The Foreign Exchange Management Act, 1999 (FEMA) Vocabulary

Vocabulary-style flashcards based on the Foreign Exchange Management Act, 1999, focusing on legal definitions, residential status criteria, and administrative schedules.

The Foreign Exchange Management Act, 1999 (FEMA)

An Act to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.

1st June, 2000

The date on which the The Foreign Exchange Management Act, $1999$ came into force and was made effective.

Authorised person

Defined under Section $2(c)$, it means an authorised dealer, money changer, off-shore banking unit or any other person authorised under section $10(1)$ to deal in foreign exchange or foreign securities.

Capital Account Transaction

Defined under Section $2(e)$, it is a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liability in India of persons resident outside India.

Current Account Transaction

Defined under Section $2(j)$, it means a transaction other than a capital account transaction, including trade payments, interest on loans, income from investments, and remittances for living expenses or travel/medical/education costs.

Currency

Includes all currency notes, postal notes, postal orders, money orders, cheques, drafts, travelers’ cheques, letters of credit, bills of exchange, promissory notes, credit cards, or similar instruments as notified by the Reserve Bank.

Export

According to Section $2(l)$, it means the taking out of India to a place outside India any goods, or the provision of services from India to any person outside India.

Foreign Exchange

As per Section $2(n)$, foreign currency and includes deposits, credits, and balances payable in foreign currency, as well as instruments drawn in one currency but payable in another.

Person resident in India

A person residing in India for more than $182$ days during the course of the preceding financial year, but excluding those who leave India for employment, business, or an intention to stay outside for an uncertain period.

Person Resident Outside India

Defined under Section $2(w)$ as a person who is not resident in India.

Transfer

Includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien as per Section $2(ze)$.

Directorate of Enforcement

The separate body formed and entrusted with the enforcement of FEMA under Section $36$.

Schedule I (Current Account Transactions Rules)

A list of transactions for which drawal of foreign exchange is prohibited, including remittance out of lottery winnings and racing income.

Schedule II (Current Account Transactions Rules)

A list of current account transactions requiring prior approval of the Government of India, such as cultural tours and advertisement in foreign print media exceeding $USD\,10,000$.

Schedule III (Current Account Transactions Rules)

A list of transactions where individuals can avail of foreign exchange facilities within the limit of $USD\,250,000$ per financial year, requiring RBI approval for excess amounts.

Liberalised Remittance Scheme (LRS)

A scheme allowing resident individuals, including minors, to freely remit up to $USD\,250,000$ per financial year for permissible current or capital account transactions.

Debt instruments

Instruments as determined by the Central Government in consultation with the Reserve Bank which are managed under capital account regulations by the RBI.

Section 6(4) of FEMA

Allows a person resident in India to hold, own, transfer or invest in foreign currency, securities, or immovable property situated outside India if it was acquired when they were resident outside India or inherited from one.

Section 6(5) of FEMA

Allows a person resident outside India to hold, own, transfer or invest in Indian currency, securities, or immovable property if it was acquired when they were resident in India or inherited from one.

Transferable Development Rights (TDRs)

Certificates issued in respect of land acquired for public purpose without monetary compensation; investment in these by persons resident outside India is prohibited.

Resident Foreign Currency (RFC) account

An account from which remittances for transactions listed in Schedule II and III can be made without requiring approval.