The Foreign Exchange Management Act was created by the Indian Central Government to promote cross-border trade and payments in India. FERA (Foreign Exchange Regulation Act) was replaced by FEMA (Foreign Exchange Management Act) in 1999. The Foreign Exchange Regulation Act (FERA) had many flaws, thus FEMA was created to fix them all. As a result, important economic reforms were enacted under the FEMA Act. In this article information on “What is FEMA Act?”, FEMA Applicability, Objectives, compliance requirement, and Penalty under FEMA Act is mentioned.
An act known as FEMA was published to control payments and foreign exchange in India. FEMA is a law that was put into place to help with international trade and payments as well as to support the country’s forex market being managed in an orderly fashion. It aids in fostering the steady growth and upkeep of India’s foreign exchange industry. The Foreign Exchange Management Act was primarily implemented in India in order to de-regulate and establish an open economy.
Most significantly, FEMA regarded all forex-related offences as civil offences, whereas FERA regarded them as criminal offences. Additionally, there were other important guidelines such as:
The Foreign Exchange Management Act (FEMA) is applicable to all of India as well as to organizations and offices abroad (which are owned or managed by an Indian Citizen). The Enforcement Directorate is the name of FEMA’s headquarters, which is located in New Delhi. FEMA is relevant to:
According to the FEMA Act, the current account transactions have been divided into three categories, namely:
Any person who violates a provision of this Act, a rule, regulation, notification, direction, or order issued in the course of exercising the powers granted by this Act, or a condition to which a Reserve Bank authorization is subjected to a fine of up to thrice the amount involved in such violation, if quantifiable, or up to two lakh rupees, if not quantifiable, and where such contravention is a continuous one.
With effect from June 1, 2000, FEMA was established with the purpose of facilitating all international transactions and payments in order to support the orderly growth and upkeep of the Indian foreign exchange market.
Suggested Read: FEMA Compliance in India
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