role of foreign exchange management act 2000

8/3/2019 Role of Foreign Exchange Management Act 2000

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ROLE OF FOREIGN EXCHANGE MANAGEMENT ACT 2000


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GROUP NO:03


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Acknowledgement

e would like to express our profound gratitude to

our project guide Prof .KAMAL ROHRA , who has

so ably guided our research project with his vast

fund of knowledge, advice and constant

encouragement, which made us think past the difficulties and

lead us to successful completion of the project.

We have tried to cover all the aspects of the project& every care has been taken to make the project faultless. We

have tried to write the project in our words as far as possible

and simplified all the concepts by presenting it in a different

form.

Well be looking forward in future for such type of

project. We are eagerly waiting for fruitful comments &constructive suggestions.

Thank you


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SR.NO TOPICSPAGE

NO

1. INTRODUCTION 5

2. SWITCH FROM FERA 6

3. NEED FOR ITS MANAGEMENT 8

4. MAIN FEATURES 9

5. OBJECTIVES 10

6. DEFINITION UNDER ACT 11

7. TYPES OF FOREIGN EXCHANGE TRANSACTION 13

8. SALIENT FEATURES OF FROM MASTER CIRCULR

ON IMPORT OF GOODS AND SERVICES

18

9. SALIENT FEATURES OF FROM MASTER CIRCULR

ON EXPORT OF GOODS AND SERVICES

21


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10 ARTICLES ON FEMA REGULATIONS 2000 24

11. CONCLUSION 28

12. REFERENCE 29

INTRODUCTION

The Foreign Exchange Management Act (FEMA) was an act passed in the winter

session of Parliament in 1999 which replaced Foreign Exchange Regulation Act.

This act seeks to make offenses related to foreign exchange civil offenses. It

extends to the whole of India.

FEMA, which replaced Foreign Exchange Regulation Act (FERA), had become the

need of the hour since FERA had become incompatible with the pro-liberalisation

policies of the Government of India. FEMA has brought a new management


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regime of Foreign Exchange consistent with the emerging framework of the

World Trade Organisation (WTO). Unlike other laws where everything is permitted

unless specifically prohibited, under this act everything was prohibited unless

specifically permitted. Hence the tenor and tone of the Act was very drastic. It

required imprisonment even for minor offences. Under FERA a person was

presumed guilty unless he proved himself innocent, whereas under other laws a

person is presumed innocent unless he is proven guilty.

SWITCH FROM FERA

In India, all transactions that include foreign exchange were regulated by Foreign

Exchange Regulations Act (FERA), 1973. The main objective of FERA was

conservation and proper utilisation of the foreign exchange resources of the

country. It also sought to control certain aspects of the conduct of business

outside the country by Indian companies and in India by foreign companies. It was

a criminal legislation which meant that its violation would lead to imprisonment


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and payment of heavy fine. It had many restrictive clauses which deterred foreign

invest The introduction of Foreign Exchange Regulation Act was done in 1974, a

period when Indias foreign exchange reserve position wasnt at its best. A new

control in place to improve this position was the need of the hour. FERA did not

succeed in restricting activities, especially the expansion of TNCs (Transnational

Corporations). The concessions made to FERA in 1991-1993 showed that FERA

was on the verge of becoming redundant. After the amendment of FERA in 1993,

it was decided that the act would become the FEMA. This was done in order to

relax the controls on foreign exchange in India, as a result of economic

liberalization. FEMA served to make transactions for external trade (exports and

imports) easier transactions involving current account for external trade no

longer required RBIs permission. The deals in Foreign Exchange were to be

managed instead of regulated.

The switch to FEMA shows the change on the part of the government in terms of

foreign capital. The Act applies to all branches, offices and agencies outside India,

owned or controlled by a person resident in India. FEMA emerged as an investor

friendly legislation which is purely a civil legislation in the sense that its violation

implies only payment of monetary penalties and fines. However, under it, a

person will be liable to civil imprisonment only if he does not pay the prescribed

fine within 90 days from the date of notice but that too happens after formalities

of show cause notice and personal hearing. FEMA also provides for a two year

sunset clause for offences committed under FERA which may be taken as the

transition period granted for moving from one 'harsh' law to the other 'industry

friendly' legislation.


