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FEMA 2000

Definition of FEMA 2000

FEMA 2000 means Foreign exchange management Act 2000. Foreign exchange management act 2000 is very helpful law for development of foreign exchange market in India. It was passed in 1999 and came into effect from June 1, 2000 to entire country. After this foreign exchange regulation act ( FERA ) 1973 was closed . FEMA was most suitable for India corporate sector instead of FERA because almost all strict regulations of FERA were removed in FEMA .

Objectives of FEMA

1. Main objective of apply FEMA is to reduce the restriction on foreign exchange . Now , any offense in foreign exchange will be civil offense not criminal offense .

2. This law's main objective is to increase the flow of foreign exchange in India. Now , under this law , you can bring foreign currency in India without any legal barrier .

Provision /Rules / Regulation of FEMA

1. Provision regarding dealing in foreign exchange :-

According to section 3 of FEMA 2000 ," only authorized person under the govt. terms can deal in foreign exchange in India . "

2. Provision regarding holding of foreign exchange :-

According to section 4 of FEMA 2000, " All persons which are provided authority only can hold or purchase foreign exchange in India or outside India."

3.Provision regarding current account transactions :-

According to section 5 of FEMA 2000 ," There is no restriction regarding sale or deal foreign exchange , if it is a current account transaction ."

The following transaction are deemed current account transactions under FEMA :-

a) Expenses in connection with foreign travel , education and medical care of parents , spouse and children ( Any body now can send the foreign currency in India for above expenses under current account )

b) Payment due as interest on loan

c) Payment due under short term loan for business .

4. Provision regarding capital account transactions :-

Under section six ," RBI will fix the limit of foreign exchange transactions relating to capital account after discussion with Indian govt. "

RBI can restrict following :-

a) transfer of foreign security by Indian resident .

b) transfer of foreign security by Indian resident which is now outside India .

c) transfer of immovable property .

5. Provision regarding export of goods and services :-

According to section 7 of FEMA 2000 , " It is the duty of exporter to declare the true and correct detail of goods which , he have to sell the market outside India and must send complete report to RBI .

RBI can make particular requirement for any exporter .

RBI can also make rules and regulations for realization of amount earned from foreign country.

6. Provision regarding authorised persons :-

RBI can authorize any body who can deal in money exchange or off shore transaction and foreign exchange .

  • He has to follow the rules and guidelines of RBI .
  • RBI can revoke the authorisation granted to any person at any time in public interest .
  • If authorized person will be done contravention the rules of RBI , he will be liable to pay up to Rs. 10000 penalty and Rs. 2000 for every day during which such contravention continue .

7. Provision regarding contravention and penalties :-

Section 13 to 15

If any body or person contravenes the rules and regulation of FEMA 2000 or RBI direction , he will be liable to a penalty three times of sum involved in contravention .

If contravention will continue , then he will pay upto Rs. 5000 per day during the time of contravention .

8. Provision regarding adjucation and appeal :-

According to section 18, " Central govt. can appoint adjudicating authority who can give the punishment of civil imprisonment of maximum six months if case is less than one crore . If demanded value is more than one crore then punishment of imprisonment may be of three years . the person can appeal to special director against the decisions of adjudicating officer . He can also appeal in appellate tribunal and also in high court with the sixty days of communication of order .


  1. very nice. it is very helpful for international business students.
    thank you.

  2. Phoiai New DelhiJune 20, 2011 at 7:04 PM

    Very Good Answer
    Thank You

  3. Thank you so much to given me discription of FEMA, it must help me for my examination . Regards. Sakshi uniyal


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