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Contents FOREIGN EXCHANGE MANAGEMENT ACT, 1999 PAGE

CHAPTER I PRELIMINARY 1. Short title, extent, application and commencement

1

2. Definitions

2 CHAPTER II

REGULATION AND MANAGEMENT OF FOREIGN EXCHANGE 3. Dealing in foreign exchange, etc.

9

4. Holding of foreign exchange, etc.

10

5. Current account transactions

11

6. Capital account transactions

12

7. Export of goods and services

14

8. Realisation and repatriation of foreign exchange

15

9. Exemption from realisation and repatriation in certain cases

15

CHAPTER III AUTHORISED PERSON 10. Authorised person

16

11. Reserve Bank’s powers to issue directions to authorised person

19

12. Power of Reserve Bank to inspect authorised person

19

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CONTENTS

I-6 PAGE

CHAPTER IV CONTRAVENTION AND PENALTIES 13. Penalties

19

14. Enforcement of the orders of Adjudicating Authority

22

14A. Power to recover arrears of penalty

23

15. Power to compound contravention

24

CHAPTER V ADJUDICATION AND APPEAL 16. Appointment of Adjudicating Authority

25

17. Appeal to Special Director (Appeals)

27

18. Appellate Tribunal

28

19. Appeal to Appellate Tribunal

28

20. [Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]

32

21. Qualifications for appointment of Special Director (Appeals)

33

22. [Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]

33

23. Terms and conditions of service of Special Director (Appeals)

34

24. [Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]

34

25. [Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]

34

26. [Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]

34

27. Staff of Special Director (Appeals)

35

28. Procedure and powers of Appellate Tribunal and Special Director (Appeals)

35

29. [Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]

36

30. [Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]

36

31. [Omitted by the Finance Act, 2017, w.e.f. 26-5-2017]

36

32. Right of appellant to take assistance of legal practitioner or Chartered Accountant and of Government, to appoint presenting officers

36

33. Officers and employees, etc., to be public servant

37

34. Civil court not to have jurisdiction

37

35. Appeal to High Court

37

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CONTENTS PAGE

CHAPTER VI DIRECTORATE OF ENFORCEMENT 36. Directorate of Enforcement

38

37. Power of search, seizure, etc.

38

37A. Special provisions relating to assets held outside India in contravention of section 4 38. Empowering other officers

38 39

CHAPTER VII MISCELLANEOUS 39. Presumption as to documents in certain cases

40

40. Suspension of operation of this Act

40

41. Power of Central Government to give directions

41

42. Contravention by companies

41

43. Death or insolvency in certain cases

42

44. Bar of legal proceedings

42

44A. Powers of Reserve Bank not to apply to International Financial Services Centre 45. Removal of difficulties

42 42

46. Power to make rules

43

47. Power to make regulations

44

48. Rules and regulations to be laid before Parliament

45

49. Repeal and saving

45

SUBJECT INDEX

49

FOREIGN EXCHANGE MANAGEMENT (ADJUDICATION PROCEEDINGS AND APPEAL) RULES, 2000 1. Short title and commencement

53

2. Definitions

53

3. Appointment of Adjudicating Authority

54

4. Holding of inquiry

54

5. Appeal to Special Director (Appeals)

55

6. Procedure before Special Director (Appeals)

55

7. Contents of the Order in appeal

56

CONTENTS

I-8 PAGE

8. Representation of party 9. Service of notices, requisitions or orders 10. Appeal to the Appellate Tribunal 11. Procedure before Appellate Tribunal 12. Contents of the Order in appeal 13. Representation of party 14. Service of notices, requisitions or orders FORM I : Form of Appeal FORM II : Form of Appeal

56 56 56 57 57 57 57 59 60

FOREIGN EXCHANGE (AUTHENTICATION OF DOCUMENTS) RULES, 2000 1. Short title 2. Authority for authentication and the manner of authentication of documents

61 61

FOREIGN EXCHANGE MANAGEMENT (CURRENT ACCOUNT TRANSACTIONS) RULES, 2000 1. Short title and commencement 2. Definitions 3. Prohibition on drawal of Foreign Exchange 4. Prior approval of Government of India 5. Prior approval of Reserve Bank 6.

7. Use of International Credit Card while outside India SCHEDULE I SCHEDULE II SCHEDULE III

62 62 62 63 63 63 63 63 64 65

FOREIGN EXCHANGE MANAGEMENT (ENCASHMENT OF DRAFT, CHEQUE, INSTRUMENT AND PAYMENT OF INTEREST) RULES, 2000 1. Short title and commencement

68

2. Definitions

68

I-9

CONTENTS PAGE

3.

4.

5.

6.

7.

8.

