Foreign Exchange Management Act, 1999 – Comprehensive Notes

FEMA 1999

The Foreign Exchange Management Act, enacted in 1999 and effective June 1, 2000, shifting from a regulation/criminal approach under FERA to a management/civil approach.

Capital Account Transaction (CAT)

Transactions that alter assets or liabilities (including contingent) outside India for Persons Resident in India (PRIIs) or in India for Persons Resident Outside India (PROIs).

Current Account Transaction (CuAT)

Any transaction other than a Capital Account Transaction, including payments for foreign trade, services, interest on loans, remittances for living expenses abroad, and expenses for foreign travel, education, and medical care.

Person Resident in India (PRII)

A person residing in India for more than 182 days in the preceding financial year, with certain exceptions for specific purposes like employment, business, or indefinite stay abroad.

Person Resident Outside India (PROI)

A person who is not a Person Resident in India.

Authorised Persons (APs)

Entities recognized by FEMA for dealing in foreign exchange, such as Authorised Dealers (ADs), Money Changers, or Offshore Banking Units.

Liberalised Remittance Scheme (LRS)

A scheme under FEMA allowing resident individuals (including minors) to remit up to USD\;250,000 per financial year for any permissible current or capital account transaction.

Directorate of Enforcement

The official body responsible for enforcement under FEMA, as per Section 36 of the Act.

Currency [2(h)]

Currency notes, postal/money orders, cheques, drafts, travelers cheques, Letters of Credit, Bills of Exchange, promissory notes, credit cards, or similar instruments as notified by RBI.

Export [2(l)]

Taking goods out of India or providing services from India to a person outside India.

Import [2(p)]

Bringing goods or services into India.

Transfer [2(ze)]

Refers to the act of selling, purchasing, exchanging, mortgaging, pledging, gifting, loaning, or any other form of transferring right, title, possession, or lien of foreign exchange or security.

Export of Goods (Merchandise Trade)

Selling and sending physical products manufactured or produced in India to other countries (e.g., textiles, pharmaceuticals).

Import of Goods (Merchandise Trade)

Purchasing and bringing physical products from other countries into India (e.g., crude oil, electronic goods).

Export of Services (Invisible Trade)

Providing services from India to persons or entities outside India (e.g., IT services, BPO, tourism for foreigners visiting India).