FOREIGN EXCHANGE MANAGEMENT ACT, 1999 (FEMA)

FOREIGN EXCHANGE MANAGEMENT ACT, 1999 (FEMA)
A Bill based on the recommendations of the Task Force, was interoduced in the Lok Sabha on 4 August, 98. The Bill was referred to teh standing committee on Finance which submitted it's report to the House on 23 December'98 with suggestion and modifications. The 12th Lok Sabha was dissolved before any decision could be taken on the bill. The Bill subsequently lapsed. The bill was again introduced int eh 13th Lok Sabha on 25th Oct'99. The presendential Asset was received on 6th Jan 2000. Finally the FEMA came into operation w.e.f. 1st June 2000.
TO WHOM IS THE ACT APPLICABLE
The FEMA, is applicable-
-To the whole of India.
-Any branch, office and agency, which is situated outside India, but is owned or controlled by a person resident in India.
-Any contravention of provisions of FEMA, by all those, who are covered under above two aspects committed outside India.

CATEGORIES & STATUS OF DIFFERENT PERSONS
Broadely speaking FEMA, covers, three different types of categories, and deals differently with them.
These categories are:
A) Person
B) Person Resident in India
C) Person Resident Outside India

A.PERSON
For the purpose of provisions, a person shall include any of the following:
(i) An individual
(ii) A Hindu Undivided family
(iii) A company
(iv) A firm
(v) An association of persons or a body of individuals, whether incorporated or not,
(vi) Every artificial judicial person, not falling within any of the preceding sub clauses, and
(vii) Any agency, office or branch owned or controlled by such person.

B. "PERSON RESIDENT IN INDIA"
"A person resident in India", shall include any of the following
(i) A person who has beeen residing in India for more than 182 days, in the last financial year. This means if a person has to be assessed, as the whether he is person resident in India, for any offence committed in August 2001, then he should be residing in India for more than 182 days during April 2000 to March 2001.
(ii) Any person or body corporate registered or incorporated in India, or
(iii) An office, branch or agency in India owned or controlled by a person resident outside India, or
(iv) An office, branch or agency outside India owned or controlled by a person residen in India.
However, in following cases a person shall not be person resident in India", even if he is residing in India for more than 182 days in the last financial year.
(i) A person who has gone abroad, for:
-Taking up employment outside India or
-For carrying on any business outside India,or
-For any other purpose, which itself would indicate his intention to stay outside India for an uncertain period.
(ii) Similarly, a person who has come to India for any purpose except:
-Taking up employment in India, or
-Carrying on any business in India,or
- For any other purpose, which itself would indicate his intention to saty in India for an unceratin period.

C. PERSON RESIDENT OUTSIDE INDIA
Simply putting it," a person resident outside India" means" a person who is not resident in India"
IMPLICATION ON DIFFERENT CATEGORIES

PERSON RESIDENT IN INDIA
Provision of FEMA, are applicatble with different implicatin on Person resident in, and outside India.
With respect to " Person Resident in India", they are:-
(1) A person who is resident in Inia, can acquire, hold, own possess or transfer any foreign Exchange, foreign security or any immovable property situated outside India, only according to FEMA.
foreign security: means any security, in the form of shares, stocks, bonds, debentures or any other instrument denominated or expressed in foreign currency and includes securities expressed in foreign currency, but where redemption or any form of return such as interest or dividends is payable in Indian currency.
(2) The Reserve Bank of Inida, may prohibit, restrict or regulate any of the following:
i. Transfer or issue of any foreign security by a person resident in India.
ii. Any borrowing or lending in rupees in whatever form or by whatever name called between a person resident in India nd a person resident outside India.
3. Deposites between persons resident in India and person resident outside India:
R.B.I may make all these restrictions, in general or with respect to " Capital Account Transactions."
"CAPITAL ACCOUNT TRANSACTIONS" means a transaction, which alters 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.
4. (iv) Giving of a guarantee or surety in respect of any dent, onligation or other liability incurred, by a person resident in India and owned to a person resident outside India.
5. (v) Transfer of immovable property outside India, other than a lease not, exceeding five years, by a person resident outside India.
(3) A person resident in India may hold, own transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India.
(4) If any amount of foreign exchange has become due or has accrued to any person resident in India, then he shall take steps to realise and bring it back to India within the time frame and manner specified by Reserve Bank

PERSON RESIDENT OUTSIDE INDIA
Implications of FEMA, on "Person Resident outside India", are as follows:
1. For making any sort of payment in any manner, to a "person resident outside India", provisions of FEMA has to be compiled, and also general or special permission of Reserver Bank is required Similarly, for receiving any payment by order or on behalf of any " person resident outside" in any manner, provisions of FEMA has to be complied, and also general or special permission of Reserve Bank is required.
2. The Reserve Bank may prohibit, restrict or regulate any of the following
-Transfer or issue of any security by a person resident outside India.
-Transfer or issue of any security or foreign security by any branck, office or agency in India of a "person resident outside India."
-Any borrowing or lending in rupees in whatver name called between a "person resident in India" and a " person resident outside India"
-Deposit between "persons resident in India" and "persons resident outside India".
R.B.I may make all these restrictions,in general or with respect to "Capital Account Transactions."
"CAPITAL ACCOUNT TRANSACTIONS" means a transaction, which alters the assets or liabilities, including contingenet liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India.
4. (iv) Giving of a guarantee or surety in respect of any debt, obligation or other liability incurred, by a person resident in India and owned to a person resident outside India.
5. (v) Transfer of immovable property outside India, other tahn a lease not, exceeding five years, by a person resident outside India.
(3) A person resident in India may hold, own transfer or invest in foreign currency, foreign security or any immovable situalted outside India if such currency, security or property was acqurired, held or owned by such person when he was resident outside India or in herited form a person who was resident outside India.
(4) If any amount of foreign exchange has become due or has accrued to any person resident in India, then he shall take steps to realise and bring it back to India within the rime frame and manner specified by Reserve Bank

PERSON RESIDENT OUTSIDE INDIA
Implications of FEMA, on "Person Resident Outside India", are as follows:
1. For making any sor of payment in any manner, to a "person resident outside India", provisions of FEMA has to be complied, and also general or special permission of Reserve Bank is required. Similarly, for receiving any payment by order on behalf of any "person resident outside" in any manner, provisions of FEMA has to be complied, and also general or special permission of Reserve Bank is required.
2. The Reserve Bank may prohibit, restrict or regulate any of the following
- Transfer or issue of any security by a person resident outside India.
- Transfer or issue of any security or foreign security by any branch, office or agency in India of a "person resident outside India."
- Any borrowing or lending in rupees in whatever name called between a "persone resident in India" and "person resident outside India"
- Deposit between "persons resident in India" and "persons resident outside India"
- Acquisition or transfer of immovable property in India other than a lease, not exceeding five years, by a person outside India.
- Giving of a guarantee or surety in respect of any respect, obligation or other liability incurred, by a person resident outside India.