Delivery of Draft, Cheque and other Instrument for Encashment Encashment of draft, cheque or other instrument Opening an Account Indemnity Direction for Payment of the proceeds Payment of interest on the seized Indian currency

68 69 69 69 69 69

FOREIGN EXCHANGE MANAGEMENT (NON-DEBT INSTRUMENTS) RULES, 2019 CHAPTER I PRELIMINARY 1. Short title and commencement 2. Definitions 2A. Reserve Bank to administer these rules

70 70 77

CHAPTER II GENERAL CONDITIONS APPLICABLE TO ALL INVESTORS 3. Restriction on investment in India by a person resident outside India 4. Restriction on receiving investment 5. Permission for making investment by a person resident outside India

77 77 78

CHAPTER III INVESTMENT BY PERSON RESIDENT OUTSIDE INDIA Investments by person resident outside India Acquisition through rights issue or bonus issue Acquisition after renunciation of rights Issue of Employees Stock Options, sweat equity shares and Share Based Employee Benefits to persons resident outside India 9. Transfer of equity instruments of an Indian company by or to a person resident outside India 9A. Swap of equity instruments and equity capital

6.

7.

7A. 8.

78 79 80 80 81 84

CHAPTER IV INVESTMENT BY FOREIGN PORTFOLIO INVESTOR (FPI) 10. Investment by FPI

84

11. Transfer of equity instruments of an Indian company by FPI

85

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CONTENTS

PAGE

CHAPTER V INVESTMENT BY NON-RESIDENT INDIAN OR AN OVERSEAS CITIZEN OF INDIA 12. Investment by NRI or OCI

86

13. Transfer of equity instruments by NRI or OCI

86

CHAPTER VI INVESTMENT BY OTHER NON-RESIDENT INVESTORS 14. Investment in securities by other non-resident investors

87

15. Transfer of securities by other non-resident investors

88

CHAPTER VII INVESTMENT BY FOREIGN VENTURE CAPITAL INVESTOR 16. Investment by FVCI

88

17. Transfer of equity instruments of an Indian company by or to a FVCI

88

CHAPTER VIII GENERAL PROVISIONS 18. Issue of Convertible Notes by an Indian startup company

88

19. Merger or demerger or amalgamation of Indian companies

89

20. Reporting requirements

89

21. Pricing guidelines

90

22. Taxes and remittances of sale proceeds

91

23. Downstream investment

92 CHAPTER IX

ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY IN INDIA 24. Acquisition and transfer of property in India by a NRI or an OCI

95

25. Joint acquisition by the spouse of a NRI or an OCI

96

26. Acquisition of immovable property for carrying on a permitted activity

96

27. Purchase or sale of immovable property by Foreign Embassies or Diplomats or Consulate Generals

97

28. Acquisition by a long-term visa holder

97

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CONTENTS PAGE

29. Repatriation of sale proceeds

98

30. Prohibition on transfer of immovable property in India

98

31. Prohibition on acquisition or transfer of immovable property in India by citizens of certain countries 32. Miscellaneous

99

33. Savings

99

99

CHAPTER X INVESTMENT BY PERMISSIBLE HOLDER IN EQUITY SHARES OF PUBLIC COMPANIES INCORPORATED IN INDIA AND LISTED ON INTERNATIONAL EXCHANGES 34. Investment by permissible holder

100

SCHEDULE I: Purchase or sale of equity instruments of an Indian company by a person resident outside India SCHEDULE II: Investments by Foreign Portfolio Investors

100

SCHEDULE III: Investments by Non-Resident Indian (NRI) or Overseas Citizen of India (OCI) on repatriation basis SCHEDULE IV: Investment by NRI or OCI on non-repatriation basis

143

SCHEDULE V: Investment by other non-resident investors

145

SCHEDULE VI: Investment in a Limited Liability Partnership (LLP)

145

SCHEDULE VII: Investment by a Foreign Venture Capital Investor (FVCI)

146

SCHEDULE VIII: Investment by a person resident outside India in an Investment Vehicle SCHEDULE IX: Investment in Depository Receipts by a person resident outside India SCHEDULE X: Issue of Indian Depository Receipts

147

SCHEDULE XI: Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme ANNEXURE

150

140

144

148 149

153

FOREIGN EXCHANGE MANAGEMENT (OVERSEAS INVESTMENT) RULES, 2022 1. Short title and commencement

154

2. Definitions

154

3. Administration of these rules

157

4. Non-applicability of rules and regulations relating thereto in certain cases

157

5. Debt instruments and non-debt instruments

157

CONTENTS

I-12 PAGE

6. Continuity of certain investments

158

7. Rights issue and bonus shares

158

8. Prohibition on investment outside India

158

9. Overseas Investment

158

10. No Objection Certificate

159

11. Manner of making Overseas Direct Investment by Indian entity

160

12. Manner of making Overseas Portfolio Investment by an Indian entity

160

13. Manner of making Overseas Investment by resident individual

160

14. Overseas Investment by person resident in India other than Indian entity and resident Individual

160

15. Overseas Investment in IFSC by person resident in India

160

16. Pricing guidelines

160

17. Transfer or liquidation

160

18. Restructuring

161

19. Restrictions and prohibitions

161

20. Requirements to be specified by Reserve Bank

162

21. Restriction on acquisition or transfer of immovable property outside India

162

SCHEDULE I: Manner of making Overseas Direct Investment by Indian entity

164

SCHEDULE II: Manner of making Overseas Portfolio Investment by an Indian entity

165

SCHEDULE III: Manner of making Overseas Investment by resident individual

166

SCHEDULE IV: Overseas Investment by person resident in India other than Indian entity and resident Individual

167

SCHEDULE V: Overseas Investment in IFSC by person resident in India

169

FOREIGN EXCHANGE (COMPOUNDING PROCEEDINGS) RULES, 2024 1. Short title and commencement

