THE FOREIGN EXCHANGE MANAGEMENT ACT, 1999

1 THE FOREIGN EXCHANGEMANAGEMENT ACT

Preamble Extent Commencement

 1 Preamble

2. For promoting orderly

1. Facilitating external
development and
trade and payments.
maintenance of foreign
exchange market in
India.
2 Extent:- Whole of India

3 Commencement:- With effect

st
from 1 June, 2000.
 Residential Status under FEMA 1999

Person Resident in India (PRI) as per section 2(v) means a

person residing in India for more than 182 days during the
course of preceding financial year but does not include-
(A) A person who goes out of India or stays outside for
any of the three purposes.
(A) A person who goes out of India or stays outside for
any of the three purposes.

For any other purpose

Business or the circumstances of
Employment
vocation outside which indicates his
outside India or
India or intention to stay
outside India for
uncertain period.
(B) A person who came to India or stays India for any
purpose otherwise than for following three purposes-

For any other purpose

Employment in the circumstances of
Business or
India. which indicates his
vocation in India.
intention to stay in
India for uncertain
period.
 Following persons are also regarded as Person Resident in
India (PRI)

Any person or Any office, branch

body corporate or agency in India Any office, branch or
registered or owned or agency outside India
incorporated in controlled by but owned or
India. Person Resident controlled by PRI.
Outside India.
 Person Resident Outside India

Person resident outside India as per section 2(10)

means a person who is not resident in India.
Example 1: Rahul went outside for 1st time in financial
year 2021-2022 for vacation. Comment on his residential
status under FEMA for financial year 2021 – 2022.

Answer:
Financial year 2021-2022:- PRI because in preceding
financial year 2021 – 2022 he resided in India for more
than 182 days did not leave India for any of three
purposes.
Example 2: What if in above question it was vocation
instead of vacation?

Answer:
Financial year 2021-2022:- PROI because although he
resided in preceding financial year more than 182 days
but he is going out of India for vocation i.e. one of the
three purposes.
Example 3: Peter came to India for 1st time in financial
year 2021 – 2022 for vocation and resided 200 days.
Comment for financial year 2021 – 2022 and 2022 –
2023?

Answer:
Financial year 2021-2022:- PROI because he did not reside
in India for more than 182 days in preceding financial year
2021 – 2022.
Financial year 2022 - 2023:- PRI because he resided in
India more than 182 days in preceeding financial year
2021 – 2022 and came for one of the three purposes.
Example 4: What if Peter came for vacation?

Answer:
Financial year 2021-2022:- PROI because he did not
reside in India for more than 182 days in preceding
financial year 2021 – 2022.
Financial year 2022 - 2023:- PROI because he did not
reside in India for more than 182 days in preceding
financial year 2021 – 2022.
Example 5: Rahul is going out of India first time in
financial year 2021 – 2022 (01.04.2021) for MBA of 3
years

Answer:
Financial year 2021-2022:- PRI because in preceding
financial year 2021 – 2022 he resided in India for more
than 182 days did not leave India for any of three
purposes.
Financial year 2022 - 2023:- PROI because he did not
reside in India for more than 182 days in preceding
financial year 2021 – 2022.
Example 6: An airhostess of British Airways stayed at
Mumbai base for more than 182 days in financial year
2020 – 2021. Comment for financial year 2021 – 2022.

Answer:
Financial year 2021-2022:- PROI because he did not reside
in India for more than 182 days in preceding financial year
2021 – 2022. Although her stay exceeds 182 days in India
in preceding financial year 2020 – 2021 but it was a
compulsive stay and not for employment in India or any of
the three purposes.
Note:- Had she been employed by Mumbai branch of
British Airways then she would had been considered as
PRI.
Example 7: Japenese Company has a headquarter in
Mumbai which controls its Singapore Branch.

