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P.S.Swathi Associate Professor SSIM
Foreign Exchange Management 1999 Act
replaced Foreign Exchange Regulation Act. Foreign Exchange Management deals with the objective of facilitating external trade and payments for promoting the development and maintenance of foreign exchange market in India It extends to whole India
offices and agencies outside India owned or controlled by a person resident in India Any contravention committed outside India by any person to whom the Act applies .To whom it applies To all branches.
5. 7. 8.Definitions 1. Foreign Exchange Person under FEMA Person Resident in India NRI or PIO Drawal and Retention of Foreign Exchange AD (Authorized Dealer/Money Changer) Capital Account Transactions Current Account Transactions Repatriate to India . 6. 3. 4. 2. 9.
letters of credit or bills of exchange drawn by banks. credits and balances payable in any foreign currency Drafts. . institutions or persons outside India.Foreign Exchange Foreign Exchange : means foreign currency Deposits. traveler’s cheques. but payable in Indian Currency.
7. An Individual A Hindu Undivided family A Company A Firm An association of persons or a body of individuals. not falling within any preceding sub-clauses and Any agency. whether incorporated or not Every artificial judicial person. 6. . 5. 4. 3.Person • Person under FEMA includes : 1. 2. officer or branch owned or controlled by such persons.
.Person Resident in India A person residing in India for more than one hundred and eighty two days during the course of the preceding financial year Non-Resident Indian (NRI): is a person resident outside India who is a citizen of India or is a person of Indian origin .
or (b) he or either of his parents or any of his grandparents were citizen of India by virtue of the Constitution of India. if (a) he at any time held Indian passport. . (c) the person is a spouse of an Indian citizen or a persons referred to in sub-clause (a) or (b) above.Person of Indian Origin Person of Indian Origin (PIO) : is a citizen of any country other than Bangladesh or Pakistan.
Using International Credit Cards.Drawal Drawal and Retention of Foreign Exchange It means that drawing foreign exchange from authorized persons. or any other thing creating exchange liability. For Example: Opening of Letters of Credit . International Debit Cards or ATM Card. .
. money-changer. Before undertaking any transactions in foreign exchange with any person the authorized person has to take declaration from the person that he will not involve in the contravention of rules and regulations of the Act or the rules and regulations of the Government or RBI. He shall not engage in any transaction involving any foreign security which is not in conformity with the terms of his authorisation. offshore banking unit or any other person being authorized under the Act to deal in foreign exchange or foreign securities.AD (Authorized Dealer/Money Changer) An authorized person means an authorized dealer.
borrowing money etc. lending. investments.Capital Account Transactions Capital Accounts Transacations: It relates to movement of capital such as transactions in property. Section 6 of the Act provides powers to RBI to specify in consultation with the Central Government classes of permissible Capital Account transactions . purchase and sale of securities/other assets.
education and medical care of parents. Remittances of living expenses of parents. other credit facilities in the ordinary course of business. spouse and children. spouse and children residing abroad.Current Account Transactions Current Account Transactions : Transactions with does to fall under the Capital Account category is a current account. For Example: Payments due in connection with foreign trade. . Expenses in connection with foreign travel.
or (b) the holding of realised amount in an account with an authorised person in India to the extent notified by the Reserve Bank . It includes use of the realised amount for discharge of a debt or liability denominated in foreign exchange and the expression ‘repatriation’ shall be construed accordingly.Repatriate to India It means bringing into India the realised foreign exchange and (a) the selling of such foreign exchange to an authorised person in India in exchange for rupees. .
Rules and Regulations for Current Account Transactions The Government/RBI framed rules and regulations with regard to current account transactions under the Act.e. . (i)Transactions for which drawl of foreign exchange is prohibited (ii) Transactions which require prior approval of the Government of India for drawal of foreign exchange (iii) Transactions which require RBI’s prior approval for drawal of foreign exchange. There are three categories i.
or any other hobby Transaction with a person resident in Nepal or Bhutan ( unless specifically exempted by RBI by general/specify order) .Transactions for which drawl of foreign exchange is prohibited Remittance out of lottery winnings Remittance of income from racing/riding etc.