170

2. Definitions

170

3. Compounding authority

170

4. Compounding authorities of Reserve Bank to compound various contraventions

171

5. Compounding authorities of Directorate of Enforcement to compound various contraventions

171

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6. Discontinuation of adjudication

172

7. Discharge on compounding of contravention

172

8. Procedure for compounding

172

9. Contraventions not to be compounded in certain cases

173

10. Payment of amount compounded

173

11. Consequences of failure in paying sum compounded

173

12. Contents of order of Compounding Authority

173

13. Copy of compounding order

173

14. Continuation of pending proceedings

173

FORM

174

FOREIGN EXCHANGE MANAGEMENT (FOREIGN EXCHANGE DERIVATIVE CONTRACTS) REGULATIONS, 2000 1. Short title and commencement

177

2. Definitions

177

3. Prohibition

179

4. Permission to enter into a foreign exchange derivative contract

179

5. [Omitted by the FEM (Foreign Exchange Derivatives Contracts) (First Amendment) Regulations 2020, w.e.f. 18-2-2020]

179

5A. [Omitted by the FEM (Foreign Exchange Derivatives Contracts) (First

180

Amendment) Regulations 2020, w.e.f. 18-2-2020] 5B. [Omitted by the FEM (Foreign Exchange Derivatives Contracts) (First

180

Amendment) Regulations 2020, w.e.f. 18-2-2020] 5C. [Omitted by the FEM (Foreign Exchange Derivatives Contracts) (First

180

Amendment) Regulations 2020, w.e.f. 18-2-2020] 6. Commodity hedge 6A. Freight hedge

180 181

7. Remittance related to a Foreign Exchange Derivative contract

182

8. Remittance related to a Commodity Derivative Contract

182

SCHEDULE I: Permissible Foreign Exchange Derivative Contract

183

SCHEDULE II: [Omitted by the FEM (Foreign Exchange Derivatives Contracts) (First Amendment) Regulations 2020, w.e.f. 18-2-2020]

184

SCHEDULE III: Procedure for application for approval for hedging of commodity price risk

184

CONTENTS

I-14 PAGE

FOREIGN EXCHANGE MANAGEMENT (GUARANTEES) REGULATIONS, 2000 1. Short title and Commencement

186

2. Definitions

186

3. Prohibition

186

3A. Restriction on obtaining overseas guarantee

187

4. Guarantees which may be given by an authorised dealer

187

5. Guarantees which may be given by persons other than an authorised dealer

189

FOREIGN EXCHANGE MANAGEMENT (ISSUE OF SECURITY IN INDIA BY A BRANCH, OFFICE OR AGENCY OF A PERSON RESIDENT OUTSIDE INDIA) REGULATIONS, 2000 1. Short title and commencement

192

2. Definitions

192

3. Prohibition on transfer or issue of security

192

4. Transfer or Issue of Security with the permission of Reserve Bank

192

FOREIGN EXCHANGE MANAGEMENT (PERMISSIBLE CAPITAL ACCOUNT TRANSACTIONS) REGULATIONS, 2000 1. Short title and commencement

193

2. Definitions

193

3. Permissible Capital Account Transactions

194

4. Prohibition

194

5. Method of payment for investment

196

6. Declaration to be furnished

196

SCHEDULE I: Classes of capital account transactions of persons resident in India

196

SCHEDULE II: Classes of capital account transactions of persons resident outside India

197

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CONTENTS PAGE

FOREIGN EXCHANGE MANAGEMENT [WITHDRAWAL OF GENERAL PERMISSION TO OVERSEAS CORPORATE BODIES (OCBs)] REGULATIONS, 2003 1. Short title and commencement

198

2.

198

3. Object and construction of these Regulations

199

4. Overriding effect

199

5. Withdrawal of general permission and unwinding of investments and transactions

199

6. Permission to hedge certain transactions

200

SCHEDULE: Amendments to the existing provisions of the FEMA Regulations

201

FOREIGN EXCHANGE MANAGEMENT (CRYSTALLIZATION OF INOPERATIVE FOREIGN CURRENCY DEPOSITS) REGULATIONS, 2014 1. Short title and commencement

202

2. Definitions

202

3. Crystallisation of inoperative foreign currency deposits

203

FOREIGN EXCHANGE MANAGEMENT (INTERNATIONAL FINANCIAL SERVICES CENTRE) REGULATIONS, 2015 1. Short title and commencement

204

2. Definitions

204

3.

205

4.

205

5.

205

CONTENTS

I-16 PAGE

FOREIGN EXCHANGE MANAGEMENT (REGULARIZATION OF ASSETS HELD ABROAD BY A PERSON RESIDENT IN INDIA) REGULATIONS, 2015 1. Short title and commencement

206

2. Definitions

206

3.