Answer:
Mumbai Headquarter:- PRI because in preceding financial
year 2021 – 2022 he resided in India for more than 182
days did not leave India for any of three purposes.
Singapore Branch:- PRI because it’s a branch outside India
but controlled by Mumbai headquarters which is a PRI.
 Regulation and Management of Foreign Exchange

Dealing in foreign exchange, etc. [Section 3]:- No person shall-

a. deal in or transfer any d. enter into any financial

foreign exchange or foreign transaction in India as
security to any person not consideration for or in
being an authorised person; c. receive otherwise association with acquisition or
than through an creation or transfer of a right to
b. make any payment to or authorised person, any
acquire, any asset outside India
for the credit of any person payment by order or on
by any person. (Hawalla
resident outside India in any behalf of any person
resident outside India in Transaction)
manner;
any manner.
 The above transactions may carried on

a. as otherwise b. with the general

provided in this or special permission
Act; or of the Reserve Bank.
 Consider following examples:

i. Example pertaining to clause (a)- Dealing in foreign exchange – A PROI

comes to India and would like to sell US$ 1,000 to his friend who is resident
in India. The friend offers him a rate better than the banks. This cannot be
done as it would amount to dealing in foreign exchange.
ii. Example pertaining to clause (b) – A PROI has an insurance policy in
India. He requests his brother in India to pay the insurance premium. This
will amount to payment for the credit of non-resident. This is not permitted.
iii. Example pertaining to clause (c)– A foreign tourist comes to India and he
takes food at a restaurant. He would like to pay US$ 20 in cash to the
restaurant. The restaurant cannot accept cash as it will be a receipt
otherwise than through Authorised Person. The restaurant will have to
take a money changers license to accept foreign currency.
iv. Example pertaining to clause (d)–Transactions covered by this sub-section
are known as Hawala transactions. An Indian resident gives ` 70,000 in
cash to an Indian dealer. For this transaction, the brother in Dubai will get
US$ 1,000 from a Dubai dealer. The two dealers may settle the transactions
later. However, transaction is not permitted.
 Holding of foreign exchange [Section 4]

Except as provided in this Act, no person resident in India shall acquire,

hold, own, possess or transfer any foreign exchange, foreign security or
any immovable property situated outside India.
Foreign currency that holds:-
Foreign Currency $ 2000 or equivalent foreign currency.
Foreign Currency Unlimited.
 Current account transactions [Section 5]
Section 2(j) of the act it means a transaction other than a capital account
transaction and includes the following types of transactions:

a. Payments in the course d. Expenses in connection

of ordinary course of with foreign travel, education
foreign trade, other etc.
services such as short-
term banking and credit c. Remittances for living
facilities in the ordinary b. Payments in the form of expenses of parents,
course of business etc. interest on loans or spouse, or children living
income from investments. abroad.
 I. SCHEDULE I
Transactions for which drawal of foreign exchange is prohibited:
a. Remittance out of lottery winnings.
b. Remittance of income from racing/riding, etc., or any other hobby.
c. Remittance for purchase of lottery tickets, banned/prescribed magazines, football pools,
sweepstakes etc.
d. Payment of commission on exports.
e. Remittance of dividend by any company to which the requirement of dividend balancing
is applicable.
f. Payment related to “Call Back Services” of telephones.
g. Remittance of interest income on funds held in Non-resident Special Rupee Scheme a/c.
 II. SCHEDULE II

Transactions, which require prior approval of the

Government of India for drawal of foreign exchange:

Purpose of Remittance Ministry/Department of Govt. of

India whose approval is required
Cultural Tours Ministry of Human Resources
Development (Department of
Education and Culture).
Purpose of Remittance Ministry/Department of Govt. of India whose
approval is required
Remittance of freight of vessel charted by a Ministry of Surface Transport.
PSU.
Payment of import through ocean transport. Ministry of Surface Transport
Multi-modal transport operators making Registration Certificate from the Director
remittances to their agents abroad. General of Shipping.
Remittances of hiring charges of transponders Ministry of Information and Broadcasting
by Ministry of Communication and Information
a. T.V. channels Technology.
b. Internet Service Providers
Remittance of container detention charges Ministry of Surface Transport (Director
exceeding the rate prescribed by Director General of Shipping)
General of Shipping.
Purpose of Remittance Ministry/Department of Govt. of India whose
approval is required
Remittance of prize money/sponsorship of Ministry of Human Resource Development
sports activity abroad by a person other than (Department of Youth Affairs and Sports)
International/National/State Level sports
bodies, if the amount involved exceeds US $
100,000.

