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FERA Vs FEMA
Foreign Exchange Management Act, 1999 (FEMA) emerged as a replacement or say an
improvement over the old Foreign Exchange Regulation Act, 1973 (FERA). Foreign
investors, frequently hear the terms FERA and FEMA, when they deal with India. As their name
specifies, FERA lays emphasis on the regulation of currencies, whereas the FEMA manages
foreign exchange, i.e. forex.
The first and foremost difference between FERA and FEMA is that the former requires previous
approval of Reserve Bank of India (RBI), whereas the latter does not require RBI’s approval, except
when the transaction is related to foreign exchange. Check out this article to know more differences
between the two acts.
BASIS FOR COMPARISON FERA FEMA
Meaning An act promulgated, to regulate payments and foreign exchange in
India, is FERA.
FEMA an act initiated to facilitate external trade and payments and
to promote orderly management of the forex market in the country.
Enactment Old New
Number of sections 81 49
Introduced when Foreign exchange reserves were low. Foreign exchange position was satisfactory.
Approach towards forex transactions Rigid Flexible
Basis for determining residential status Citizenship More than 6 months stay in India
Violation Criminal offence Civil offence
Punishment for contravention Imprisonment Fine or imprisonment (if fine not paid in the stipulated time)
Comparison Chart
About FERA
Foreign Exchange Regulation Act, shortly known as FERA, was introduced in the year
1973. The act came into force, to regulate foreign payments, securities, currency import
and export and purchase of fixed assets by foreigners. The act was promulgated in India
when the position of foreign reserves wasn’t satisfactory. It aimed at conserving foreign
exchange and its optimum utilisation in the development of the economy.
The act applies to the whole country. Therefore, all the citizens of the country, inside or
outside India are covered under this act. The act extends to branches and agencies of the
Indian multinationals operating outside the country, which is owned or controlled by the
person who is the resident of India.
About FEMA
FEMA expands to Foreign Exchange Management Act, which was promulgated in the year 1999,
to repeal and replace the earlier act. The act applies to the whole country and to all the branches
and agencies of the body corporate operating outside India, whose owner or controller is an
Indian resident and also any violation committed by the person covered under the Act, outside
India.
The main objective of the act is to facilitate foreign trade and to encourage systematic
development and maintenance of forex market in the country. There are total seven chapters
contained in the act which are divided into 49 sections, out of which 12 sections deal with the
operational part while the remaining 37 sections cover penalties, contravention, appeals,
adjudication and so on.
Key Differences Between FERA and FEMA
The primary differences between FERA and FEMA are explained in the following points:
1.FERA is an act which is enacted to regulate payments and foreign exchange in India, is
FERA. FEMA an act initiated to facilitate external trade and payments and to promote
orderly management of the forex market in the country.
2.FEMA came out as an extension of the earlier foreign exchange act FERA.
3.FERA is lengthier than FEMA, regarding sections.
4.FERA came into force when the foreign exchange reserve position in the country wasn’t
good while at the time of introduction of FEMA, the forex reserve position was satisfactory.
5.The approach of FERA, towards forex transaction, is quite conservative and restrictive,
but in the case of FEMA, the approach is flexible.
6.Violation of FERA is a non-compoundable offence in the eyes of law. In contrast
violation of FEMA is a compoundable offence and the charges can be removed.
7.Citizenship of a person is the basis for determining residential status of a person in
FERA, whereas in FEMA the person’s stay in India should not be less than six months.
8.Contravening the provision of FERA may result in imprisonment. Conversely, the
punishment for violating the provisions of FEMA is a monetary penalty, which may turn
into imprisonment if the fine is not paid on time.
Conclusion
The economic policy of liberalisation was first time introduced in India in the year 1991 that
opened gates for foreign investment in many sectors. In the year 1997, the Tarapore Committee
recommended changes in the present legislation that regulate foreign exchange in the country.
After which FERA was replaced by FEMA in the country.