206

4. Regularization of assets held abroad by persons resident in India

206

FOREIGN EXCHANGE MANAGEMENT (EXPORT AND IMPORT OF CURRENCY) REGULATIONS, 2015 1. Short title and commencement

208

2. Definitions

208

3. Export and Import of Indian currency and currency notes

208

4. Prohibition on Export of Indian coins

209

5. Prohibition on export and import of foreign currency

209

6. Import of foreign exchange into India

209

7. Export of foreign exchange and currency notes

210

8. Export and import of currency to or from Nepal and Bhutan

210

9. Reserve Bank’s power to permit export or import of currency

211

10. Reserve Bank’s power to restrict export or import of currency

211

FOREIGN EXCHANGE MANAGEMENT (INSURANCE) REGULATIONS, 2015 1. Short title and commencement

212

2. Definitions

212

3. Permission to take or hold a general insurance policy issued by an insurer outside India

212

4. Permission to take or hold a life insurance policy issued by an insurer outside India

213

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CONTENTS PAGE

FOREIGN EXCHANGE MANAGEMENT (POSSESSION AND RETENTION OF FOREIGN CURRENCY) REGULATIONS, 2015 1. Short title and commencement

214

2. Definitions

214

3. Limits for possession and retention of foreign currency or foreign coins

214

4. Possession of foreign exchange by a person resident in India but not permanently resident therein

215

FOREIGN EXCHANGE MANAGEMENT (REALISATION, REPATRIATION AND SURRENDER OF FOREIGN EXCHANGE) REGULATIONS, 2015 1. Short title and commencement

216

2. Definitions

216

3. Duty of persons to realise foreign exchange due

217

4. Manner of Repatriation

217

5. Period for surrender of realised foreign exchange

217

6. Period for surrender in certain cases

217

7. Period for surrender of received/realised/unspent/unused foreign exchange by Resident individuals

218

8. Exemption

218

FOREIGN EXCHANGE MANAGEMENT (EXPORT OF GOODS AND SERVICES) REGULATIONS, 2015 1. Short title and commencement

219

2. Definitions

219

3. Declaration of exports

220

4. Exemptions

220

5. Indication of importer-exporter code number

222

6. Authority to whom declaration is to be furnished and the manner of dealing with the declaration

222

CONTENTS

I-18 PAGE

7. Evidence in support of declaration

222

8. Manner of payment of export value of goods

223

9. Period within which export value of goods/software/services to be realised

223

10. Submission of export documents

224

11. Transfer of documents

224

12. Payment for the Export

225

13. Certain Exports requiring prior approval: Exports under trade agreement/rupee credit etc.

225

14. Delay in Receipt of Payment

225

15. Advance payment against exports

226

16. Issue of directions by Reserve Bank in certain cases

226

17. Project exports

227

SCHEDULE

227

FOREIGN EXCHANGE MANAGEMENT (FOREIGN CURRENCY ACCOUNTS BY A PERSON RESIDENT IN INDIA) REGULATIONS, 2015 1. Short title and commencement

228

2. Definitions

228

3. Restriction on holding foreign currency account by a person resident in India

228

4. Opening, holding and maintaining Foreign Currency Accounts in India

229

5. Opening, holding and maintaining a Foreign Currency Account outside India

232

6. Types of accounts

237

7. Remittances out of the account after the account holder’s death

237

8. Responsibility of authorised dealers maintaining foreign currency accounts

237

SCHEDULE I: Exchange Earner’s Foreign Currency (EEFC) Account Scheme

237

SCHEDULE II: Diamond Dollar Account (DDA) Scheme

239

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CONTENTS PAGE

FOREIGN EXCHANGE MANAGEMENT (ESTABLISHMENT IN INDIA OF A BRANCH OFFICE OR A LIAISON OFFICE OR A PROJECT OFFICE OR ANY OTHER PLACE OF BUSINESS) REGULATIONS, 2016 1. Short title and commencement

242

2. Definitions

242

3. Prohibition against opening a branch office or a liaison office or a project office or any other place of business in India

243

4. Approval for opening a branch office or a liaison office or a project office or any other place of business in India

243

5. Approval of the Reserve Bank in certain cases for establishment of branch office, liaison office or project office or any other place of business in India

247

ANNEX A : Format of the Letter of Comfort

248

ANNEX B :

249

ANNEX C : Form FNC

250

ANNEX D : Annual Activity Certificate

254

FOREIGN EXCHANGE MANAGEMENT (DEPOSIT) REGULATIONS, 2016 1. Short title and commencement

255

2. Definitions

255

3. Restrictions on deposits between a person resident in India and a person resident outside India

256

4. Exemptions

256

5. Acceptance of deposits by an authorised dealer/authorised bank from persons resident outside India

258

6. Acceptance of deposits by persons other than authorised dealer/ authorised bank

258

7. Other deposits made or held by authorised dealer

259

8. Nomination

260

9. Transfer of funds between repatriable Rupee accounts

260

CONTENTS

I-20 PAGE

SCHEDULE 1: Non-Resident (External) Rupee Account Scheme - NRE Account

260

SCHEDULE 2: Foreign Currency (Non-Resident) Account (Banks) Scheme - FCNR(B) Account

264

SCHEDULE 3: Non-Resident Ordinary Rupee Account Scheme - NRO Account

266

SCHEDULE 4: Special Non-Resident Rupee Account - SNRR Account

270

SCHEDULE 5: Terms and conditions for opening of Escrow Account

272

SCHEDULE 6: Acceptance of deposits by a company incorporated in India (including a non-banking finance company registered with Reserve Bank) on repatriation basis from a Nonresident Indian (NRI) or a Person of Indian Origin (PIO)