Remittance for membership of P & I Club Ministry of Finance (Insurance Division)

Transactions which require RBI’s prior approval for drawal of

foreign exchange.
 III. SCHEDULE III
1. Facilities for individuals—Individuals can avail of foreign exchange facility for the
following purposes within the limit of USD 250,000 only:-
a. Private visits to any country (except Nepal and Bhutan)
b. Gift or donation
c. Going abroad for employment
d. Emigration
e. Maintenance of close relatives abroad
f. Travel for business, or attending a conference or specialised training
g. Expenses in connection with medical treatment abroad
h. Studies abroad
i. Any other current account transaction
Any additional remittance in excess of the said limit for the said purposes
shall require prior approval of the Reserve Bank of India.
However, for the purposes mentioned at item numbers (iv), (vii) and (viii)
above, the individual may avail of exchange facility for an amount in excess of
the limit prescribed under the Liberalised Remittance Scheme. if it is so
required by a country of emigration, medical institute offering treatment or
the university, respectively.
Further, that for a person who is resident but not permanently resident in
India and-
a. is a citizen of a foreign State other than Pakistan; or
b. is a citizen of India, who is on deputation to the office or branch of a
foreign company or subsidiary or joint venture in India of such foreign
company,
may make remittance up to his net salary (after deduction of taxes,
contribution to provident fund and other deductions).
2. Facilities for persons other than individual—The following remittances by personsother than
individuals shall require prior approval of the Reserve Bank of India:
a. Donations exceeding one per cent. of their foreign exchange earnings during the previous three financial
years or USD 5,000,000, whichever is less, for-
i. creation of Chairs in reputed educational institutes,

ii. contribution to funds (not being an investment fund) promoted by educational institutes; and

iii. contribution to a technical institution or body or association in the field of activity of the
donor Company.
b. Commission, per transaction, to agents abroad for sale of residential flats or commercial plots in
India exceeding USD 25,000 or five percent of the inward remittance whichever is more.
c. Remittances exceeding USD 10,000,000 per project for any consultancy services in respect of
infrastructure projects and USD 1,000,000 per project, for other consultancy services procured
from outside India.
3. Procedure- If the transaction is not listed in any of the above three
schedules, it can be freely undertaken.
Exemption for remittance from RFC Account – No approval is required where
any remittance has to be made for the transactions listed in Schedule II and
Schedule III above from an RFC account.
 Capital account transactions [Section 6]

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 would be a capital account
transaction.”
 Capital Account Transaction means any
transaction which alters

OUTSIDE
IN INDIA INDIA Assets or
Liabilities
Assets or
including
Liabilities
PRII PROI Contingent
Liabilities
Capital account transaction is basically split into the following categories
under foreign exchange management (permissible capital account
transactions) regulations, 2000:-
a. Transaction, which are permissible in respect of persons resident in india
and outside india.
b. Transaction on which restrictions cannot be imposed; and
c. Transactions, which are prohibited.
 I. Permissible Transactions

SCHEDULE I
The list of permissible classes of transactions made by persons resident in India is:
a. Investment by a person resident in India in foreign securities.
b. Foreign currency loans raised in India and abroad by a person resident in India.
c. Transfer of immovable property outside India by a person resident in India.
d. Guarantees issued by a person resident in India in favour of a person resident
outside India.
e. Export, import and holding of currency/currency notes.
f. Loans and overdrafts (borrowings) by a person resident in India from a person
resident outside India.
g. Maintenance of foreign currency accounts in India and outside India by a person
resident in India.
h. Maintenance of foreign currency accounts in India and outside India by a person
resident in India.
i. Loans and overdrafts by a person resident in India to a person resident outside
India.
j. Remittance outside India of capital assets of a person resident in India.
k. Undertake derivative contracts
SCHEDULE II
The list of permissible classes of transactions made by persons resident
outside India is:
a. Investment in India by a person resident outside India, that is to say
i. issue of security by a body corporate or an entity in India and investment
therein by a person resident outside India; and
ii. investment by way of contribution by a person resident outside India to
the capital o f a firm or a proprietorship concern or an association of a person
in India.
b. Acquisition and transfer of immovable property in India by a person resident
outside India.
c. Guarantee by a person resident outside India in favour of, or on behalf of, a
person resident in India.
d. Import and export of currency/currency notes into/from India by a person
resident outsideIndia.
e. Deposits between a person resident in India and a person resident outside India.
f. Foreign currency accounts in India of a person resident outside India.
g. Remittance outside India of capital assets in India of a person resident outside
India.
h. Undertake derivative contracts.
 Transactions with no
restriction They are:

2. For depreciation of direct

1. For amortisation of loan
(1)
investments in ordinary
and
course of business.
 Prohibited Capital Account Transactions

a. The person resident outside India is prohibited from making investments

in India in any form, in any company, or partnership firm or proprietary
concern or any entity whether incorporated or not which is engaged or
proposes to engage:
i. In the business of chit fund;
ii. As Nidhi company;
iii. In agricultural or plantation activities;
iv. In real estate business, or construction of farm houses or
Explanation: In “real estate business” the term shall not include development
of townships, construction of residential /commercial premises, roads or
bridges and Real Estate Investment Trusts (REITs) registered and regulated
under the SEBI (REITs) Regulations 2014.; or
v. In trading in Transferable Development Rights (TDRs).
b. For Korea specific approval from the Central Government to carry on any
transaction.
Thus, a capital account transaction is permitted only if it is specifically
permitted under the regulations. If the transaction is not stated as generally
permitted, a prior specific approval is required.
 Repatriation of sale proceeds
A person referred to in sub-section (5) of section 6 of the Act, or his successor
shall not, except with the prior permission of the Reserve Bank, repatriate
outside India the sale proceeds of any immovable property.
In the event of sale of immovable property other than agricultural land/farm
house/plantation property in India by a person resident outside India who is a
citizen of India or a person of Indian origin, the authorised dealer may allow
repatriation of the sale proceeds outside India, provided the following
conditions are satisfied, namely:
i. the immovable property was acquired by the seller in accordance with the
provisions of the foreign exchange law.
ii. the amount (profit on sale of immovable property cannot be repatriated) to
be repatriated does not exceed (a) the amount paid for acquisition of the
immovable property in foreign exchange received through normal banking
channels or out of funds held in Foreign Currency Non-Resident Account, or
(b) the foreign currency equivalent, as on the date of payment, of the amount
paid where such payment was made from the funds held is Non-Resident
External account for acquisition of the property; and
iii. in the case of residential property, the repatriation of sale proceeds is
restricted to not more than two such properties.
 Framework for raising loans through External Commercial
Borrowings

ECBs are commercial loans raised by eligible resident entities from recognised non-
resident entities and should conform to parameters such as minimum maturity,
permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.
The term ‘All-in-Cost’ includes rate of interest, other fees, expenses, charges,
guarantee fees.
Approval route: Under the ECB framework, ECB can be raised either under the
automatic route or under the approval route. Under the approval route, the
prospective borrowers are required to send their requests to the Reserve Bank
through their AD Banks for examination.
Automatic route: For the automatic route, the cases are examined
by the Authorised Dealer Category-I (AD Category-I) banks. RBI
approval not required

Sr. No. Parameters FCY denominated ECB INR denominated

ECB
i. Currency of borrowing Any freely convertible Foreign Indian Rupee (INR)
Currency
Sr. No. Parameters FCY denominated ECB INR denominated ECB
ii. Forms of ECB Loans including bank loans; Loans including bank loans;
floating/ fixed rate notes/ bonds/ floating/ fixed rate
debentures Trade credits beyond 3 notes/bonds/ debentures/
years; 19FCCBs; 20FCEBs and preference shares. Trade
Financial Lease. credits beyond 3 years.
iii. Eligible All entities eligible to receive FDI. a) All entities eligible to raise
borrowers Further, the following entities are FCY ECB; and
also eligible to raise ECB: b) Registered entities engaged
in micro-finance activities,
i. Port Trusts;
viz., registered Not for
ii. Units in SEZ Profit companies,
iii. SIDBI; and registered societies/trusts/
cooperatives and Non-
iv. EXIM Bank of India.
Government Organisations.
Sr. Parameters FCY denominated ECB INR denominated ECB
No.
iv. Recognised The lender should be resident of FATF or IOSCO (International
lenders Organisation of Securities Commission) compliant country,
including on transfer of ECB. However, Multilateral and
Regional Financial Institutions where India is a member
country will also be considered as recognized lenders;
Individuals as lenders can only be permitted if they are
foreign equity holders or for subscription to
bonds/debentures listed abroad; and
Foreign branches / subsidiaries of Indian banks are permitted
as recognised lenders only for FCY ECB
 v. Minimum Average Maturity Period (MAMP)

MAMP for ECB will be 3 years. Call and put options

Sr. No Category MAMP
(a) ECB raised by manufacturing 1 year
companies up to USD 50
million or its equivalent per
financial year.