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NEED FOR ITS MANAGEMENT

The buying and selling of foreign currency and other debt instruments by

businesses, individuals and governments happens in the foreign exchange market.

Apart from being very competitive, this market is also the largest and most liquid

market in the world as well as in India]. It constantly undergoes changes and

innovations, which can either be beneficial to a country or expose them to greater

risks. The management of foreign exchange market becomes necessary in order

to mitigate and avoid the risks. Central banks would work towards an orderly

functioning of the transactions which can also develop their foreign exchange

market.


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Whether under FERA or FEMAs control, the need for the management of foreign

exchange is important. It is necessary to keep adequate amount of foreign

exchange reserves, especially when India has to go in for imports of certain goods.

By maintaining sufficient reserves, Indias foreign exchange policy marked a shift

from Import Substitution to Export Promotion.

MAIN FEATURES

- Activities such as payments made to any person outside India or receipts fromthem, along with the deals in foreign exchange and foreign security is restricted. It

is FEMA that gives the central government the power to impose the restrictions.

- Restrictions are imposed on people living in India who carry out transactions in

foreign exchange, foreign security or who own or hold immovable property

abroad.

- Without general or specific permission of the Reserve Bank of India, FEMA

restricts the transactions involving foreign exchange or foreign security and

payments from outside the country to India the transactions should be made

only through an authorised person.


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- Deals in foreign exchange under the current account by an authorised person

can be restricted by the Central Government, based on public interest.

- Although selling or drawing of foreign exchange is done through an authorised

person, the RBI is empowered by this Act to subject the capital account

transactions to a number of restrictions.

- People living in India will be permitted to carry out transactions in foreign

exchange, foreign security or to own or hold immovable property abroad if the

currency, security or property was owned or acquired when he/she was living

outside India, or when it was inherited to him/her by someone living outside

India.

- Exporters are needed to furnish their export details to RBI. To ensure that the

transactions are carried out properly, RBI may ask the exporters to comply to its

necessary requirements.


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OBJECTIVES

Broadly, the objectives ofFEMA are:

(i) To facilitate external trade and payments; and

(ii) To promote the orderly development and maintenance of foreign exchangemarket.

The Act has assigned an important role to the Reserve Bank of India (RBI) in the

administration of FEMA. The rules, regulations and norms pertaining to several

sections of the Act are laid down by the Reserve Bank of India, in consultation


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with the Central Government. The Act requires the Central Government to

appoint as many officers of the Central Government as Adjudicating Authorities

for holding inquiries pertaining to contravention of the Act. There is also a

provision for appointing one or more Special Directors (Appeals) to hear appeals

against the order of the Adjudicating authorities. The Central Government also

establish an Appellate Tribunal for Foreign Exchange to hear appeals against the

orders of the Adjudicating Authorities and the Special Director (Appeals).

FEMA permits only authorised person to deal in foreign exchange or foreign

security. Such an authorised person, under the Act, means authorised dealer,

money changer, off-shore banking unit or any other person for the time being

authorised by Reserve Bank.

The Act thus prohibits any person who:-

(a) Deal in or transfer any foreign exchange or foreign security to any person not

being an authorized person;

(b) Make any payment to or for the credit of any person resident outside India in

any manner;

(c) Receive otherwise through an authorized person, any payment by order or onbehalf of any person resident outside India in any manner;

(d) Enter into any financial transaction in India as consideration for or inassociation with acquisition or creation or transfer of a right to acquire, any asset

outside India by any person is resident in India which acquire, hold, own, possessor transfer any foreign exchange, foreign security or any immovable propertysituated outside India.


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DEFINITIONS UNDER ACT

FEMA Contains Definition of Certain Terms which have been used

Throughout the ACT

Authorized Person: It includes an authorized dealer, money changer, off-shore

banking unit or any other person for the time being authorized to deal in foreignexchange,

Capital Account Transaction: It means a transaction which alters the assets orliabilities outside India of persons resident in India. It also includes transactionsthat alter assets or liabilities in India of persons resident outside India.