274

SCHEDULE 7: Acceptance of deposits by Indian proprietorship concern/ firm or company (including non-banking finance company registered with Reserve Bank) on non-repatriation basis from Non-resident Indian (NRI) or a Person of Indian Origin (PIO)

275

FOREIGN EXCHANGE MANAGEMENT (REMITTANCE OF ASSETS) REGULATIONS, 2016 1. Short title and commencement

277

2. Definitions

277

3. Prohibition on Remittance outside India of assets held in India

278

4. Permission for remittance of assets in certain cases

278

5. Permission to an Indian entity to remit funds in certain cases

279

6. Permission for remittance of assets on closure or remittance of winding up proceeds of branch office/liaison office (other than project office)

280

7. Reserve Bank’s prior permission in certain cases

280

8. Payment of taxes

281

FOREIGN EXCHANGE MANAGEMENT (CROSS BORDER MERGER) REGULATIONS, 2018 1. Short title and commencement

282

2. Definitions

282

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3.

283

4. Inbound merger

283

5. Outbound merger

284

6. Valuation

285

7. Miscellaneous

285

8. Reporting

286

9. Deemed approval

286

FOREIGN EXCHANGE MANAGEMENT (BORROWING AND LENDING) REGULATIONS, 2018 Short Title and Commencement Definitions Prohibition to Borrow or Lend Borrowing from outside India in Foreign Exchange by a Person Resident in India 5. Lending in Foreign Exchange by a Person Resident in India 6. Borrowing in Indian Rupees by a Person Resident in India 7. Lending in Indian Rupees by a Person Resident in India 7A Borrowing and lending by persons resident outside India 8. Continuation of loan in the event of change in the residential status of the lender/borrower 9. Any borrowing under erstwhile regulations can be continued as permitted up to the due date of repayment SCHEDULE I: Borrowings from outside India by a person resident in India SCHEDULE II: Trade Credit for Imports SCHEDULE III: Lending to borrowers outside India by a person resident in India 1.

2.

3.

4.

287 287 289 289 291 291 292 293 293 294 294 296 298

FOREIGN EXCHANGE MANAGEMENT (DEBT INSTRUMENTS) REGULATIONS, 2019 CHAPTER I PRELIMINARY 1. Short Title and Commencement

299

2. Definitions

299

CONTENTS

I-22 PAGE

CHAPTER II GENERAL CONDITIONS APPLICABLE TO ALL INVESTORS 3. Restriction on investment by a person resident outside India

301

4. Restriction on receiving investment

301

5. Permission for making investment by a person resident outside India

301

6. Merger or demerger or amalgamation of Indian companies

302

7. Taxes and remittance of sale proceeds

302

SCHEDULE 1: Purchase and sale of debt instruments by a person resident outside India

302

FOREIGN EXCHANGE MANAGEMENT (MODE OF PAYMENT AND REPORTING OF NON-DEBT INSTRUMENTS) REGULATIONS, 2019 1. Short title and commencement

307

2. Definitions

307

3. Mode of Payment and Remittance of sale proceeds

308

4. Reporting Requirements

314

5. Delays in reporting

317

FOREIGN EXCHANGE MANAGEMENT (MARGIN FOR DERIVATIVE CONTRACTS) REGULATIONS, 2020 1. Short title and commencement

318

2. Definitions

318

3. Prohibition

319

4. Permission

319

FOREIGN EXCHANGE MANAGEMENT (OVERSEAS INVESTMENT) REGULATIONS, 2022 1. Short title and commencement

321

2. Definitions

321

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3. Financial commitment by Indian entity by modes other than equity capital

321

4. Financial commitment by Indian entity by way of debt

322

5. Financial commitment by way of guarantee

322

6. Financial commitment by way of pledge or charge

323

7. Acquisition or transfer by way of deferred payment

324

8. Mode of payment

324

9. Obligations of person resident in India

325

10. Reporting requirements for Overseas Investment

325

11. Delay in reporting

326

12. Restriction on further financial commitment or transfer

327

FOREIGN EXCHANGE MANAGEMENT (MANNER OF RECEIPT AND PAYMENT) REGULATIONS, 2023 1. Short title and commencement

328

2. Definitions

328

3. Manner of receipt and payment

328

Foreign Exchange Management Act, 1999 [42 OF 1999]1 An Act to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.

BE it enacted by Parliament in the Fiftieth Year of the Republic of India as follows :— CHAPTER I PRELIMINARY Short title, extent, application and commencement.

1. (1) This Act may be called the Foreign Exchange Management Act, 1999.

(2) It extends to the whole of India.

(3) It shall also apply to all branches, offices and agencies outside India owned or controlled by a person resident in India and also to any contravention thereunder committed outside India by any person to whom this Act applies.

(4) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint2 : Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

COMMENTS SECTION NOTES

This Act (FEMA, 1999) applies to the whole of India.

It shall also apply to:

all branches, offices and agencies outside India owned or controlled by a person resident in India.

1. Dated 29-12-1999.

2. 1-6-2000 vide Notification No. G.S.R. 371(E), dated 1-5-2000.