.Advertisement abroad by any PSU/State and Central Government department. Remittance of prize money/sponsorship of sports activity abroad by a person other than International/National/State Level sports bodies. Multi model transport operates making remittances to their agents abroad.Transactions which require prior approval of the Government of India The following are the transactions for drawal of foreign exchange which require prior permission from the Government: Cultural Tours .
exceeding 5% of the inward remittance Remittance of royalty and payment of lump sum fee under technical collaboration agreement. Gift remittance exceeding US$ 5. which has not been registered with RBI.000 per beneficiary per annum Commission to agents abroad for sale of residential flats/ commercial plots in India. .Transactions which require RBI’s prior approval for drawal of foreign exchange.
II Authorised Dealers. individuals.Foreign Exchange Market in India Tier-I Regulator: Reserve Bank of India Regulation: Foreign Exchange Management Act. . FIIs. Corporates. 1999 Tier . importers. Non-Residents. NRIs etc. Money changers Tier-III Buyers and sellers: exporters.
Forex Activities in India – Facilitators Ministry of Finance Ministry of Commerce Directorate of Enforcement Customs Export Promotion Councils Export Inspection Units .
FOREIGN EXCHANGE TRANSACTIONS Current Account Capital Account Trade Invisibles Tour Travel Remittance Gift Profit/Div/int FDI Portfolio Loan (Govt/ Pvt(ECB) Exports Imports Foreign Source (FII) Indian Source (GDR/ADR) Fcy A/C RI & NRI .
Regulation and Management of Foreign Exchange Dealing in Foreign Exchange Holding of Foreign Exchange Export of goods and services Realization and Repatriation of Foreign Exchange .
except with the general or special permission of the Reserve Bank of India. shall deal in or transfer any foreign exchange. Dealing in foreign exchange can be done only by authorized person. . or make any payment to any person resident outside India or receive any payment from outside India or enter into any financial transaction in India.Dealing in Foreign Exchange No person. to acquire any asset outside India.
possess or transfer any foreign exchange or acquire any immovable property outside India without the sanction of the Reserve Bank of India.Holding of Foreign Exchange No person resident in India shall hold. . Foreign exchange may be drawn from an authorized person for current account transactions and for capital account transactions to such restrictions as may be imposed by the Reserve Bank of India in consultations with the Central Government. own .
Exports of goods and services Every exporter of goods and services shall furnish to the Reserve Bank of India or to such other authority a declaration containing true and correct particulars representing full export value or payment for services. .
However certain category of persons are exempt from realization and repatriation. .Realization and Repatriation of Foreign Exchange Person resident in India shall take all reasonable steps to realize and repatriate the foreign exchange due or accrued within such period and in such manner as may be prescribed.
to investiagate any contravention referred to in Sec. The Central Government may also. 37 (2)] . authorise any officer or class of officers in the Central Government. by notification.Directorate of Enforcement The Central Government may appoint the Director of Enforcement or an Additional Director of Enforcement or Special Director of Enforcement to investigate the contravention referred to in Sec.37 (1)].13 [Sec. not below the rank of an Under Secretary to the government of India.13[Sec. State Government or the Reserve Bank.
the Reserve Bank may impose on the authorised person a penalty which may extent to Rs. regulation.10. or any condition imposed by RBI for its authorisation.Penalties for Contravention of the Act Where any authorized person fails to file any return as directed by the Reserve Bank. notification.after hearing and determining judicially the Adjudicating Authority.. The penalty shall be levied upon adjudication (i. the penalty can be up to thrice the sum involved in the contravention. Any contraventions of provision of this Act or any rule. direction or order issued under this Act.000. Where the amount is quantifiable. Where the contravention is not quatifiable the penalty .e.
direct that any currency. Civil Imprisonment: If any person fails to make full payment of the penalty imposed on him within a period of 90 days form the date on which the notice for payment of such penalty is served on him. Any person aggrieved by an order made by the Adjudicating Authority may prefer appeal to The Special Director(Appeals) within 45 days from the . if it thinks fit. security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government. he shall be liable to civil imprisonment. Confiscation: The Adjudication Authority adjudging any contravention referred to above may.
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