FERA and FEMA
THE Foreign Exchange Regulation Act, 1973 (FERA) was repealed and a new Act called the Foreign Exchange Management Act, 1999 (FEMA) came into force with effect from June 1, 2000, with a view to facilitating external trade and payments and promoting orderly development and maintenance of foreign exchange market in India. UNDER the FEMA, foreign exchange transactions are divided into two broad categories - current account and capital account transactions. Transactions that alter the assets or liabilities, including contingent liabilities outside India, of persons resident in India or assets or liabilities in India of persons resident outside India are classified as capital account transactions. All other transactions are current account transactions. Current Account Transactions
UNDER the FEMA, the Government of India, in consultation with the Reserve Bank, is empowered to impose reasonable restrictions on current account transactions. The Government of India has notified the Foreign Exchange Management (Current Account Transactions) Rules, 2000, governing the current account transactions (Notification No. G.S.R. 381(E) dated May 3, 2000, as amended from time to time). The Foreign Exchange Management (Current Account Transactions) Rules, 2000 (the Rules) list the current account remittances under three categories. Remittances,
i. which are prohibited are listed in Schedule – I to the Rules; ii. which need prior approval of the Government of India are listed in Schedule – II to the Rules; and iii. which need prior permission from the Reserve Bank that is, in case the amount of remittance exceeds the stipulated limits are listed in Schedule – III to the Rules. UNDER the Foreign Exchange Management (Current Account Transaction) Rules, 2000, powers have been delegated to the Authorised Persons (APs) to allow remittances which are of current account in nature, in a hassle-free manner. Under the FEMA, ADs have been classified as under : Category – I :...
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