FERA And FEMA

FERA was enacted to manage payments and foreign exchange in India; on the other hand, FEMA was enacted to facilitate external transactions and encourage orderly foreign exchange management in India.

FERA

The operations of multinational corporations (MNCs) in India were specifically mentioned in Section 29 of this Act. According to the Section, any non-banking foreign branches and subsidiaries with foreign equity greater than 40% are required to obtain approval to start new operations, purchase existing firm shares, or acquire entirely or partially any other company. An Act to consolidate and amend the law governing certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange, and currency import and export to conserve the country’s foreign exchange resources and ensure their proper use in the interests of the country’s economic development. It covers the entire country of India. It also applies to all Indian citizens living outside of India, as well as the branches and agencies of firms or bodies corporate registered or incorporated in India.

Provided, however, that different dates may be set for separate provisions of this Act, and any reference to the commencement of this Act in any such provision must be understood as a reference to that provision’s coming into force.

FEMA

Among the many goals of the Foreign Exchange Management Act (FEMA), one of the most essential is to update and consolidate all foreign exchange legislation. FEMA also wants to encourage international payments and trade in the country. Another significant goal of the Foreign Exchange Management Act (FEMA) is to encourage India’s foreign exchange market to be maintained and improved. 

It supports full current account convertibility and includes measures for the gradual liberalisation of capital account transactions. It is clearer in its application because it specifies the areas in which the Reserve Bank/Government of India must grant explicit authorisation for the acquisition/holding of foreign cash. Foreign exchange transactions were divided into two categories: capital account and current account transactions. It gives the Reserve Bank the authority to define the types of capital account transactions and the exchange limitations for such transactions in conjunction with the federal government.

Difference between FERA and FEMA-

FERA-In 1973, India’s parliament established the Foreign Exchange Regulation Act. It became effective on January 1, 1974. The Vajpayee government repealed FERA in 1998. It is divided into 81 sections. Foreign Exchange is a rare resource. Hence FERA was created with that in mind.

Foreign payments were governed by FERA guidelines. FERA was created to preserve foreign exchange.  The concept of an Authorized Person did not include banking units. If FERA rules were broken, it was deemed a criminal offence. Legal assistance was not provided to a person suspected of violating the FERA.

FEMA- On December 29, 1999, India’s Parliament passed the Foreign Exchange Management Act (FEMA), which replaced the Foreign Exchange Regulation Act (FERA). It went into effect in June of 2000. FEMA took over from FERA. It is divided into 49 pieces. FEMA was created on the premise that foreign exchange is a valuable asset. FEMA aimed to boost India’s foreign exchange reserves while also facilitating international payments and trade. The FEMA’s mission is to manage foreign exchange. Authorised Persons included banking units in their definition. If the FEMA rules were broken, it would be deemed a civil offence. A person accused of violating FEMA will receive legal assistance.

Conclusion-

FEMA and FERA are economic-based topics and are the acts that were implemented for the same concern. The priority of describing FEMA is on ‘exchange management,’ as is evident from the Act’s name, whereas the importance of explaining FERA was on ‘exchange regulation,’ or exchange charge. The Foreign Exchange Management Act (FEMA) was enacted in 1999 to replace the Foreign Exchange Regulation Act (FERA).

FERA and FEMA are two pieces of legislation implemented by the Indian government to help with the foreign currency market. The earlier act, FERA, was superseded in 1999 by the more flexible and efficient FEMA. FERA applied to Indian citizens and was created at a period when the country’s foreign exchange was having difficulties, whereas FEMA applied to people who stayed in India for more than six months. The approach to forex, violation, and punishment, as well as the basis for residential status and purpose, are all major distinctions between the two acts.

FERA was enacted to manage payments and foreign exchange in India; on the other hand, FEMA was enacted to facilitate external transactions and encourage orderly foreign exchange management in India.

FERA

The operations of multinational corporations (MNCs) in India were specifically mentioned in Section 29 of this Act. According to the Section, any non-banking foreign branches and subsidiaries with foreign equity greater than 40% are required to obtain approval to start new operations, purchase existing firm shares, or acquire entirely or partially any other company. An Act to consolidate and amend the law governing certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange, and currency import and export to conserve the country’s foreign exchange resources and ensure their proper use in the interests of the country’s economic development. It covers the entire country of India. It also applies to all Indian citizens living outside of India, as well as the branches and agencies of firms or bodies corporate registered or incorporated in India.

Provided, however, that different dates may be set for separate provisions of this Act, and any reference to the commencement of this Act in any such provision must be understood as a reference to that provision’s coming into force.

FEMA

Among the many goals of the Foreign Exchange Management Act (FEMA), one of the most essential is to update and consolidate all foreign exchange legislation. FEMA also wants to encourage international payments and trade in the country. Another significant goal of the Foreign Exchange Management Act (FEMA) is to encourage India’s foreign exchange market to be maintained and improved. 

It supports full current account convertibility and includes measures for the gradual liberalisation of capital account transactions. It is clearer in its application because it specifies the areas in which the Reserve Bank/Government of India must grant explicit authorisation for the acquisition/holding of foreign cash. Foreign exchange transactions were divided into two categories: capital account and current account transactions. It gives the Reserve Bank the authority to define the types of capital account transactions and the exchange limitations for such transactions in conjunction with the federal government.

Difference between FERA and FEMA-

FERA-In 1973, India’s parliament established the Foreign Exchange Regulation Act. It became effective on January 1, 1974. The Vajpayee government repealed FERA in 1998. It is divided into 81 sections. Foreign Exchange is a rare resource. Hence FERA was created with that in mind.

Foreign payments were governed by FERA guidelines. FERA was created to preserve foreign exchange.  The concept of an Authorized Person did not include banking units. If FERA rules were broken, it was deemed a criminal offence. Legal assistance was not provided to a person suspected of violating the FERA.

FEMA- On December 29, 1999, India’s Parliament passed the Foreign Exchange Management Act (FEMA), which replaced the Foreign Exchange Regulation Act (FERA). It went into effect in June of 2000. FEMA took over from FERA. It is divided into 49 pieces. FEMA was created on the premise that foreign exchange is a valuable asset. FEMA aimed to boost India’s foreign exchange reserves while also facilitating international payments and trade. The FEMA’s mission is to manage foreign exchange. Authorised Persons included banking units in their definition. If the FEMA rules were broken, it would be deemed a civil offence. A person accused of violating FEMA will receive legal assistance.

Conclusion-

FEMA and FERA are economic-based topics and are the acts that were implemented for the same concern. The priority of describing FEMA is on ‘exchange management,’ as is evident from the Act’s name, whereas the importance of explaining FERA was on ‘exchange regulation,’ or exchange charge. The Foreign Exchange Management Act (FEMA) was enacted in 1999 to replace the Foreign Exchange Regulation Act (FERA).

FERA and FEMA are two pieces of legislation implemented by the Indian government to help with the foreign currency market. The earlier act, FERA, was superseded in 1999 by the more flexible and efficient FEMA. FERA applied to Indian citizens and was created at a period when the country’s foreign exchange was having difficulties, whereas FEMA applied to people who stayed in India for more than six months. The approach to forex, violation, and punishment, as well as the basis for residential status and purpose, are all major distinctions between the two acts.