1

S. 2

FOREIGN EXCHANGE MANAGEMENT ACT, 1999

2

any contravention thereunder committed outside India by any person to whom this Act applies.

Applicability of FEMA to transactions

The applicability of FEMA to a transaction depends on the residential status under FEMA of the parties to the transaction. That is to say, it must be determined whether each party to a transaction is a person resident in India or a person resident outside India.

Secondly, it must be ascertained whether the currency involved is a foreign currency or Indian rupees (INR), whether the subject matter of the contract is property located in India/property located abroad, and whether the subject matter is an Indian security or a foreign security.

Thirdly, it also depends on where the transaction took place—whether in India or outside India.

Suppose A and B are persons resident in India and the dealings are in Indian rupees (INR) in India. Here, FEMA does not apply. A resident opens a bank account in rupees with a branch of a bank in India; FEMA does not apply. A resident in India purchases immovable property in Delhi from B another resident in India. Here also FEMA does not apply. So if both/all the parties to a transaction are residents and they deal in INR and subject matter of their dealings is property located in India/Indian securities, FEMA does not apply.

Suppose A and B are two non-resident persons and they deal in foreign currency or subject matter of their dealings is foreign security or property located outside India, FEMA does not apply.

FEMA applies when a party to the transaction is resident and the other is non-resident or when foreign currency/foreign security/foreign property is involved in dealings between residents or when INR/property in India/Indian security is involved in dealings between non-residents.

FEMA also applies to the holding of foreign currency by a resident, export(taking out or sending out of India) or import(bringing into India) of rupees or foreign currency by a resident or non-resident.

Definitions.

2. In this Act, unless the context otherwise requires,— (a) “Adjudicating Authority” means an officer authorised under sub-section (1) of section 16; 3

[(b) “Appellate Tribunal” means the Appellate Tribunal referred to in section 18;] (c) “authorised person” means an authorised dealer, money changer, offshore banking unit or any other person for the time being authorised under sub-section (1) of section 10 to deal in foreign exchange or foreign securities;

3. Substituted by the Finance Act, 2017, w.e.f. 26-5-2017. Prior to its substitution, clause (b) read as under : ‘(b) “Appellate Tribunal” means the Appellate Tribunal for Foreign Exchange established under section 18;’

3

FOREIGN EXCHANGE MANAGEMENT ACT, 1999

S. 2

4-5

[(cc) “Authorised Officer” means an officer of the Directorate of Enforcement authorised by the Central Government under section 37A;] (d) “Bench” means a Bench of the Appellate Tribunal; (e) “capital account transaction” means a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India, and includes transactions referred to in sub-section (3) of section 6; (f) “Chairperson” means the Chairperson of the Appellate Tribunal; (g) “chartered accountant” shall have the meaning assigned to it in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949);

4-5

[(gg) “Competent Authority” means the Authority appointed by the Central Government under sub-section (2) of section 37A;] (h) “currency” includes all currency notes, postal notes, postal orders, money orders, cheques, drafts, travellers cheques, letters of credit, bills of exchange and promissory notes, credit cards or such other similar instruments, as may be notified by the Reserve Bank; (i) “currency notes” means and includes cash in the form of coins and bank notes; (j) “current account transaction” means a transaction other than a capital account transaction and without prejudice to the generality of the foregoing such transaction includes,— (i) payments due in connection with foreign trade, other current business, services, and short-term banking and credit facilities in the ordinary course of business, (ii) payments due as interest on loans and as net income from investments, (iii) remittances for living expenses of parents, spouse and children residing abroad, and (iv) expenses in connection with foreign travel, education and medical care of parents, spouse and children; (k) “Director of Enforcement” means the Director of Enforcement appointed under sub-section (1) of section 36; (l) “export”, with its grammatical variations and cognate expressions, means— (i) the taking out of India to a place outside India any goods, (ii) provision of services from India to any person outside India; (m) “foreign currency” means any currency other than Indian currency;

4-5. Inserted by the Finance Act, 2015, w.e.f. 9-9-2015.

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(n) “foreign exchange” means foreign currency and includes,— (i) deposits, credits and balances payable in any foreign currency, (ii) drafts, travellers cheques, letters of credit or bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency, (iii) drafts, travellers cheques, letters of credit or bills of exchange drawn by banks, institutions or persons outside India, but payable in Indian currency; (o) “foreign security” means any security, in the form of shares, stocks, bonds, debentures or any other instrument denominated or expressed in foreign currency and includes securities expressed in foreign currency, but where redemption or any form of return such as interest or dividends is payable in Indian currency; (p) “import”, with its grammatical variations and cognate expressions, means bringing into India any goods or services; (q) “Indian currency” means currency which is expressed or drawn in Indian rupees but does not include special bank notes and special one rupee notes issued under section 28A of the Reserve Bank of India Act, 1934 (2 of 1934); (r) “legal practitioner” shall have the meaning assigned to it in clause (i) of sub-section (1) of section 2 of the Advocates Act, 1961 (25 of 1961); (s) “Member” means a Member of the Appellate Tribunal and includes the Chairperson thereof; (t) “notify” means to notify in the Official Gazette and the expression “notification” shall be construed accordingly; (u) “person” includes— (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) every artificial juridical person, not falling within any of the preceding sub-clauses, and (vii) any agency, office or branch owned or controlled by such person; (v) “person resident in India” means— (i) a person residing in India for more than one hundred and eightytwo days during the course of the preceding financial year but does not include— (A) a person who has gone out of India or who stays outside India, in either case—