Currency: It is an assortment of currency notes, postal notes, postal orders, money

orders, cheques, drafts, travelers cheques, letter of credit, bills of exchange andpromissory notes.

Currency Notes: It includes cash in the form of coins and bank notes.

Current Account Transactions : It means a transaction other than capital accounttransaction.

Export : It simply means exporting of any goods or provision of services fromIndia to any person outside India.

Financial Transaction : It means making any payment to, or for the credit of any person, or receiving any payment for, by order or on behalf of any person, ordrawing, issuing or negotiating any bill of exchange or promissory note, ortransferring any security or acknowledging any debt.


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Foreign Currency : It denotes any currency other than the Indian currency.

Foreign Exchange :Money instruments used to make payments between

countries.

Foreign Security : Any security in the form of shares, stocks, bonds, debenturesor any other instrument denominated or expressed in foreign currency . It is onlyapplicable where redemption or any form of return such as interest or dividends is

payable in Indian currency.

Import : It simply defines a process that facilitates bringing of goods or servicesinto India.

Indian Currency : Currency expressed in Indian rupee.

Person : It includes an individual, a Hindu undivided family, a company, a firm,

an association of persons or a body of individuals, whether incorporated or not,every artificial juridical person and any agency, office or branch owned orcontrolled by such person.

Person Resident in India : He is a person who lives a minimum of 182 days inIndia during the preceding financial year.

Repatriate to India : It means bringing into India the realized foreign exchangeand selling of such foreign exchange to an authorized person in India.

Security : It means shares, stocks, bonds and debentures, Government securities,savings certificates, deposit receipts in respect of deposits of securities and units ofthe Unit Trust of India or of any mutual fund and includes certificates of title tosecurities, but does not include bills of exchange or promissory notes other thanGovernment promissory notes or any other instruments which may be notified bythe Reserve Bank as security for the purposes of this Act .

Service : It means service of any description which is made available to potentialusers and includes the provision of facilities in all terms.

Transfer : It includes sale, purchase, exchange, mortgage, pledge, gift, loan or anyother form of transfer of right, title, possession or lien.


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TYPES OF FOREIGN EXCHANGE TRANSACTIONS

The Act deals with two types of foreign exchange transactions:

A) Capital account transactions

B) Current account transactions

A) Capital account transactions can be defined as:


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(1) Alters the assets or liabilities, including contingent liabilities, outside India of

persons resident in India. In other words, it includes those transactions which are

undertaken by a resident of India such that his/her assets or liabilities outside India

are altered (either increased or decreased).

For example: - (i) a resident of India acquire an immovable property outside India

or acquire shares of a foreign company. This way his/her overseas assets are

increased; or

(ii) a resident of India borrows from a non-resident through External commercial

Borrowings (ECBs). This way he/she has created a liability outside India.

(2) Alters the assets or liabilities in India of persons resident outside the India. In

other words, it includes those transactions which are undertaken by a non-

resident such that his/her assets or liabilities in India are altered (either increased

or decreased). For

example, (i) a non-resident acquires immovable property in India or acquires

shares of an Indian company or invest in a Wholly Owned Subsidiary or a Joint

Venture with a resident of India. This way his/her assets in India are increased; or

(ii) a non-resident borrows from Indian housing finance institute for acquiring ahouse in India. This way he/she has created a liability in India.

The Act also contains a list of some of the most common capital accounttransactions:-

1. Transfer or issue of any foreign security by a person resident in India;2. Transfer or issue of any security by a person resident outside India;3. Transfer or issue of any security or foreign security by any branch, office or

agency in India of a person resident outside India;4. Any borrowing or lending in rupees in whatever form or by whatever namecalled;

5. Any borrowing or lending in rupees in whatever form or by whatever namecalled between a person resident in India and a person resident outside India;


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6. Deposits between persons resident in India and persons resident outsideIndia;

7. Export, import or holding of currency or currency notes;8. Transfer of immovable property outside India, other than a lease not

exceeding five years, by a person resident in India;9. Acquisition or transfer of immovable property in India, other than a lease not

exceeding five years, by a person resident outside India;

10. Giving of a guarantee or surety in respect of any debt, obligation or otherliability incurred-(i) By a person resident in India and owed to a person resident outside India;or(ii) By a person resident outside India.

