by FERA
The Foreign Exchange Regulation Act is an act of parliament that was introduced in 1973 with the aim of controlling and managing foreign payments, purchase of fixed assets to foreigners, and the export and import of currency from and in India.
FERA aimed to ensure that the economy was competitive by conserving India’s foreign reserves, which was inadequate despite the economy recording improvements.
The act is so elaborate and exhaustive such that it covers all citizens of India who are living inside or outside India.
FEMA
Foreign Exchange Management Act (FEMA) is an expansion or improvement of the Foreign Exchange Regulation Act (FERA). The primary purpose of FEMA is to regulate and facilitate foreign exchange while at the same time encouraging the development of forex market in the country.
The act covers all India’s resident including those living inside or outside the country. Moreover, any agency that is managed by a resident of India is also subjected to requirements of FEMA.
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FERA |
FEMA |
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| Provisions | FERA consisted of 81 sections, and was more complex | FEMA is much simple, and consist of only 49 sections. |
| Features | Presumption of negative intention ( Mens Rea ) and joining hands in offence (abatement) existed in FEMA | These presumptions of Mens Rea and abatement have been excluded in FEMA |
| New Terms in FEMA | Terms like Capital Account Transaction, current Account Transaction, person, service etc. were not defined in FERA. | Terms like Capital Account Transaction, current account Transaction person, service etc., have been defined in detail in FEMA |
| Enactment | Old | New |
| Number of sections | 81 | 49 |
| Introduced when | Foreign exchange reserves were low. | Foreign exchange position was satisfactory. |
| Authorized Person | Definition of ” Authorized Person” in FERA was a narrow one (2(b) | The definition of Authorized person has been widened to include banks, money changes, off shore banking Units etc. (2 (c ) |
| Meaning Of “Resident” As Compared with Income Tax Act | There was a big difference in the definition of “Resident”, under FERA, and Income Tax Act | The provision of FEMA, are in consistent with income Tax Act, in respect to the definition of term ” Resident “. Now the criteria of “In India for 182 days” to make a person resident has been brought under FEMA. Therefore, a person who qualifies to be a non-resident under the income Tax Act, 1961 will also be considered a non-resident for the purposes of application of FEMA, but a person who is considered to be non-resident under FEMA may not necessarily be a non-resident under the Income Tax Act, for instance a business man going abroad and staying therefore a period of 182 days or more in a financial year will become a non-resident under FEMA. |
| Punishment | Any offence under FERA, was a criminal offence, punishable with imprisonment as per code of criminal procedure, 1973 | Here, the offence is considered to be a civil offence only punishable with some amount of money as a penalty. Imprisonment is prescribed only when one fails to pay the penalty. |
| Quantum of Penalty | The monetary penalty payable under FERA, was nearly the five times the amount involved. | Under FEMA the quantum of penalty has been considerably decreased to three times the amount involved. |
| Appeal | An appeal against the order of “Adjudicating office”, before ” Foreign Exchange Regulation Appellate Board went before High Court | The appellate authority under FEMA is the special Director ( Appeals ) Appeal against the order of Adjudicating Authorities and special Director (appeals) lies before “Appellate Tribunal for Foreign Exchange.” An appeal from an order of Appellate Tribunal would lie to the High Court. (sec 17,18,35) |
| Right of Assistance during Legal Proceedings. | FERA did not contain any express provision on the right of on impleaded person to take legal assistance | FEMA expressly recognizes the right of appellant to take assistance of legal practitioner or chartered accountant (32) |
| Power of Search and Seize | FERA conferred wide powers on a police officer not below the rank of a Deputy Superintendent of Police to make a search | The scope and power of search and seizure has been curtailed to a great extent |
| Basis for determining residential status | Citizenship | More than 6 months stay in India |
| Violation | Criminal offence | Civil offence |
| Punishment for contravention | Imprisonment | Fine or imprisonment (if fine not paid in the stipulated time) |
