What is the full form of FEMA
FEMA: Foreign Exchange Management Act
FEMA stands for Foreign Exchange Management Act. It was introduced to replace the earlier Foreign Exchange Regulation Act (FERA) as FERA was not compatible with post-liberalisation policies. FEMA was passed in the winter session of Parliament in 1999. It became an act on 1 June 2000. According to this act, all offenses related to foreign exchange are civil offenses as opposed to criminal offenses according to FERA.
Its head office which is called Enforcement Directorate is located in New Delhi. It has five zonal offices which are located in Delhi, Mumbai, Chennai, Kolkata and Jalandhar. Each zonal office is headed by the Deputy Director. Each Zone is further divided into 7 sub-zonal offices and 5 field units. The sub-zonal office is headed by Assistant Director and the field unit is headed by Chief Enforcement Officer.
The key objective of the FEMA is to consolidate and amend the laws related to foreign exchange to facilitate external trade and payments. The other objective for which it is formulated is to promote the orderly development and maintenance of foreign exchange market in India. FEMA is applicable throughout the India. It is also applicable to all offices, agencies which are outside India but owned or controlled by a person who is a citizen of India.
Main Features
- 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.