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Presented By: Sunil ModgillNRO0212523
GENERAL AWARENESS ABOUT FEMA
NEED FOR FEMA
• World of Globalisation• Dealing in Foreign Currency
when enterprise– Import goods–Export goods–Make investments abroad
• Deposits, credits and balances
payable in any foreign currency;
• Drafts, travellers' cheques, letters of
credit or bills of exchange, expressed
or drawn in Indian currency but
payable in any foreign currency; and
• Drafts, travellers' cheques, letters of
credit or bills of exchange drawn by
banks, institutions or persons outside
India, but payable in Indian currency.
Meaning of Foreign Currency
FERA•Criminal legislation•Restrictive clauses which deterred foreign investments.•Incompatible with the pro-liberalisation policies of the Govt
•Foreign Exchange Regulations Act (FERA), 1973•Objective:- conservation and proper utilisation of the foreign exchange resources
Foreign Exchange Management Act, 1999.
ApplicabilityExtends to whole
of India.All branches,
offices and agencies outside India, owned or controlled by PRI.
Any contravention committed outside India by any person to whom this Act applies.
Investor Friendly Legislation
•Facilitate external trade and payments•Promote the orderly development and maintenance of foreign exchange market in India.•Consolidate and amend the law relating to foreign exchange.
OBJECTIVES OF FEMA
Rules, regulations and norms laid down by RBI in consultation with CG.Authorities for holding inquiries
Adjudicating AuthoritiesSpecial Directors
(Appeals)Appellate Tribunal
Director of Enforcement, for taking up investigations.
ADMINISTRATION OF FEMA
I. Only Authorized persons permitted to deal in foreign exchange.
II. They include:-I. authorised dealerII. money changerIII.off-shore banking unit
III.They are free to release foreign exchange upto the prescribed limits upon their satisfaction
Authorized
Persons
• Any person other than Authorised person is prohibited to:-
– Deal in or transfer any foreign exchange or foreign security to any person.
–Make any payment to or for the credit of any person resident outside India.
– Receive any payment by order or on behalf of any person resident outside India.
– Enter into any financial transaction in India to acquire any asset outside India.
PROHIBITIONS IN DEALING
Upto 3 times the sum involved in the contravention.
Upto Rs. 2,00,000 – if the amount involved in contravention is not quantifiable.
Upto Rs. 5,000 per day – if the contravention continues.
Any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the CG.
PENALTIES
CAPITAL ACCOUNT TRANSACTIONS
• Transaction which alters:- assets or liabilities outside India of
PRI assets or liabilities in India of PROI
• RBI with CG empowered to specify permissible capital account transactions along with prescribed limits.
No restrictions on withdrawal of currency for:-
amortization of loans
depreciation of direct investments
No restrictions on holding of assets:-
Acquired by a PRI outside India when he was a PROI
PRI acquired due to inheritance
Categories of permitted Capital Account Transactions:-
permitted to persons resident in India
permitted to non-residents
There are also some transactions not permitted to non-residents
CAPITAL ACCOUNT TRANSACTIONS
– Transactions include:-» Other than a capital
account transactions» Payments due in
connection with normal business trade.
» Payments dueon interest.» Remittances.» Expenses for travelling,
education, etc.– CG in consultation with RBI
can impose reasonable restrictions on withdrawal.
CURRENT ACCOUNT TRANSACTIONS
For some transactions withdrawl is:-Totally prohibitedPermitted, subject to the prior approval of concerned Ministry, CG
Permitted, subject to prior approval of RBI.
CURRENT ACCOUNT TRANSACTIONS
• For Resident Individuals only.• Remittance upto US $ 200,000 per financial year.• Not available for the transactions
» Totally prohibited
• Require the prior approval of CG.
LIBERALISED REMITTANCE SCHEME
Indian rupee fully convertible w.r.t current account transactions.Non-residents freely allowed remitting outside India the income or capital gain generated in India.Indian rupee w.r.t capital account transactions not fully convertible.