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S. 2

(a) for or on taking up employment outside India, or (b) for carrying on outside India a business or vocation outside India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period; (B) a person who has come to or stays in India, in either case, otherwise than— (a) for or on taking up employment in India, or (b) for carrying on in India a business or vocation in India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period; (ii) any person or body corporate registered or incorporated in India, (iii) an office, branch or agency in India owned or controlled by a person resident outside India, (iv) an office, branch or agency outside India owned or controlled by a person resident in India; (w) “person resident outside India” means a person who is not resident in India; (x) “prescribed” means prescribed by rules made under this Act; (y) “repatriate to India” means bringing into India the realised foreign exchange and— (i) the selling of such foreign exchange to an authorised person in India in exchange for rupees, or (ii) the holding of realised amount in an account with an authorised person in India to the extent notified by the Reserve Bank, and includes use of the realised amount for discharge of a debt or liability denominated in foreign exchange and the expression “repatriation” shall be construed accordingly; (z) “Reserve Bank” means the Reserve Bank of India constituted under sub-section (1) of section 3 of the Reserve Bank of India Act, 1934 (2 of 1934); (za) “security” means shares, stocks, bonds and debentures, Government securities as defined in the Public Debt Act, 1944 (18 of 1944), savings certificates to which the Government Savings Certificates Act, 1959 (46 of 1959) applies, deposit receipts in respect of deposits of securities and units of the Unit Trust of India established under sub-section (1) of section 3 of the Unit Trust of India Act, 1963 (52 of 1963) or of any mutual fund and includes certificates of title to securities, but does not include bills of exchange or promissory notes other than Government promissory notes

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or any other instruments which may be notified by the Reserve Bank as security for the purposes of this Act; (zb) “service” means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, medical assistance, legal assistance, chit fund, real estate, transport, processing, supply of electrical or other energy, boarding or lodging or both, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service; (zc) “Special Director (Appeals)” means an officer appointed under 6[section 17]; (zd) “specify” means to specify by regulations made under this Act and the expression “specified” shall be construed accordingly; (ze) “transfer” includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien.

COMMENTS SECTION NOTES

2.1 Person resident in India [Section 2(v)] Residential Status under FEMA is unrelated to citizenship.

Whether an individual is a person resident in /outside India is to be determined as per

sub-clause (i) of clause (v) of section 2.

Whether firms/artificial persons are resident or not is to be determined as per sub-clause

(ii).

Whether offices, branches and agencies are resident or not is to be determined as per

sub-clauses (iii) and (iv).

2.1-1 Criteria for treating an individual as a resident in India

As per sub-clause (i) of clause (v) of section 2, a person resident in India means a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year, but does not include the persons specified in Items (A) and (B) of sub-clause (i).

The words used in sub-clause (i) are “residing in India”, instead of “is in India” [See section 6 of the Income-tax Act,1961/section 6 of the Income-tax Act, 2025] or “stayed in India” [See Section 7(1) of the LLP Act, 2008] or “stays in India [See Section 149(3) of the Companies Act, 2013].

Thus, to be treated as ‘a person resident in India’, under FEMA, a person has not only to satisfy the condition of the period of stay (being more than 182 days during the course of the preceding financial year) but also to comply with the condition of the purpose/ intention of stay. This is clear from the use of the words residing in India in sub-clause (i) as well as the exclusions in items (A) and (B) of sub-clause (i).

Mere physical presence or stay in India for more than 182 days in the preceding financial year will not make an individual a person resident in India.

6. Substituted for “section 18” by the Finance Act, 2017, w.e.f. 26-5-2017.

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An individual who comes to India as a tourist or for other reasons where he has no intention to stay in India for an uncertain period will not be considered a resident even if his stay in India was for more than 182 days in the preceding FY.

An individual shall be treated as a person resident outside India, despite his stay in India for more than 182 days in the preceding year, if he leaves India or stays outside India for any of the following purposes specified in item (A) of sub-clause (i): (a) for or on taking up employment outside India, or (b) for carrying on outside India a business or vocation outside India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;

2.1-2 Criteria for treating a firm/association/artificial person as a resident in India Any person or body corporate shall be treated as resident in India if it is registered or incorporated in India.

The word “person”, as defined in section 2(u), specifically includes the following:

a company,

a firm,

an association of persons or a body of individuals, whether incorporated or not,

every artificial juridical person.

Therefore, a company incorporated in India is resident in India. An LLP would be treated as resident in India if it is incorporated in India under the LLP Act, 2008.

A firm would be treated as resident in India if it is registered in India under section 59 of the Indian Partnership Act,1932. An AOP/BOI . An AOP/BOI would be treated as resident in India if registered in India under any law such as the Societies Registration Act, 1860 or the Co-operative Societies Act, 1912.

2.1-3 Criteria for treating office/branch/agency as resident in India An office, branch or agency in India owned or controlled by a person resident outside India shall be resident in India.

An office, branch or agency outside India owned or controlled by a person resident in India shall be treated as resident in India.