(b) ECB raised from foreign 5 years

equity holder for working
capital purposes, general
Sr. No Category MAMP
(c) ECB raised for working capital purposes or 10 years
general corporate purposes.
(d) ECB raised for repayment of rupee loans 7 years
availed domestically for capital
expenditure.

(e) ECB raised for repayment of Rupee loans 10 years

availed domestically for purposes other
than capital expenditure.
Sr. No. Parameters FCY denominated ECB INR denominated ECB
vi. All-in-cost Benchmark rate plus 450 bps spread.
ceiling per
annum
vii. Other costs Prepayment charge should not be more than 2 per cent.

viii. End-uses The negative list, for which the ECB proceeds cannot be
(Negative list) utilized, would include the following:
a. Real estate activities.
b. Investment in capital market.
c. Equity investment.
d. Working capital purposes
e. General corporate purposes
f. Repayment of Rupee loans
g. On-lending to entities.
Entities desirous to raise ECB under the automatic route may
approach an AD Category I bank with their proposal along with
duly filled in Form ECB.
 Reporting Requirements
Borrowings under ECB Framework are subject to following reporting requirements:
1. Loan Registration Number (LRN): To obtain the LRN, borrowers are required to
submit duly certified Form ECB, which also contains terms and conditions of the
ECB, in duplicate to the designated AD Category I bank.
2. Changes in terms and conditions of ECB: Changes in ECB parameters in
consonance with the ECB norms, including reduced repayment by mutual
agreement between the lender and borrower, should be reported to the DSIM
through revised Form ECB at the earliest, in any case not later than 7 days from
the changes effected.
3. Monthly Reporting of actual transactions: The borrowers are required to report
actual ECB transactions through Form ECB 2 Return through the AD Category I
bank on monthly basis.
4. Late Submission Fee (LSF) for delay in reporting: Any borrower, who is otherwise
in compliance of ECB guidelines, can regularise the delay in reporting of drawdown
of ECB proceeds before obtaining LRN or delay in submission of Form ECB 2 returns,
by payment of late submission fees.
5. Powers delegated to AD Category I banks to deal with ECB cases:
I. Conversion of ECB into equity: Conversion of ECB, including those which are
matured but unpaid, into equity is permitted subject to the following conditions:
a. The activity of the borrowing company is covered under the automatic route for
FDI or Government approval is received, wherever applicable.
b. The conversion, which should be with the lender’s consent and without any
additional cost;
c. Applicable pricing guidelines for shares are complied with;
d. the reporting to the Reserve Bank will be as under:
i. For partial conversion, the converted portion is to be reported in Form FC-
GPR.
ii. For full conversion, the entire portion is to be reported in Form FC-GPR.
6. Special Dispensations under the ECB framework.
 ECB facility for Startups
AD Category-I banks are permitted to allow Startups to raise ECB under the automatic route
as per the following framework:

i. Eligibility: An entity recognised as a Startup by the Central Government as on date of

raising ECB.
ii. Maturity: Minimum average maturity period will be 3 years.
iii. Recognised lender: Lender / investor shall be a resident of a FATF compliant country.

iv. Forms: The borrowing can be in form of loans or non-convertible, optionally convertible or
partially convertible preference shares.
v. Currency: The borrowing should be denominated in any freely convertible currency or in
Indian Rupees (INR) or a combination thereof.
vi. Amount: The borrowing per Startup will be limited to USD 3 million.
vii. All-in-cost: Shall be mutually agreed between the borrower and the lender.
viii. End uses: For any expenditure in connection with the business of the
borrower.
ix. Conversion into equity: Conversion into equity is freely permitted subject to
Regulations applicable for foreign investment in Startups.
x. Security: The choice of security to be provided to the lender is left to the
borrowing entity.
 Mode of direct investment outside India:
1. Automatic route for direct investment or financial commitment outside India:
An Indian Party has been permitted to make investment in overseas Joint Ventures
(JV)/ Wholly Owned Subsidiaries (WOS), as per the ceiling prescribed by the
Reserve Bank.
It has been decided that any financial commitment (FC) exceeding USD 1 (one)
billion (or its equivalent) in a financial year would require prior approval of the
Reserve Bank even when the total FC of the Indian Party is within the eligible limit
under the automatic route [i.e., within 400% of the net worth (Paid up capital +
Free Reserves) as per the last audited balance sheet].
 Limit permissible
The total financial commitment of the Indian Party in all the Joint Ventures/
Wholly Owned Subsidiaries shall comprise of the following:
a. 100% of the amount of equity shares and/ or Compulsorily Convertible
Preference Shares (CCPS);
b. 100% of the amount of other preference shares;
c. 100% of the amount of loan;
d. 100% of the amount of guarantee
e. 100% of the amount of bank guarantee issued
 Requirements for investments/ financial commitments