The Act has empowered the Reserve Bank of India (RBI) to specify, inconsultation with the Central Government, the permissible capital accounttransactions and the limits upto which foreign exchange may be drawn for thesesuch transactions. But it shall not impose any restriction on the drawal of foreignexchange for payments due on account of amortization of loans or for depreciationof direct investments in the ordinary course of business.

Accordingly, the RBI has issued notifications governing capital accounttransaction. The FEMA Notification No. 1/2000 dated 3-5-2000 contains the listof permissible capital account transactions as well as list of prohibited capitalaccount transactions:

The permitted capital account transactions have been classified into twocategories:-

(1) Capital account transactions by persons resident in India includes,

1. Investment in foreign securities;2. Foreign currency loans raised in India and abroad;3. Acquisition and transfer of immovable property outside India;


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4. Guarantees issued in favour of a person resident outside India;5. Export, import and holding of currency or currency notes;6. Loans and overdrafts (borrowings) from a person resident outside India;7. Maintenance of foreign currency accounts in India and outside India;8. Taking out the insurance policy from an insurance company outside India;9. Remittance outside India of capital assets of a person resident in India10. Sale and purchase of foreign exchange derivatives in India and abroad and

commodity derivatives abroad.

(2) Capital account transactions by non- residents includes,

1. Investment in India such as

(i) Issue of security by a body corporate or an entity in India and investmenttherein by a non-resident and

(ii) Investment by way of contribution to the capital of a firm or a proprietaryconcern or an association of persons in India;

2. Acquisition and transfer of immovable property in India;3. Guarantee in favour of, or on behalf of, a person resident in India;4. Import and export of currency/currency notes into/from India;5. Deposits between a person resident in India and a person resident outside

India;6. Foreign currency accounts in India of a non-resident;7. Remittance of the assets in India held by a non-resident

There are generally two types of prohibitions on capital account transactions:-

1. General Prohibition:- A person shall not undertake or sell or draw foreignexchange to or from an authorized person for any capital accounttransaction. This prohibition is subjected to the conditions specified byReserve Bank in its circulars and notifications. For example, Reserve

Bank of India has issued an AP (DIR) Circular, wherein a residentindividual can draw from an authorized person foreign exchange up to US$25,000 per calendar year for a capital account transaction specified inSchedule I to the Notification.


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1. Special Prohibition:- A non resident person shall not make investment inIndia in any form, in any company or partnership firm or proprietary concernor any entity, whether incorporated or not, which is engaged or proposes toengage:-

(i) in the business of chit fund, or

(ii) as Nidhi Company, or

(iii) in agricultural or plantation activities or

(iv) in real estate business, or construction of farm houses or

(v) in trading in Transferable Development Rights (TDRs).

B) Current account transactions:

The Act defines the term 'current account transaction' as a transaction other than acapital account transaction and without prejudice to the generality of the foregoingsuch transaction includes:

(i) Payments due in connection with

2. Foreign trade,

3. Other current business4. Services, and5. Short-term banking and credit facilities in the ordinary course of business;

(ii) Payments due as

1. Interest on loans and2. Net income from investments,

(iii) Remittances for living expenses of parents, spouse and children residingabroad, and

(iv) Expenses in connection with

1. Foreign travel,2. Education and


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3. Medical care of parents, spouse and children.

In the above definition, the words without prejudice to the generality of the

foregoing such transaction includes imply that even if the transactions listed

above may fit into the definition of capital account transactions, such transactions

shall be treated current account transactions.

For example, resident of India imports goods from outside India on a short term

credit (for a period of less than 6 months), he is creating a liability outside India

and thus, it can be treated a capital account transaction but, it is specifically

included in the above definition as a current account transaction.

