Foreign Exchange Management Act (FEMA)
FERA and FEMA - Comparison
- CHANGES / PROGRESSION FROM FERA TO FEMA - A STEP AHEAD
The similarities between FERA and FEMA are as follows:
- The Reserve Bank of India and central government would continue to be the regulatory bodies.
- Presumption of extra territorial jurisdiction as envisaged in section (1) of FERA has been retained.
- The Directorate of Enforcement continues to be the agency for enforcement of the provisions of the law such as conducting search and seizure
Differences between FERA and FEMA
|1||PROVISIONS||FERA consisted of 81 sections, and was more complex||FEMA is much simple, and consist of only 49 sections.|
|2||FEATURES||Presumption of negative intention ( Mens Rea ) and joining hands in offence (abatement) existed in FEMA||These presumptions of Mens Rea and abatement have been excluded in FEMA|
|3||NEW TERMS IN FEMA||Terms like Capital Account Transaction, current Account Transaction, person, service etc. were not defined in FERA.||Terms like Capital Account Transaction, current account Transaction person, service etc., have been defined in detail in FEMA|
|4||DEFINITION OF AUTHORIZED PERSON||Definition of " Authorized Person" in FERA was a narrow one ( 2(b)||The definition of Authorized person has been widened to include banks, money changes, off shore banking Units etc. (2 ( c )|
|5||MEANING OF "RESIDENT" AS COMPARED WITH INCOME TAX ACT.||There was a big difference in the definition of "Resident", under FERA, and Income Tax Act||The provision of FEMA, are in consistent with income Tax Act, in respect to the definition of term " Resident ". Now the criteria of "In India for 182 days" to make a person resident has been brought under FEMA. Therefore a person who qualifies to be a non-resident under the income Tax Act, 1961 will also be considered a non-resident for the purposes of application of FEMA, but a person who is considered to be non-resident under FEMA may not necessarily be a non-resident under the Income Tax Act, for instance a business man going abroad and staying therefore a period of 182 days or more in a financial year will become a non-resident under FEMA.|
|6||PUNISHMENT||Any offence under FERA, was a criminal offence , punishable with imprisonment as per code of criminal procedure, 1973||Here, the offence is considered to be a civil offence only punishable with some amount of money as a penalty. Imprisonment is prescribed only when one fails to pay the penalty.|
|7||QUANTUM OF PENALTY.||The monetary penalty payable under FERA, was nearly the five times the amount involved.||Under FEMA the quantum of penalty has been considerably decreased to three times the amount involved.|
|8||APPEAL||An appeal against the order of "Adjudicating office", before " Foreign Exchange Regulation Appellate Board went before High Court||The appellate authority under FEMA is the special Director ( Appeals ) Appeal against the order of Adjudicating Authorities and special Director (appeals) lies before "Appellate Tribunal for Foreign Exchange." An appeal from an order of Appellate Tribunal would lie to the High Court. (sec 17,18,35)|
|9||RIGHT OF ASSISTANCE DURING LEGAL PROCEEDINGS.||FERA did not contain any express provision on the right of on impleaded person to take legal assistance||FEMA expressly recognizes the right of appellant to take assistance of legal practitioner or chartered accountant (32)|
|10||POWER OF SEARCH AND SEIZE||FERA conferred wide powers on a police officer not below the rank of a Deputy Superintendent of Police to make a search||The scope and power of search and seizure has been curtailed to a great extent|
A Step ahead From FERA To FEMA
Enactment of FEMA has brought in many changes in the dealings of Foreign Exchange, as compared to FERA. Some of them are restrictive, and some has widened the scope.
However some of the relevant progress made, from FERA to FEMA, are as follows:
Withdrawal of Foreign Exchange
Now, the restrictions on withdrawal of Foreign Exchange for the purpose of current Account Transactions, has been removed. However, the Central Government may, in public interest in consultation with the Reserve Bank impose such reasonable restrictions for current account transactions as may be prescribed.
FEMA has also by and large removed the restrictions on transactions in foreign Exchange on account of trade in goods, services except for retaining certain enabling provisions for the Central Government to impose reasonable restriction in public interest.