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Facilitates Growth Healthy Development of Market: Forex
Facilitates Growth Healthy Development of Market: Forex
PTMBA – HR
Group 2
04 Kapil Asrani 14 Melrosa Fernandes
FERA to FEMA
Foreign Exchange Management Act (FEMA)1999
∆ Extent of FEMA
– applicable to the entire country
– Agencies, branches, and offices, outside India, that are owned by Indian
residents
– dispute that are committed in offices, agencies and branches outside India
that are owned by individuals covered by this act
•
∆ Objectives of FEMA:
– to consolidate and amend the law relating to foreign exchange
– to facilitate external trade and payments
– to promote the orderly development and maintenance of foreign exchange
market in India
•
∆ Implementation of FEMA:
•
•
Salient features of FEMA
∆ Facilitate trade rather than prevent misuse of foreign
exchange.
∆ Definitions of capital account transaction and current
account transaction
∆ All current account transactions shall be allowed
∆ All key sections simplified
∆ Attitude is of putting trust in the persons covered
•
∆
FEMA Rules & Policies
∆ Section 2 - clarity on several definitions and terms used in the
context of foreign exchange
∆ Section 3 prohibits dealings in foreign exchange except through
an authorized person
∆ Section 4restrains any person resident in India from acquiring,
holding, owning, possessing or transferring any foreign
exchange, foreign security or any immovable property situated
outside India except as specifically provided in the Act.
∆ Section 6 deals with capital account transactions.
New terms under FEMA
∆ Person
∆ Person resident in India
– A person who has been residing in India for more than 182 days, in
the last financial year
– Any person or body corporate registered or incorporated in India,
or
– An office, branch or agency in India owned or controlled by a
person resident outside India, or
– An office, branch or agency outside India owned or controlled by a
person resident in India
∆ Person resident outside India
– "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
– Current Account Transactions
∆
A Step ahead from FERA To FEMA
Export of Services
Residential Status
aresumption
and The
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FERA – FEMA: Differences
Authorizedperson
"Authorized Person in FERA
has" been wastoa include
widened narrow banks
one , (money
2(b) changes, off shore banking Units etc. (2 ( c )
Amendments
∆ Automatic Approval for External Commercial Borrowings
– amounts upto US $ 50 Million without taking prior approval of
the Ministry of Finance / RBI, subject to the following
conditions:
– The loan is raised from internationally acceptable and
recognized lenders
– The average maturity of the loan is not less than 3 years
– The loan should be organized through a reputed merchant
banker registered with the regulatory authorities of the host
country.
process
∆
Case Study: Kites
FEMA Provisions
∆ an individual can carry up to $ 10,000 on foreign visits – $
5000 in cash and the rest in travel cheques
∆ FEMA violations can attract a fine three times the transaction
amount. Primarily there is no imprisonment for violation of
the law. However, if the person cannot pay the penalty, then
he can be arrested.
∆ RBI Contraventions
•
Evaluation
∆The primary trigger for the highlight of this case is the issue of
pending dues between Spectrum Entertainment and Rakesh Roshan’s
production house
∆The first violation mentioned is the more serious offense, and can
invite penalty of upto three times the original amount as
applicable
∆Expenses upon personal budget are also supported by Challans,
receipts etc., but the production house, which is gaining tax
benefits, can easily absorb the expenditure as creative expenses
Case Study: Kites
Allegations
∆controversial real estate deals by foreigners in Goa could well have
been funded by proceeds from crime and narcotics trade
∆large volumes of money were being illegally routed by several
foreign-run companies from tax havens abroad to purchase properties
in coastal resort villages in the state
∆no IT returns are filed at all
Case Study: Foreigners buying immovable proper
FEMA Provisions
∆ Who can freely purchase immovable property in India?
∆ A foreign national of non-Indian origin cannot be a second
holder to immovable property purchased by NRI / PIO.
∆ A foreign national of non-Indian origin, resident outside
India cannot purchase any immovable property in India.
•
Case Study: Foreigners buying immovable proper
∆ This was a political issue which was raised with an objective arise
interest in the vote bank more than the legal applicability.
∆ The provisions under FEMA do not allow the foreign national to
own immovable property, hence Taxis and motorbikes do not
fall under a FEMA violation.
∆ The shops are being run by the foreign nationals and the owner on
paper is a PIO/NRI, which can definitely attract litigation – this is
a clear violation
∆ The formation of a Company under Companies Act is being
followed and advised by some of the foreign nationals, so it
falls under completely legal activities.
•
Conclusion
TH A N K Yo U