What are the differences between FERA and FEMA?
What is FERA?
Foreign Exchange Regulation Act (also known as FERA), was introduced in the year 1973. The act came into force, to regulate inflow and outflow of foreign currency, foreign payments, securities and purchase of fixed assets by the foreigners.
The FERA was promulgated in India at a time when it does not have good foreign exchange reserve. It aimed at conserving foreign currency and its optimum utilisation for the development of the economy.
What is FEMA?
In the budget of 1997-98, the government had proposed to replace FERA-1973 by FEMA (Foreign Exchange Management Act). It came into force on June 1, 2000. Under the FEMA, provisions related to foreign exchange have been modified and liberalised so as to simplify foreign trade and payments.
The important goal of FEMA is to amend and integrate all laws related to foreign currency in India. In addition to this, FEMA aims to promote foreign payments, export of the country and promote foreign capital and investment in the country to promote holistic development of India.
FEMA also encourages the maintenance and improvement of the foreign exchange market in India. FEMA provides complete independence to a person living in India that he/she can buy property outside India.
Let's know what are the differences between FERA and FEMA;
| S.N. |
FERA |
FEMA |
| 1. |
It was approved by the Parliament in 1973. |
It was approved by the Parliament in 1999. |
| 2. |
Currently it is not in force. |
Currently it is not in force. |
| 3. |
It had 81 sections. |
It had 49 sections. |
| 4. |
It was implemented to regulate foreign payments and to ensure optimum use of foreign currency in India. |
It aims to promote foreign trade, foreign payments and to increase size of foreign exchange reserve in the country. |
| 5. |
Under FERA, only "citizenship" was a criterion to conclude the residential status of a person. |
As per this law; a person who is living in India from last 6 months can be considered as an Indian. |
| 6. |
The crime was kept in criminal offence category. |
The crime was kept in Civil offence category. |
| 7. |
If anyone found guilty of FERA violation; there was a provision of punishment directly. |
Fine or imprisonment (if the person does not deposit the prescribed penalty within 90 days from the date of conviction). |
| 8. |
The accused was considered guilty as soon as the lawsuit was filed and he had to prove that he is innocent. |
In FEMA, the accused is not liable to prove his innocence but burden lies on the FEMA officer to prove him guilty. |
| 9. |
A person has to obtain permission of RBI with regard to transfer of funds related to external operations. |
There is no requirement of pre approval from RBI related to remittances & external trade. |
Hopefully; depending on the differences given above, you must have understood that what are the differences between FERA and FEMA and why FERA was replaced by the FEMA?