As a general rule, any person may sell or draw foreign exchange if such sale or

drawal is a current account transaction. Under the Act, Central Government may,

in public interest and in consultation with the Reserve Bank, impose such

reasonable restrictions for current account transactions as may be prescribed.

Accordingly, the Central Government has issued the Foreign Exchange

Management (Current Account Transaction) Rules, 2000.It contains the list of

current account transactions for which drawal of foreign exchange is:-

1. Totally prohibited;

2. Permitted, subject to the prior approval of concerned Ministry, CentralGovernment;

3. Permitted, subject to prior approval of the Reserve Bank of India;

4. No restrictions or limits are applicable for undertaking the transactions that

are not covered by the above rules and the authorized dealers are free torelease foreign exchange upon the satisfaction that the transactions will notinvolve and is not designed for the purpose of, violation of the Act, or anyrules, regulations made there under.


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SALIENT FEATURES OF FROM MASTER CIRCULAR ON IMPORT

OF GOODS AND SERVICES

Import trade is regulated by the Directorate General of Foreign Trade (DGFT)

under the Ministry of Commerce & Industry .Imports into India are in conformity

with the Foreign Trade Policy, Foreign Exchange Management (Current Account

Transactions) Rules, 2000, Government of India Notification No. G.S.R.381 (E)

dated May 3, 2000, Provisions of Uniform Customs and Practices for Documentary

Credits (UCPDC), for LCs, Provisions of Research & Development Cess Act,

1986 may be ensured for import of drawings and design. Compliance with the

provisions of Income Tax Act, wherever applicable adhere to "Know Your

Customer" (KYC) guidelines issued by Reserve Bank (Department of Banking

Operations & Development).

1. Import Licenses:

Excepting for goods included in the negative list requiring licence under the

Foreign Trade Policy no Licence is required.


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While opening letters of credit, the For Exchange Control purposes copy of

the licence should be called for and special conditions, if any, attached to

such licences should be adhered to. Banks preserve the Licence copies for

verification by the internal auditors or inspectors.

2. Obligation of Purchaser of Foreign Exchange:

Section 10(6) of the Foreign Exchange Management Act, 1999 (FEMA), any

person acquiring foreign exchange is permitted to use it either for the

purpose mentioned in the declaration made by him to an AD bank under

Section 10(5) of the Act or to use it for any other purpose for which

acquisition of foreign exchange is permissible under the said ActWhere foreign exchange acquired has been utilised for import of goods into

India, the AD should ensure that the importer furnishes evidence of import

viz., Exchange Control copy of the Bill of Entry, Postal Appraisal Form or

Customs Assessment Certificate, etc., and that value of goods are equivalent

to the value of remittance.

3. Time Limit for Settlement of Import Payments:

(i) Remittances against imports should be completed not later than six months

from the date of shipment, except in cases where amounts are withheld towards

guarantee of performance, banks may permit settlement of import dues delayed

due to disputes, financial difficulties,

(ii) Deferred payment arrangements, including suppliers and buyers credit,

providing for payments beyond a period of six months from date of shipment upto a period of less than three years, are treated as trade credits for which the

procedural guidelines laid down in the Master Circular for External

Commercial Borrowings and Trade Credits may be followed.


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(iii) Remittances against import of books may be allowed without restriction as

to time limit,

(iv) Bank may allow payment of interest on usance bills or overdue interest at

maximum of6 months LIBOR 50 / 125 basis points.

1. Import of Foreign Exchange / Indian Rupees:

No person shall, without the general or special permission of the Reserve Bank,

import or bring into India, any foreign currency. Importing currency, including

cheques, is governed by clause (g) of sub-section (3) of Section 6 of the Foreign

Exchange Management Act, 1999.

(a) Import of Indian currency and currency notes:

Person resident in India who had gone out of India on a temporary visit, may

bring into India at the time of his return from any place outside India (other

than from Nepal and Bhutan), currency notes of Government of India and

Reserve Bank notes up to an amount not exceeding Rs.5,000/- per person.