i. The Indian Party can invest up to the prescribed limit is 400% of its net
worth (as per the last audited Balance Sheet) in JV / WOS for any bonafide
activity permitted as per the law of the host country.
ii. The Indian Party is not on the Reserve Bank’s exporters' caution list / list
of defaulters.
iii. The Indian Party routes all the transactions relating to the investment in a
JV/WOS through only one branch of an authorised dealer.
Process: The Indian Party should approach an Authorized Dealer with an application
in Form ODI and the prescribed enclosures / documents for effecting the
remittances towards such investments.
2. Approval route for direct investment or financial commitment outside India
i. Prior approval of the Reserve Bank would be required in all other cases of direct
investment(or financial commitment) abroad.
ii. Reserve Bank would, inter alia, take into account the following factors while
considering such applications:

a. Prima facie viability of the JV / WOS outside India;

b. Contribution to external trade
c. Financial position and business track record of the Indian
Party
d. Expertise and experience of the India Party.
 Prohibitions on direct investment abroad by an Indian
party

a. Indian Parties are prohibited from making investment (or financial

commitment) in foreign entity engaged in real estate (meaning buying and
selling of real estate or trading in Transferable Development Rights (TDRs) or
banking business, without the prior approval of the Reserve Bank.
b. An overseas entity, having direct or indirect equity participation by an
Indian Party, shall not offer financial products linked to Indian Rupee specific
approval of the Reserve Bank.
 General Permission

General permission has been granted to persons residents in India for

purchase / acquisition of securities in the following manner:
a. out of the funds held in RFC account;
b. as bonus shares on and
c. when not permanently resident in India, out of their foreign currency
resources outside India.
 Export of goods and services (Section 7)

1. Every exporter of goods shall-(a) furnish to the Reserve Bank or to such

other authority a declaration in such form i.e., Form EDF and containing true
and correct material particulars, including the amount representing the full
export value or, if the full export value of the goods is not ascertainable at
the time of export, the value which the exporter, having regard to the
prevailing market conditions, expects to receive on the sale of the goods in
a market outside India, (b) furnish to the Reserve Bank such other
information as may be required by the Reserve Bank for the purpose of
ensuring the realization of the export proceeds by such exporter.
2. The Reserve Bank may, for the purpose of ensuring that the full export
value of the goods or such reduced value of the goods as the Reserve Bank
determines, having regard to the prevailing market conditions, is received
without any delay, direct any exporter to comply with such requirements as
it deems fit.
3. Every exporter of services shall furnish to the Reserve Bank or to such
other authorities a declaration in such form i.e., Form SOFTEX and in such
manner as may be specified, containing the true and correct material
particulars in relation to payment for such services.
 Exemptions
Export of goods / software may be made without furnishing the declaration in the
following cases, namely:
[Link] samples of goods and publicity material supplied
[Link] effects of travellers
c. ship's stores
[Link] way of gift of goods that they are not more than five lakh rupees in value
[Link] or aircraft engines and spare parts
f. goods imported free of cost on re-export basis;
Indication of importer-exporter code number: The
importer-exporter code number (allotted by the Director
General of Foreign Trade shall be indicated on all copies
of the declaration forms submitted by the exporter.
Period within which export value of goods/software/
services to be realized
i. In ordinary case: The amount representing the full export value of goods /
software/ services exported shall be realised and repatriated to India within nine
months or within such period as may be specified by the Reserve Bank.
However, where the goods are exported to a warehouse established outside India
with the permission of the Reserve Bank, the amount representing the full export
value of goods exported shall be paid to the authorised dealer as soon as it is
realised and in any case within fifteen months.
Extension of period: Further the Reserve Bank, for a sufficient and reasonable
cause, extend the said period.
 Certain Exports requiring prior approval:

Exports under trade agreement/rupee credit etc. Export of goods

under special arrangement between the Central Government and
Government of a foreign state. The instructions issued from time to
time by the Reserve Bank.
 Advance payment against exports

Where an exporter receives advance payment (with or without interest),

from a buyer / third party named in the export declaration made by the
exporter, outside India, the exporter shall be under an obligation to ensure
that the shipment of goods is made within one year from the date of receipt
of advance payment.
 Realisation and repatriation of foreign exchange [Section 8]

All foreign exchange should be realized, repatriated and surrendered to the

Reserve Bank through Authorised Persons. Permitted amounts can be held as
foreign currency as per the guidelines issued from time to time.
The provisions of sections 4 and 8 shall not apply to the following,
namely:—
a. possession of foreign currency or foreign coins by any person up to such
limit as the Reserve Bank may specify
b. foreign currency account held or operated by such person or class of
persons and the limit up to which the Reserve Bank may specify
c. foreign exchange acquired or received before the 8th day of July, 1947 which
is held outside India
d. foreign exchange held by a person resident in India if such foreign exchange
was acquired by way of gift or inheritance from a person referred to in clause
(c)
e. foreign exchange acquired from employment, business, trade, vocation,
services, honorarium, gifts, inheritance or any other legitimate means up to
such limit as the Reserve Bank may specify; and
 AUTHORISED PERSON [SECTION 10]

The term authorised person is defined under Section 2(c) of the Act to mean
a. an authorised dealer,
b. money changer,
c. off-shore banking unit or
d. any other person authorised to deal in foreign exchange or foreign
securities.
 Off Shore Banking Unit
An Off Shore Banking Unit means a branch of a bank in India, located in the Special
Economic Zone.
If any person, other than an authorized person, who has acquired or purchased
foreign exchange for any purpose mentioned in the declaration made by him to
authorized person
 Does not use it for such purpose or
 Does not surrender it to the authorized person within the specified period or
 Uses the foreign exchange so acquired or purchased for any other purpose for which
purchase or acquisition of foreign exchange is not permissible under the provisions of
the Act or the rules or regulations or direction or order made there under
Such person shall be deemed to have committed contravention of the
provisions of the Act.
Any authorisation given by the Reserve Bank of India may be revoked by it,
at any time, if it is satisfied that: -
1. It is in public interest so to do, or
2. The authorised person has failed to comply with the conditions laid down
in the authorisation.
The authorised person has contravened any of the provisions of this Act or any
Rule.
Reserve Bank’s powers to issue directions to authorised
person [Section 11]

The reserve bank may direct the authorised persons with regard
to
1. Matters pertaining to making of payment; or
2. Furnishing such information, in such manner, as it deems fit.
Penalty for Contravention of Directions by an
Authorised Person

A penalty which may extend to ten thousand rupees and in the

case of continuing contravention with an additional penalty
which may extend to two thousand rupees for every day during
which such contravention continues.
 Power of Reserve Bank to inspect authorised person [Section 12]

1. Verification of the correctness of any statement, information, or particulars

furnished to the Reserve Bank.
2. Obtaining any information or particulars, which such authorised person, has
failed to furnish, on being called upon to do so.
Every authorised person is duty-bound
a. to produce such books, accounts to the officer making the inspection, and
b. to furnish any statement relating to the affairs of such person, company or firm.
 Contraventions and Penalties
Section No. Contravention Quantum of Penalty
Section 11 By Authorised person any direction by  Upto Rs 10,000.
RBI or failure to file any return as  If continuing offence additional
directed by RBI. penalty upto Rs 2,000 per day.

Section 13 Of any provision of the Act, or any rule,  Upto three times, the sum
regulation, notification, direction or involved, if it is quantifiable.
order or of any condition subject to  If not quantifiable upto Rs 2 lacs.
which an authorisation issued  If continuing offence, further
penalty upto Rs 5,000 per day after
first day.
Section No. Contravention Quantum of Penalty
Section 13(1A) Acquisition of any foreign exchange,  Upto three times, the sum involved.
and 13(1C) foreign security or immovable  confiscation of the value equivalent
property, situated outside India, of the of foreign assets involved in
aggregate value exceeding the contravention, situated in India.
threshold.
 Imprisonment upto 5 years with a
fine.

