Foreign Exchange Regulation Act (FERA), 1973
The Foreign Exchange Regulation Act (FERA)
was promulgated in 1973 and came into power on 1 January 1974. Section 29 of this Act related to the services of
MNCs in India. According to the section, all non-banking foreign subsidiaries
with more than 40 percent foreign equity are required to certify separate
functions, to receive allowances in subordinate companies, or to acquire each
other company wholly or exclusively.
An amendment to the law governing specific payments,
transactions in foreign exchange and contracts, transactions affecting the
import and export of foreign currency and foreign currency, maintenance of the
country's foreign exchange reserves and its use.
Peculiarities of FERA:
· It continues for the entirety of India.
· It applies to all
residents outside India and to departments and firms outside India, which are
outside organizations or bodies in India or are disclosed or consolidated in
India.
It shall come
into force on this date by a declaration in the Gazette of the Central
Government, the representative in this regard:
It is submitted that different dates can be chosen for
different requirements of this Act and any endorsement in any purchase for the
initiation of this Act will be interpreted as a sign of developing in the
strength of that purchase.
According to these instructions, the initial rule was
that all parts and branches of foreign companies operating in India should
convert themselves into Indian organizations, including at least 60 percent
local equality support. In addition, all foreign subsidiaries must produce
foreign equity shares of 40% or less than 40%. The exact effect of the
act was completely contradictory to the economic expansion of the country as it
obliged the instructions of giant corporate houses to grow their enterprises,
hence it was considered by policy makers that the Act should have notable entertainment
so that the economic Promotion can be done in the country through
industrialization for development.
Foreign Exchange Management Act (FEMA), 1999
The ForeignExchange Management Act (FEMA) was launched in Parliament on 4 August 1998
by the Government of India. The purpose of the Bill is to "strengthen and improve the law that reads
foreign exchange with foreign currency to promote and improve external trade
and payments." Systematic expansion and protection of the foreign
exchange market in India.
Within the many aspirations of the Foreign Exchange Management Act (FEMA), there is a comprehensive
one to reform and consolidate all laws associated with foreign exchange. In
addition, FEMA aims to improve foreign payments and trade in the country.
Various important objectives of the Foreign
Exchange Management Act (FEMA) are to encourage the maintenance and
improvement of the foreign exchange market in India.
Features of FEMA some of the essential features of the Foreign Exchange Management Act are:
This is consistent with substantial prevailing account
convertibility and includes purchases for liberalization of statement account
transactions.
It is highly translucent in its use due to deposits under
sections claiming special permission of ReserveBank of India / Government of India on recovery of foreign currency.
It listed foreign exchange transactions in two divisions,
viz. Capital Account Transactions and Current Account Transactions.
This presents the Reserve Bank with the ability to submit
consultations, investments, Types of capital account transactions and transfer
limits for all those transactions.
It is the absolute freedom of any foreign resident / person residing in India or the residence of a person living outside India to bear / self transfer and purchase any foreign security / immovable property established outside India.
This action contradicts a civil law and an act that
exists only for arrests in exceptional cases.
FEMA: A Major Departure from FERA
As is evident from the name of the Act itself, the
importance of explaining FERA is on 'Exchange Management' as under FERA this importance was on Exchange Regulation or
exchange fee. Under the FERA, it was necessary to obtain the Reserve Bank's
permission, unless specific or common to most regulations. FEMA has initiated
about a sea change in the interest and absence of Section 3 which is aided for
distribution in foreign exchange etc. There is no other requirement to obtain
FEMA designated Reserve Bank permission.
Comparison between FERA and FEMA:
The principal variations among FERA and FEMA:-
The FERA was assembled with 81 different and complex
requirements, although FEMA has only 48 simple divisions.
It is prevalent that this account was not settled under
FERA, although it was established in FEMA.
Another extended meaning of FEMA is "authorized person" and includes
banks.
Adaptability with IT was not traded at all with the
support of FERA, yet FEMA has made purchases for IT.
Under, its demolition was an illegal crime that was
turned into a civil offense in FEMA.
Under FERA, the application managed to be transferred to
the High Court, however, FEMA required a Special Director (Appeals) and a Special Tribunal.
Under FERA, no assistance was given to the accused,
although as per section 32 of FEMA, the accused have the right to seek guidance
from legal practitioners or lawyers.
FERA was with the major objective of the preservation of
foreign exchange, although FEMA was introduced with the major objective of
managing foreign exchange.
FERA was formed by assuming that foreign exchange is a
scarce resource and therefore should be protected and managed with exceptional
care, although FEMA was created with the principle that foreign exchange is an
asset and its exact must be management.
Only authorized dealers and money changers under FERA
were determined to be authorized individuals, however, even after FEMA,
offshore banking units were included in this definition.
FERA is an act prescribed for the payment and monitoring of foreign exchange in India. FEMA inaugurated an act to promote external trade and payments and to encourage the systematic management of the foreign exchange market in the country.
FEMA turned out to be an extension of the more early
foreign exchange act FERA.
When the foreign exchange reserve position in the country was not reliable at the time of the establishment of FEMA, FERA came into force, the foreign exchange reserve position was sufficient.
FERA's strategy towards foreign exchange transactions is
quite traditional and definitive but in the case of FEMA, the approach is
favorable.
FERA depreciation is a non-compound crime at the heart of
the law. The FEMA contradiction violation is a complex offense and charges can
be dropped.
A person's citizenship is the foundation to search for a
person's residential status in FERA, whereas in FEMA the person's domicile in
India should not be less than six months.
Controlling the requirement of FERA can lead to imprisonment. Conversely, the penalty for breaking and violating FEMA provisions is a monetary penalty, which can result in imprisonment if the penalty is not paid on time.
Acquisition of property under FERA and FEMA
There is a major difference between FERA and FEMA related
to the acquisition of property in India. Following FERA, "citizenship 'was
a guideline for acquiring property; under FEMA it is" domicile "which
is the criterion. This indicates that, under the FERA provisions, a person who
is an Indian citizen owns property in India. Can acquire and a foreign citizen
cannot buy property in India (except with permission to NRI).Nevertheless,
under FEMA, an Indian resident can acquire property in India which is not allowed
to non-residents. In particular, FEMA has evolved as a replacement or
enhancement on the former FERA.
Further, as per FERA / FEMA regulations, a foreign
company has a branch office or other place of business in India, which can
acquire immovable property in India which is incidental or subsidiary to carry
out such activity.