Person may bring into India from Nepal or Bhutan, currency notes of

Government of India and Reserve Bank notes other than notes of

denominations of above Rs.100 in either case.

(b) Import of foreign exchange into India

A person may :(i) send into India without limit foreign exchange in any form

other than currency notes, bank notes and travelers cheques;

(ii) bring into India from any place outside India, without limit foreign

exchange (other than unissued notes), which shall be subject to the condition

that such person makes, on arrival in India, a declaration to the Custom

authorities in Currency Declaration Form (CDF) (shall not be necessary to make

such Declaration by such person if aggregate value of the foreign exchange at


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any one time does not exceed USD10,000 and/or the aggregate value of

foreign currency does not exceed USD 5,000 )

2. Remittances against Replacement Imports:

Where goods are short-supplied, damaged, short-landed or lost in transit and

the Exchange Control copy of the import licence has already been utilised to

cover the opening of a letter of credit against the original goods which have

been lost, the original endorsement to the extent of the value of the lost

goods may be cancelled by the AD bank and fresh remittance for replacement

imports may be permitted without reference to Reserve Bank, provided the

insurance claim relating to the lost goods has been settled in favour of the

importer and ensure that the consignment being replaced is shipped within

the validity period of the license.


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SALIENT FEATURES OF FROM MASTER CIRCULAR ON EXPORT

OF GOODS AND SERVICES

1. The Directorate General of Foreign Trade (DGFT) regulates export trade.

2. AD Banks may conduct export transactions in conformity with the Foreign

Trade Policy in vogue and the Rules framed by the Government of India and

the Directions issued by Reserve Bank from time to time.

3. Rules notified by the Government of India, Ministry of Finance.

4. Regulation 4 of the Foreign Exchange Management (Guarantees)

Regulations, 2000

5. There is no restriction on invoicing of export contracts in Indian Rupees in

terms of the Rules, Regulations, Notifications and Directions framed under

the Foreign Exchange Management Act 1999.

6. Full export value of the goods exported shall be received through an AD


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Banks in the manner specified in the Foreign Exchange Management

(Manner of Receipt & Payment) Regulations, 2000.

7. GR Exemption: Grant of GR waiver export of goods free of cost, for export

promotion up to 2 per cent of the annual average Max 5 lakhs (Rs 10 lac for

status holders ).Export of goods not involving any foreign exchange

transaction directly or indirectly requires the waiver of GR/PP procedure

from the Reserve Bank.

8. Participants in international exhibition/trade fair have been granted general

permission vide Regulation 7(7) of the Foreign Exchange Management

(Foreign Currency Account by a Person Resident in India) Regulations,

2000 for opening a temporary foreign currency account abroad.

9. Reserve Bank may consider applications in Form EFC from exporters

having good track record for opening a foreign currency account with banks

in India and outside India.

10. An Indian entity can also open, hold and maintain a foreign currency

account with a bank outside India, in the name of its overseas office/branch,

by making remittance for the purpose of normal business operations of the

said office / branch or representative subject to conditions stipulated in

Regulation 7 of Notification No. FEMA 10/2000-RB dated May 3rd, 2000.

11. A unit located in a Special Economic Zone (SEZ) may open, hold and

maintain a Foreign Currency Account with an AD Banks in India subject to

conditions stipulated in Regulation 6 (A) of Notification No. FEMA

10/2000.

12. A person resident in India may open with, an AD Banks in India, an account

in foreign currency called the Exchange Earners Foreign Currency (EEFC)

Account, in terms of Regulation 4 of the Foreign Exchange Management

(Foreign Currency Account by a Person Resident in India) Regulations,

2000.

13. Account maintained only in the form of non-interest bearing current account


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and no credit facilities, either fund-based or non-fund based, shall be

permitted against the security of balances held.

