The document summarizes the Foreign Exchange Management Act of 1999 (FEMA) in India. FEMA replaced the older Foreign Exchange Regulation Act of 1973 (FERA) to liberalize foreign exchange controls and remove harsh penalties. FEMA aims to simplify external trade, promote a healthy foreign exchange market, control non-resident business/investment, and effectively utilize foreign exchange resources. It applies to individuals, companies, and organizations in India or owned/controlled by Indian residents. Authorized persons under FEMA can facilitate foreign exchange transactions and include authorized dealers, money changers, offshore banking units, and others approved by the Reserve Bank of India.

1. Foreign Exchange Management Act, 1999
(FEMA)
By Kashish Kundlani

2. FEMA 1999
Foreign Exchange Regulation Act, 1973 (FERA) was replaced by the Foreign
Management Act, 1999 (FEMA). FEMA was enacted by Parliament of India and it
came into force on 1st June, 2000. There are a total of 49 Sections divided into 7
chapters. The reason for the replacement emerged because it was not suitable for
the prevailing environment and was harsh as it contained a provision for
imprisonment.
On the other hand, FEMA was introduced with the changes because of the new,
liberal and changing environment.
Also, earlier FERA was passed due to the insufficient foreign exchange in the
country and FEMA was passed with the objective to relax the controls on foreign
exchange in India.
The head office of FEMA is situated in New Delhi known as Enforcement
Directorate and is headed by a Director.

3. Objectives
● To reinforce and amend the law relating to foreign exchange.
● To simplify and smooth the external trade and payments.
● To promote the systematized development and maintenance of
a healthy foreign exchange market in India.
● To remove the disparity of payments.
● To control and direct the employment business and investment
of the non-residents.
● To utilise the foreign exchange resources effectively for the
country.

4. Features of FEMA
● FEMA does not apply to the Indian citizens who resides outside India.
This criteria is checked by the number of days a person stays in India
for more than 182 days in the preceding financial year.
● Central Government has the authority given by FEMA to impose
restrictions on and supervise three things which are- payments made
to any person outside India or receipts from them, forex and foreign
security deals.
● It specified the areas for holding of forex that required specific
permission of the Reserve Bank of India (RBI) or the government.
● FEMA classified the transaction into a current and capital account.

5. To whom it is applicable?
● It is applicable to the whole of India.
● Any branch, office and agency, which is situated outside India, but it is owned or controlled
by a person resident in India. Any violation by these entities committed outside India will be
covered under this Act.
In general, FEMA includes three different types of categories and deals separately which are:-
1) Person
For the object of the act, a person includes the following:-
● An individual,
● A Hindu undivided family,
● A company,
● A firm,
● An association of persons or a body of individuals whether incorporated or not,
● Any artificial judicial person not falling any of the preceding sub-clauses and,
● Any agency office or branch owned or controlled by such person.

6. 1) Person resident in India
● A person residing in India for more than 182 days during the course of a preceding financial year
but it does not include-
(A) A person who has gone out of India or stays outside India, in any one of the cases-
1. for taking up employment outside India, or
2. for carrying on outside India a business or vocation, or
3. for any other purpose, in such circumstances as would indicate his intention to stay outside India for
an uncertain period.
(B) A person who has come to or stays in India, in any of the following cases-
1. for taking up employment in India, or
2. for carrying on in India a business or vocation, or
3. for any other purpose, in such circumstances, as would indicate his intention to stay in India for an
uncertain period.
● Any person or body corporate registered or incorporated in India.
● An office, branch or agency in India owned or controlled by a person resident outside India.
● An office, branch or agency outside India owned or controlled by a person resident in India.
1) Person resident outside India
It means a person who is not an Indian resident or not a resident in Indian.

7. Authorised Person
Section 2(c) of the Foreign Exchange Management Act,1999 defines Authorised person.
The Reserve Bank on an application made on this behalf may authorise any person to deal in foreign
exchange or in foreign securities.
For example, if an Indian resident wants to visit the USA and requires their currency which is dollars so for
the exchange he will only go to the authorised person or if a person residing abroad wants to visit India
and requires Indian currency then similarly will approach an authorised person for the foreign exchange.
So, an authorised person is governed under this section which states 4 persons as an authorised person-
● Authorised dealer, or
● Money changer, or
● Off-shore banking unit, or
● Any other person for the time being authorised to deal in foreign exchange or foreign securities
under Section 10 (1) of FEMA.

8. Thank you