any rule, regulation, notification, direction or order made there under. (1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order, do anything not inconsistent with the provisions of this Act for the purpose of removing the difficulty: Provided that no such order shall be made under this section after the expiry of two years from the commencement of this Act. (2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament.

44 . Bar of legal proceedings .

45 . Removal of difficulties .

INVESTIGATION
The Directorate of Enforcement investigate to prevent leakage of foreign exchange which generally occurs through the following malpractices : Remittances of Indians abroad otherwise than through normal banking channels, i.e. through compensatory payments. Acquisition of foreign currency illegally by person in India. Non-repatriation of the proceeds of the exported goods. Unauthorised maintenance of accounts in foreign countries. Under-invoicing of exports and over-invoicing of imports and any other type of invoice manipulation. Siphoning off of foreign exchange against fictitious and bogus imports. Illegal acquisition of foreign exchange through Hawala. Secreting of commission abroad.

8 . Realisation and repatriation of foreign exchange .
8. Save as otherwise provided in this Act, where any amount of foreign exchange is due or has accrued to any person resident in India, such person shall take all reasonable steps to realise and repatriate to India such foreign exchange within such period and in such manner as may be specified by the Reserve Bank. Exemption from realisation and repatriation in certain cases .

Procedural Provisions For enforcing the provisions of various sections of FEMA, 1999, the officers of Enforcement Directorate of the level of Assistant Director and above will have to undertake the following functions Collection and development of intelligence/information. Keeping surveillance over suspects. Searches of persons/vehicles by provisions of Income-tax Act, 1961. Searches of premises as per provisions of Income-tax Act, 1961. Summoning of persons for giving evidence and producing of documents as per provisions of Income-tax Act, l96l. Power to examine persons as per provisions of Income-tax Act,1961. Power to call for any information/document as per provisions of Income-tax Act, 1961. Power to seize documents etc. as per provisions of Income-tax Act, 1961. Custody of documents as per Income-tax Act, 1961. Adjudication and appeals - Officers of and above the rank of Dy Director of Enforcement, are cases of contravention of the provisions of the Act; these proceedings which are quasi-judicial in nature, start with the issuance of show cause notice; in the event of cause shown by the Notice-not being found satisfactory, further proceedings are held, vis. personal hearing, in which the noticee has a further right to present his defence, either in person or through any authorised representative; on conclusion of these proceedings, the adjudicating authority has to examine and consider the evidence on record, in its entirety and in case the charges not being found proved, the noticee is acquitted, and in the event of charges being found substantiated, such penalty, as is considered appropriate as per provisions of section 13 of the Act can be imposed, besides confiscation of amounts involved in these contraventions.

Organisational Set Up and Functions Of Enforcement Directorate Directorate of Enforcement has to detect cases of violation and also perform substantially adjudicatory functions to curb above malpractices. The Enforcement Directorate, with its Headquarters at New Delhi has seven zonal offices at Bombay, Calcutta, Delhi, Jalandhar, Madras, Ahmedabad and Bangalore. The zonal offices are headed by the Deputy Directors. The Directorate has nine sub-zonal offices at Agra, Srinagar, Jaipur, Varanasi, Trivandrum, Calicut, Hyderabad, Guwahati and Goa, which are headed by the Assistant Directors. The Directorate has also a Unit at Madurai, which is headed by a Chief Enforcement Officer. Besides, there are three Special Directors of Enforcement and one Additional Director of Enforcement. The main functions of the Directorate are as under: To collect and develop intelligence relating to violation of the provisions of Foreign Exchange Regulation Act and while working out the same, depending upon the circumstances of the case: To conduct searches of suspected persons, conveyances and premises for seizing incriminating materials (including Indian and foreign currencies involved) and/or. To enquire into and investigate suspected violations of provisions of the Foreign Exchange Management Act. To adjudicate cases of violations of Foreign Exchange Management Act for levying penalties departmentally and also for confiscating the amounts involved in contravent ions; To realise the penalties imposed in departmental adjudication.

9. The provisions of sections 4 and 8 shall not apply to the following, namely:— (a) possession of foreign currency or foreign coins by any person up to such limit as the Reserve Bank may specify; (b) foreign currency account held or operated by such person or class of persons and the limit up to which the Reserve Bank may specify; (c) foreign exchange acquired or received before the 8th day of July, 1947 or any income arising or accruing thereon which is held outside India by any person in pursuance of a general or special permission granted by the Reserve Bank; (d) foreign exchange held by a person resident in India up to such limit as the Reserve Bank may specify, if such foreign exchange was acquired by way of gift or inheritance from a person referred to in clause (c), including any income arising therefrom; (e) foreign exchange acquired from employment, business, trade, vocation, services, honorarium, gifts, inheritance or any other legitimate means up to such limit as the Reserve Bank may specify; and (f) such other receipts in foreign exchange as the Reserve Bank may specify.

The End

Thank You

Ato Ghartey

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