Saturday, 7 December 2019

Unit 3: FEMA Act, 1999

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Unit 3: FEMA Act, 1999


‘The exchange control in India was introduced on September 3, 1939 as a war time measure in the early period of Second World War under the powers conferred by the Defense of India Rules.


The emergency powers were subsequently replaced by the Foreign Exchange Regulations Act, 1947 which came into operation on March 25, 1947.


This Act witnessed comprehensive revision in the wake of the changed needs of the economy during the post-independence period and was replaced by the Foreign Exchange Regulations Act, 1973 known as FERA.


The onset of the era of liberalization of the external sector of the economy and the industrial licensing followed by Partial Convertibility of Rupee and full convertibility on current account necessitated the need for further extensive amendments in the FERA which were brought about by the Foreign Exchange Regulations (Amendment) Act, 1993.


FERA has been replaced by Foreign Exchange Management Act (FEMA), 1999.


FEMA has been brought to consolidate and amend the law relating to foreign exchange.

The basic objective of this act is to facilitate external trade and payments and to promote the orderly development and maintenance of foreign exchange market in India.


The role of authorized person, the provisions of contravention and penalties and the procedures of adjudication and appeal and the power of directorate of enforcement dealt at great length in this act.


Currency: This expression includes all currency notes, postal notes, postal orders, money orders, cheques, drafts, travelers’ cheques, letters of credit, bills of exchange and promissory notes, credit cards or such other similar instrument as may be notified by the Reserve Bank.

Export: Outflow of goods and inflow of foreign currency.

Foreign Exchange Management Act: Foreign Exchange Management Act is to facilitate external trade and payments and to promote the orderly development and maintained of foreign exchange in India.

Import: Import with its grammatical variations and cognate expressions, means bringing into India any goods or services.

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