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FERA Vs FEMA.pptx

  • 2. Foreign Exchange Management Act, 1999 (FEMA) emerged as a replacement or say an improvement over the old Foreign Exchange Regulation Act, 1973 (FERA). Foreign investors, frequently hear the terms FERA and FEMA, when they deal with India. As their name specifies, FERA lays emphasis on the regulation of currencies, whereas the FEMA manages foreign exchange, i.e. forex.
  • 3. The first and foremost difference between FERA and FEMA is that the former requires previous approval of Reserve Bank of India (RBI), whereas the latter does not require RBI’s approval, except when the transaction is related to foreign exchange. Check out this article to know more differences between the two acts.
  • 4. BASIS FOR COMPARISON FERA FEMA Meaning An act promulgated, to regulate payments and foreign exchange in India, is FERA. FEMA an act initiated to facilitate external trade and payments and to promote orderly management of the forex market in the country. Enactment Old New Number of sections 81 49 Introduced when Foreign exchange reserves were low. Foreign exchange position was satisfactory. Approach towards forex transactions Rigid Flexible Basis for determining residential status Citizenship More than 6 months stay in India Violation Criminal offence Civil offence Punishment for contravention Imprisonment Fine or imprisonment (if fine not paid in the stipulated time) Comparison Chart
  • 5. About FERA Foreign Exchange Regulation Act, shortly known as FERA, was introduced in the year 1973. The act came into force, to regulate foreign payments, securities, currency import and export and purchase of fixed assets by foreigners. The act was promulgated in India when the position of foreign reserves wasn’t satisfactory. It aimed at conserving foreign exchange and its optimum utilisation in the development of the economy. The act applies to the whole country. Therefore, all the citizens of the country, inside or outside India are covered under this act. The act extends to branches and agencies of the Indian multinationals operating outside the country, which is owned or controlled by the person who is the resident of India.
  • 6. About FEMA FEMA expands to Foreign Exchange Management Act, which was promulgated in the year 1999, to repeal and replace the earlier act. The act applies to the whole country and to all the branches and agencies of the body corporate operating outside India, whose owner or controller is an Indian resident and also any violation committed by the person covered under the Act, outside India. The main objective of the act is to facilitate foreign trade and to encourage systematic development and maintenance of forex market in the country. There are total seven chapters contained in the act which are divided into 49 sections, out of which 12 sections deal with the operational part while the remaining 37 sections cover penalties, contravention, appeals, adjudication and so on.
  • 7. Key Differences Between FERA and FEMA The primary differences between FERA and FEMA are explained in the following points: 1.FERA is an act which is enacted to regulate payments and foreign exchange in India, is FERA. FEMA an act initiated to facilitate external trade and payments and to promote orderly management of the forex market in the country. 2.FEMA came out as an extension of the earlier foreign exchange act FERA. 3.FERA is lengthier than FEMA, regarding sections. 4.FERA came into force when the foreign exchange reserve position in the country wasn’t good while at the time of introduction of FEMA, the forex reserve position was satisfactory. 5.The approach of FERA, towards forex transaction, is quite conservative and restrictive, but in the case of FEMA, the approach is flexible. 6.Violation of FERA is a non-compoundable offence in the eyes of law. In contrast violation of FEMA is a compoundable offence and the charges can be removed. 7.Citizenship of a person is the basis for determining residential status of a person in FERA, whereas in FEMA the person’s stay in India should not be less than six months. 8.Contravening the provision of FERA may result in imprisonment. Conversely, the punishment for violating the provisions of FEMA is a monetary penalty, which may turn into imprisonment if the fine is not paid on time.
  • 8. Conclusion The economic policy of liberalisation was first time introduced in India in the year 1991 that opened gates for foreign investment in many sectors. In the year 1997, the Tarapore Committee recommended changes in the present legislation that regulate foreign exchange in the country. After which FERA was replaced by FEMA in the country.