Section 14 Failure to pay penalty within 90 days Civil imprisonment.

of penalty order as above  Upto 3 years
 where demand is of an amount  Upto 6 months.
exceeding Rs 1 crore.
 in any other case
 COMPOUNDING OF OFFENCES

Compounding Authority: Enforcement Directorate and classes of officers of the RBI

can act as Compounding Authority.
According to section 15:
[Link] of compounding of an offence: An application made by the person
committing such contravention, be compounded within one hundred and eighty days
from the date of receipt of application by the Director of Enforcement or such.
2. In case of compounding, no proceeding may be initiated: Where a contravention
has been compounded, no proceeding or further proceeding, as the case may be,
shall be initiated or continued.
 Adjudication and Appeal

Section No. Obligation Time Limit

Section 14 Full penalty to be paid Within 90 days from the date on which
notice for payment of penalty is served.

Section 15 Compounding of Contravention under Within 180 days of receipt of

section 13. application by Directorate of
Enforcement or RBI.
Section 16 Complaint under section 16(1) to be Within 1 year of receipt of complaint.
dealt by Adjudicated Authority
 Appeals under FEMA:-

Section No. Obligation Time Limit

Section 17 Appeal to Special Director Within 45 days from receipt of order
(Appeals) against order of (penalty order).
Adjudicating officer.
Section 19 Appeal to Appellate Tribunal against Within 45 days from receipt of order.
special Director (Appeal).
Section 19(5) Appeal to be dealt with by Appellate Will try to dispose off the appeal within
Tribunal. 180 days from receipt of appeal.
Section 35 Appeal to High Court against order of Within 60 days of communication of
Appellate Tribunal. order or decision.
 Appeal to Special Director (Appeals)

1. The Central Government shall, by notification, appoint one or more Special Directors
(Appeals) to hear appeals against the orders of the Adjudicating Authorities.
2. Any person aggrieved by an order made by the Adjudicating Authority, being an Assistant
Director of Enforcement or a Deputy Director of Enforcement, may prefer an appeal of the
Special Director (Appeals).
3. Every appeal shall be filed within forty-five days from the date on which the copy of the
order made by the Adjudicating Authority.
4. The Special Director (Appeals) may entertain an appeal after the expiry of the said period
of forty-five days, if he is satisfied that there was sufficient cause for not filing it.
 Appeal to Appellate Tribunal [Section 18]

The Central Government or any person aggrieved by an order made by an

Adjudicating Authority, other than those referred to in sub-section (1) of section 17,
or the Special Director (Appeals), may prefer an appeal to the Appellate
Tribunal[Section 19(1)]. Every appeal shall be filed within a period of forty-five days
from the date on which a copy of the order made by the Adjudicating Authority or
the Special Director (Appeals) is received by the aggrieved person or by the Central
Government. [Section 19(2)].Where any appeal could not be disposed of within the
said period of one hundred and eighty days, the Appellate Tribunal shall record its
reasons in writing for not disposing of the appeal within the said period.
 Appeal to High Court (Section 35)

Any person aggrieved by any decision or order of the Appellate

Tribunal may file an appeal to the High Court within sixty days
from the date of communication of the decision or order of the
Appellate Tribunal on any question of law arising out of such
order.
 Directorate Of Enforcement

[Link] central government shall establish a directorate of enforcement with a

director and such other officers or class of officers , who shall be called officers of
enforcement, for the purposes of this act.
2. The central government may authorise the director of enforcement or an
additional director of enforcement or a special director of enforcement or a deputy
director of enforcement to appoint officers of enforcement below the rank of an
assistant director of enforcement.
 Power of search and seizure

The Director of Enforcement and other officers of

Enforcement, not below the rank of an Assistant
Director, shall take up for investigation the
contravention.
 Contravention by companies [Section 42]

Every person who, at the time the contravention was committed,

was in charge of, and was responsible to, the company for the
conduct of the business of the company as well as the company,
shall be deemed to be guilty.