14. Eligible credits represent inward remittance received through normal

banking channel, other than the remittance received pursuant to any

undertaking given to the Reserve Bank or which represents foreign currency

loan raised or investment received from outside India or those received for

meeting specific obligations by the account holder, Payments received in

foreign exchange by a unit in Domestic Tariff Area (DTA) for supplying

goods to a unit in Special Economic Zone out of its foreign currency

account.

15. Setting up Offices Abroad and Acquisition of Immovable Property forOverseas Offices.

16. AD Banks may allow remittances towards initial expenses up to fifteen per

cent of the average annual sales/income or turnover during the last two

financial years or up to twenty-five per cent of the net worth, whichever is

higher and For recurring expenses, remittances up to ten per cent of the

average annual sales/income, subject to certain terms conditions and

obligations. Remittances also allowed to acquire immovable property

outside India for its business and for residential purpose of its staff.

17. Advance Payments against Exports Regulation 16 of FEMA 23 dated May

3, 2000, where an exporter receives advance payment (with or without

interest), from a buyer outside India, the exporter shall ensure that, shipment

of goods is made within one year from the date of receipt, interest, if any,

payable on the advance payment does not exceed LIBOR+ 100 basis points,

documents covering the shipment are routed through the AD Bank through

whom the advance payment is received;

18. In the event of the exporter's inability to make the shipment, partly or fully,

within one year from the date of receipt of advance payment, no remittance

towards refund of unutilised portion of advance payment or towards

payment of interest, shall be made after the expiry of the said period of one


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year, without the prior approval of the Reserve Bank. Where the export

agreement provides for shipment of goods extending beyond the period o

one year from the date of receipt of advance payment, the exporter shall

require the prior approval of the Reserve Bank.

19. Allowed to purchase of foreign exchange from the market for refunding

advance payment credited to EEFC account only after utilising the entire

balances held in the exporters EEFC accounts maintained at different

branches/banks.

20. GR Approval for Trade Fair: Organisations participating in Trade

Fair/Exhibition abroad can take/export goods for exhibition and sale outside

India without the prior approval of the Reserve Bank of India.Permissible to `gift' unsold goods up to the value of USD 5000 per exporter,

per exhibition/trade fair.

21. Exporter shall produce relative Bill of Entry within one month of re-import

into India of the unsold items. Sale proceeds of the items sold arerepatriated

to India in accordance with the Foreign Exchange Management (Realisation,

Repatriation, and Surrenderof Foreign Exchange) Regulations, 2000.


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ARTICLES ON FEMA REGULATIONS,2000

'Adnan can travel abroad, but must deposit 1.5 c

Adnan Sami has been sent a show cause notice by the Enforcement Directorate

(ED) for declaring that he was an Indian while seeking a Rs 1.5 crore loan from a

bank to help him buy eight flats in Mumbai.

The Bombay high court on Tuesday allowed Pakistani singer and musicdirector Adnan Sami to travel abroad, provided he submitted sureties of Rs 1.50crore. The court was hearing an appeal by Sami seeking permission to travelto Dubai, Australia, New Zealand and South Africa to perform at various shows.

The Enforcement Directorate (ED) had in December 2010 confiscated Sami's eight


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flats and five parking spaces in the city. As Pakistani nationals are banned from

buying properties in India without the permission of the Reserve Bank of India

(RBI), Sami acquiring property in Mumbai was an offence under the Foreign

Exchange Management Act (FEMA).Sami told the court of Justice B R Gavai that he would return to India and appear

before the court conducting the trial. "Make sure he (Sami) complies with the

order or else he will have to give company to the people lodged in Arthur Road

jail. He can perform for them then," Justice Gavai remarked while granting the

permission.

The high court accepted the argument of Sami's lawyer Vibhav Krishna that

though Sami is a Pakistani, his career has potential only in India and hence he

would return.

"The organizer of the show, Rajendra Lodhia and his wife Mital Lodhia, will be the

two sureties for Sami and would file an affidavit assuring that the singer comes

back to India and faces trial," the court was informed.

Apart from FEMA, Sami is also facing a case of domestic violence registered

against him by his estranged wife, Sabah Galadari.

Last week, a sessions court had rejected his plea seeking permission to travel

abroad.

