Exemption In FEMA, 1999

FEMA is an Act to combine and modify the law related to foreign exchange with the objective to facilitate external trade, payments and to promote orderly development and maintenance of foreign exchange market in India.

On the 1st of June 2000, the Foreign Exchange Regulation Act of 1973 (FERA) in India was revoked. In the winter session of the Parliament in 1999 it was replaced by the Foreign Exchange Management Act (FEMA). Enacted in 1973, in the background of acute shortage of Foreign Exchange in the country, FERA had a contentious 27 year stretch during which many bosses of the Indian Corporate world found themselves at the mercy of the Enforcement (E.D.). Under FERA any offense was considered as a criminal offense liable to imprisonment, whereas FEMA endeavors to make offenses which are related to foreign exchange civil offenses.

FERA has been replaced by FEMA, which has become the need of the hour since FERA had unsuited with the pro-liberalization policies of the Government of India. A new management rule has been introduced for Foreign Exchange consistent with the rising frame work of the World Trade Organization (WTO). It is another matter that performance of FEMA also brought with it Prevention of Money Laundering Act, 2002 which came into effect recently from 1st of July 2005 and the heat of which is yet to be felt as “Enforcement Directorate” would be investigating the cases under PMLA too.

Circumstances Where Holding and Repatriation of Foreign Exchange Is "Exempted" From FEMA Rules:

With regards to the Holding and Repatriation of Foreign Exchange, the provisions of FEMA will not apply in the following circumstances:

1. Ownership of foreign currency or foreign coins by any person up to a limit as specified by the Reserve Bank.
2. The Reserve Bank should specify the limit to foreign currency account held or operated by person or class of persons.
3. Foreign Exchange acquired or received before the 8th of July 1947 or any income arising or accruing thereon, which is held outside India by any person in pursuance of a general or special permission granted by the Reserve Bank.
4. Foreign Exchange held by a person who resides in India up to a specific limit specified by the Reserve Bank. If such foreign exchange was acquired by way of gift or inheritance from a person who acquired or received it before 8th of July 1947 or if the income has occurred to him, which was held outside India in pursuance of a general or special permission granted by the Reserve Bank.
5. Foreign Exchange acquired from employment, trade vocation, services, business, gifts, inheritance or any other lawful means up to the limit as specified by the Reserve Bank.
6. Other receipt in foreign Exchange as specified by the Reserve Bank.