What is the FEMA Act?

The Foreign Exchange Management Act (FEMA) was launched in 1999 to monitor the law and regulation of foreign exchange. Previously, it was managed by the FERA, which is the Foreign Exchange Regulations Act. It was replaced by FEMA because FERA had strict and violated. This act provides an easy cross-border transaction and foreign investments, which make India's economy more strong, transparent, and friendly for investment. 

 Objectives of the Foreign Exchange Management Act (FEMA) 

• The FEMA Act helps individuals and businesses in India with a smooth and secure flow of money from other countries for various purposes like travel, education, investments, and business. 
• It helps you to know your money flow status for the foreign exchange coming into the country and out of the country.  
• It also acts as a reserve to help the country in emergencies. 
• The FEMA acts help allow foreign investments in India with a legal and transparent process to encourage Indian businesses.
• It makes relationships stronger with other countries through foreign exchange and trade rules.  

FEMA Act Applicability 

The FEMA Act applies to: 

• Foreign security. 
• Export of any services or commodities from India to another country.
• Import of any commodity or service from outside countries to India. 
• Any securities which is under the Public Debt Act 1994.
• Financial, banking, and insurance services. 
• Any company owned by an NRI that holds more than 60% ownership.  
• Any citizen of India living in the country or outside India. 
• Foreign exchange.