ED SERVES NOTICE TO NTR TRUST

November 23, 2011 | TNNHYDERABAD: The Enforcement Directorate has issued notices to NTR Trust andothers under Foreign Exchange Management Act (Fema). NTR Trust whichreceives donations from NRIs is asked to explain whether any of these funds being

spent for political purposes. If any part of the funds received by the Trust arediverted to TDP, which is also being run from the same NTR Trust Bhavan, then it

amounts to violation of Fema rules. N Sridhar, joint director of Hyderabad ED,confirmed sending notices to the Trust

and others. The recepients of such notices have to furnish the relevant documents

within 10 days and the ED will examine whether a Fema case can be made out

against the parties .


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The ED too was directed by the A P High Court to inquire into the allegations

made by YSR Congress legislator Y S Vijayamma against Chandrababu Naidu and

his associates.

Nara Lokesh, son of TDP chief Chandrababu Naidu too was served with an EDnotice to explain the source of funds for his education in foreign varsities. Satyam

founder B Ramalinga Raju had allegedly paid Rs 22 crore for Lokesh's study in the

US. Ritvik Projects chief C M Ramesh, Sujana Chowdary and others too were

served ED notices.

LUCKNOW

Another million Euro fraud, three nabbedNovember 26, 2010 | TNNLUCKNOW: In a case similar to the Euro fraud in February, Kaiserbagh policehave arrested three persons under Foreign Exchange Management Act (FEMA)and fraud for trying to dupe gullible targets and recovered one million Euro banknotables along with a million Euro golden plate and an authority certificate.

Interestingly, unlike in the Aliganj case, the Kaiserbagh police have booked thethree under FEMA. The three were identified as Ravi Singh , Ankur Srivastava,

both residents of Aashiana area and Virendra Tiwari, a resident of Faizabaddistrict.

Strangely, Aliganj police had nabbed the accused, who was identified as Vijay

Kumar, a resident of Faizabad district, on February 10 this year for fraud after

coming to know that since it is a collectors' item, the miscreant can't be booked

under FEMA.

The investigation officer had filed the chargesheet in the matter on March 9 also

this year only for fraud. Meaning hereby that the accused was not booked under

FEMA charges.

Reason: One million euro notes are basically commemorative notes and are notlegal tender. The note was issued to commemorate one currency of Euro for

15 European Union countries at that time. The bank notables were issued in

January, 2002.

DIG DK Thakur said that a letter has been sent to Reserve Bank of India (RBI)

requesting them to throw some light on the bank notable.


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SHO Kaiserbagh, when contacted, said that they have been booked under FEMA

as they did not have the right to keep the bank notable. About fraud, the SHO said

that they had planned to identify gullible targets and dupe them by selling them

one million bank notables at a decent price.

The police said that they acted on a tip-off that three persons were sitting near a

petrol pump in front of Vidhan Sabha with some foreign currency and were

waiting for gullible targets in this regard.

A team reached at the spot and nabbed the three persons and recovered one

million Euro bank notables, one million Euro golden plate and an illegal authority

certificate.

The police claimed that the source of the one million Euro bank notable was beingtraced.


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CONCLUSION

Thus from the above study we conclude that The Foreign

Exchange Management Act(FEMA) was an act passed in the

winter session of Parliament in 1999 which replaced Foreign

Exchange Regulation Act. This act seeks to make offenses

related to foreign exchange civil offenses. It extends to thewhole of India.

FEMA, which replaced Foreign Exchange Regulation

Act(FERA), had become the need of the hour since FERA had

become incompatible with the pro-liberalisation policies of

the Government of India.


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REFERENCE

1. e www.deloitte.com/assets/.../FEMA%20alerts/FEMA-04-2010.pdf

2. n.wikipedia.org/wiki/Foreign_Exchange_Management_Act

3. www.rashminsanghvi.com/fera2fema.htm

4. www.netlawman.co.in Acts of Parliament Financial services and tax

5. www.eximguru.com/exim/reserve-bank/fema.aspx

role of foreign exchange management act 2000

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