FEMA 1999 (replaced FERA). Current vs capital account. NRI property (no agricultural) + investment + repatriation. LRS $250K. Civil penalties up to 3x. RBI + ED administered.
FEMA = Foreign Exchange Management Act 1999. Replaced FERA 1973. REGULATES: (1) Cross-border transactions. (2) Foreign investment in India + Indian investment abroad. (3) NRI banking + property. (4) Import/export payments. (5) Repatriation rules. KEY: (1) CIVIL law (FERA was criminal). (2) ADMINISTERED by RBI + ED (Enforcement Directorate). (3) FACILITATES trade (vs FERA's restrictive approach). (4) PENALTIES: up to 3x amount involved. NRIs + businesses + investors must comply.
FEMA TRANSACTION TYPES: (1) CURRENT ACCOUNT: trade payments, travel, education, medical, remittances. GENERALLY PERMITTED (some limits — LRS ₹2.5L→ expanded). (2) CAPITAL ACCOUNT: investment, property, loans, foreign assets. REGULATED + needs RBI approval/automatic route. EXAMPLES: (a) Foreign tour payment: current. (b) Buying foreign property: capital. (c) FDI in Indian company: capital. (d) Salary remittance: current. STRATEGIC: capital account transactions need careful FEMA compliance.
NRI UNDER FEMA: (1) PROPERTY: NRIs can buy residential + commercial (NOT agricultural land/farmhouse/plantation). (2) INVESTMENT: stocks (PIS route), MF, bonds, NPS allowed. (3) REPATRIATION: NRE fully repatriable, NRO up to $1M/year. (4) INHERITANCE: NRIs can inherit any property (including agricultural). (5) GIFT: from relatives allowed. (6) FDI: automatic route for most sectors. STRATEGIC: NRI investments largely liberalized under FEMA — but agricultural land restriction remains.
LRS (Liberalised Remittance Scheme) under FEMA: (1) RESIDENT INDIANS can remit up to $250,000 per FY abroad. (2) PURPOSES: education, travel, medical, investment, property, gifts. (3) TCS 20% above ₹7L (5% education/medical). (4) Foreign stocks, property, bank accounts allowed. (5) NO further RBI approval within limit. (6) PROHIBITED: lottery, margin trading, certain countries. STRATEGIC: HNW use LRS for global diversification. Schedule FA disclosure mandatory for foreign assets acquired.
FEMA STRATEGY: (1) NRI: understand repatriation limits (NRE free, NRO $1M). (2) RESIDENT: LRS $250K limit + 20% TCS above ₹7L. (3) PROPERTY: NRIs avoid agricultural land. (4) FOREIGN ASSETS: Schedule FA disclosure in ITR. (5) BUSINESS: FDI/ODI compliance via authorized dealer banks. (6) FORM 15CA/CB for foreign remittances. (7) PENALTIES: up to 3x amount + ED scrutiny. (8) ANNUAL compliance: foreign asset reporting. (9) ENGAGE FEMA-specialist CA for cross-border. CRITICAL for NRIs, returning Indians, global investors, businesses with foreign operations.