Business Law Notes #3–Fera & Fema a Comparison
The similarities between FERA and FEMA are as follows:
• The Reserve Bank of India and central government would continue to be the regulatory bodies.
• The Directorate of Enforcement continues to be the agency for enforcement of the provisions of the law such as conducting search and seizure
DIFFERENCES BETWEEN FERA AND FEMA
1)FERA consisted of 81 sections, and was more complex FEMA is much simple, and consist of only 49 sections.
2)NEW TERMS IN FEMA Terms like Capital Account Transaction, current Account Transaction, person, service etc. were not defined in FERA. Terms like Capital Account Transaction, current account Transaction person, service etc., have been defined in detail in FEMA
3)MEANING OF “RESIDENT” AS COMPARED WITH INCOME TAX ACT. There was a big difference in the definition of “Resident”, under FERA, and Income Tax Act The provision of FEMA, are in consistent with income Tax Act, in respect to the definition of term ” Resident”. Now the criteria of “In India for 182 days” to make a person resident has been brought under FEMA. Therefore a person who qualifies to be a non-resident under the income Tax Act, 1961 will also be considered a non-resident for the purposes of application of FEMA, but a person who is considered to be non-resident under FEMA may not necessarily be a non-resident under the Income Tax Act, for instance a business man going abroad and staying therefor a period of 182 days or more in a financial year will become a non-resident under FEMA.
PUNISHMENT Any offence under FERA, was a criminal offence , punishable with imprisonment as per code of criminal procedure, 1973 Here, the offence is considered to be a civil offence only punishable with some amount of money as a penalty. Imprisonment is prescribed only when one fails to pay the penalty.
4)QUANTUM OF PENALTY. The monetary penalty payable under FERA, was nearly the five times the amount involved. Under FEMA the quantum of penalty has been considerably decreased to three times the amount involved.
5)APPEAL An appeal against the order of “Adjudicating office”, before ” Foreign Exchange Regulation Appellate Board went before High Court The appellate authority under FEMA is the special Director ( Appeals)Appeal against the order of Adjudicating Authorities and special Director (appeals) lies before “Appellate Tribunal for Foreign Exchange.”An appeal from an order of Appellate Tribunal would lie to the High Court. (sec 17,18,35)
The definition of “Residential Status” under FEMA has gone through considerable change. It has now been made compatible with the definition provided under “Income Tax” Act.
The residential status is now based on the physical stay of the person in the country. The period of 182 days as provided, indicates that it is not necessary that there should be a continuos period of stay. The period of stay would be calculated by adding up all the days of stay of the individual in the country.
An Indian resident becomes a non-resident when he goes abroad and takes up a job or engages in business.
A major change in the definition of residential status of partnerships and firms in worth noticing. Earlier, under FERA, a branch was considered a resident of a place where it was situated. Now, under FEMA, an office, branch or agency outside India owned or controlled by a person resident in India will be considered a resident in India for the purposes of this Act.
For example, a person residing in India has a branch in Maurtius; such branch will be considered a resident in India.