FERA vs FEMA

✔️  Key Differences Between FERA and FEMA

FERA FERA is an acronym for Foreign Exchange Regulation Act. It was passed by the Parliament of India in 1973. The act came into force on 1st January 1974. FERA Act was repealed by the Vajpayee government in 1998. It was enacted to regulate foreign exchange and payments in India. Its main objective was to conserve forex transactions. The rules and regulations of FERA on foreign exchange were conservative and restrictive. This act came into force when the forex position in the country was not good. Comparatively, FERA Act is lengthier as it has 81 sections. Under this act, the definition of the term ‘Authorized person’ was narrow. Under this act, the citizenship of an individual was the basis for determining his/her residential status. Under FERA, no provisions were made for IT. Violation of the provisions of FERA has been considered a criminal offence and the punishment for contravention was imprisonment. Violation of FERA was a non-compoundable offence i.e. the offence cannot be compromised. Moreover, the accused was not allowed any assistance from the lawyer. The appeals were sent to the Supreme Court. According to FERA, an individual should obtain permission from the RBI to carry out forex transactions.

❤️ FEMA FEMA is an acronym for Foreign Exchange Management Act. FEMA Act was passed by the Parliament of India in 1999 to replace the FERA. It came into force on 1st June 2000. FEMA is currently active in the country. It was enacted to remove the stringent regulations on foreign exchange and promote orderly management of foreign exchange and payments. Its main objective was to manage the forex transactions. The approach of FEMA Act toward foreign exchange is flexible. This act was introduced when the strict provisions of FERA were hampering the growth of the Indian economy. FEMA has 49 sections and is shorter than the FERA. Under this act, the definition of the term ‘Authorized person’ is broad and it has included the banks under it. Under this act, the basis for determining the residential status was that an individual should be residing in India for the past 6 months. Provisions on IT were introduced under the FEMA Act. Violation of the provisions of FEMA has been considered a civil offence and the punishment for contravention was a monetary penalty. If an individual fails to pay the penalty on time, he/she may be imprisoned. Violation of FEMA is a compoundable offence and the charges can be compromised or removed. FEMA provides the accused the right to obtain legal assistance from a lawyer. A special director and a special court were introduced under FEMA to address the appeals. Under FEMA, no such pre-approval or permission of RBI is required to carry out forex transactions.