How is the (FEMA) different from the (FERA)

How is the Foreign Exchange Management by Act (FEMA) different from the Foreign Exchange Regulation Act (FERA)?

The Foreign Exchange Management Act (FEMA) and the Foreign Exchange Regulation Act (FERA) are both Indian laws that regulate foreign exchange in India. However, there are some key differences between the two acts:

Purpose: The main difference between the two acts is their purpose. FEMA was introduced in 1999 to simplify and liberalize the foreign exchange regulations in India, while FERA was introduced in 1973 to regulate foreign exchange transactions in India and to conserve the country's foreign exchange resources.

Scope: Another key difference between the two acts is their scope. FEMA applies to all transactions related to foreign exchange, including those involving current account transactions and capital account transactions, whereas FERA only applied to capital account transactions.

Offences and Penalties: Another difference between the two acts is the offences and penalties associated with them. Under FEMA, offences are classified as civil offences, which are punishable with fines, and criminal offences, which are punishable with imprisonment. Under FERA, all offences were treated as criminal offences, punishable with imprisonment and heavy fines.

Approval requirements: Another difference between the two acts is the approval requirements for foreign exchange transactions. Under FEMA, certain transactions, such as those involving foreign direct investment, require prior approval from the Reserve Bank of India (RBI) or the government. Under FERA, all transactions involving foreign exchange required prior approval from the RBI or the government.

Impact on businesses: The two acts also had different impacts on businesses. FERA was seen as a restrictive and burdensome act that imposed severe restrictions on businesses and made it difficult for them to carry out foreign exchange transactions. FEMA, on the other hand, was seen as a more liberal and business-friendly act that provided greater flexibility to businesses in terms of foreign exchange transactions.

Overall, the Foreign Exchange Management Act (FEMA) is a more liberal and business-friendly act compared to the Foreign Exchange Regulation Act (FERA). It simplifies and liberalizes the foreign exchange regulations in India and provides greater flexibility to businesses in terms of foreign exchange transactions.