2.2 Person resident outside India [Section 2(w)] According to section 2(w)“person resident outside India” means a person who is not resident in India in accordance with section 2(v) of the Act. Such persons are colloquially referred to as “non-residents”.

2.3 Capital Account Transaction [Section 2(e)] In terms of section 2(e), the term “Capital account transaction” means: a transaction which alters the assets or liabilities, including contingent liabilities,

outside India of persons resident in India, or a transaction which alters assets or liabilities in India of persons resident outside

India.

The inclusive limb of the definition in section 2(e) is redundant as sub-section (3) of

section 6 was omitted by the Finance Act, 2015 with effect from 15-10-2019.

2.4 Current Account Transaction [Section 2(j)] “Current account transaction” means a transaction other than a capital account

transaction.

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8

The term “Current account transaction” includes,—

(i) payments due in connection with foreign trade, other current business, services, and short-term banking and credit facilities in the ordinary course of business, (ii) payments due as interest on loans and as net income from investments, (iii) remittances for living expenses of parents, spouse and children residing abroad, and (iv) expenses in connection with foreign travel, education and medical care of parents, spouse and children; 2.5 Authorised Person [Section 2(c)] “Authorised person” means an authorised dealer, money changer, off-shore banking unit or any other person for the time being authorised under section 10(1) to deal in foreign exchange or foreign securities.

2.6 Currency [Section 2(h)] “Currency” includes all currency notes, postal notes, postal orders, money orders, cheques, drafts, travellers cheques, letters of credit, bills of exchange and promissory notes, credit cards or such other similar instruments, as may be notified by the Reserve Bank.

2.7 Currency Notes [Section 2(i)] “Currency notes” means and includes cash in the form of coins and bank notes.

2.8 Foreign Currency [Section 2(m)] “Foreign currency” means any currency other than Indian currency.

2.9 Foreign Exchange [Section 2(n)] “Foreign exchange” means foreign currency.

The term “foreign exchange” includes,—

(i) deposits, credits and balances payable in any foreign currency, (ii) drafts, travellers cheques, letters of credit or bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency, (iii) drafts, travellers cheques, letters of credit or bills of exchange drawn by banks, institutions or persons outside India, but payable in Indian currency; 2.10 Foreign Security [Section 2(o)] “Foreign security” means any security, in the form of shares, stocks, bonds, debentures

or any other instrument denominated or expressed in foreign currency.

The term also includes securities expressed in foreign currency, but where redemption

or any form of return such as interest or dividends is payable in Indian currency.

2.11 Indian Currency [Section 2(q)] “Indian currency” means currency which is expressed or drawn in Indian rupees.

The term does not include special bank notes and special one rupee notes issued under

section 28A of the Reserve Bank of India Act, 1934.

2.12 Export [Section 2(l)] “Export” means— (i) the taking out of India to a place outside India any goods, (ii) provision of services from India to any person outside India.

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S. 3

2.13 Import [Section 2(p)] “Import” means bringing into India any goods or services.

2.14 Repatriate to India [Section 2(y)] “Repatriate to India” means bringing into India the realised foreign exchange and—

(i) the selling of such foreign exchange to an authorised person in India in exchange for rupees, or (ii) the holding of realised amount in an account with an authorised person in India to the extent notified by the Reserve Bank.

The term includes use of the realised amount for discharge of a debt or liability

denominated in foreign exchange and the expression “repatriation” shall be construed accordingly.

2.15 Transfer [Section (ze)] “Transfer” includes: sale, purchase, exchange, mortgage, pledge, gift, loan, or any other form of transfer of right, title, possession or lien.

CHAPTER II REGULATION AND MANAGEMENT OF FOREIGN EXCHANGE Dealing in foreign exchange, etc.

3. Save as otherwise provided in this Act, rules or regulations made thereunder, or with the general or special permission of the Reserve Bank, no person shall— (a) deal in or transfer any foreign exchange or foreign security to any person not being an authorised person; (b) make any payment to or for the credit of any person resident outside India in any manner; (c) receive otherwise (than) through an authorised person, any payment by order or on behalf of any person resident outside India in any manner; Explanation.—For the purpose of this clause, where any person in, or resident in, India receives any payment by order or on behalf of any person resident outside India through any other person (including an authorised person) without a corresponding inward remittance from any place outside India, then, such person shall be deemed to have received such payment otherwise than through an authorised person;

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10

(d) enter into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire, any asset outside India by any person.

Explanation.—For the purpose of this clause, “financial transaction” means making any payment to, or for the credit of any person, or receiving any payment for, by order or on behalf of any person, or drawing, issuing or negotiating any bill of exchange or promissory note, or transferring any security or acknowledging any debt.

COMMENTS SECTION NOTES Prohibitions or restrictions under this section apply to all persons whether resident in

India or resident outside India as the words used are “No person shall”; The prohibitions in this Section shall apply unless relaxed by any provision of this Act

or rules or regulations made under this Act or by any general or special permission of RBI; Restriction on Dealing in or transferring any foreign exchange or foreign security:

No person shall deal in or transfer any foreign exchange or foreign security to any person not being an authorised person. [Clause (a) of Section 3] Restriction on Payment to or for credit of PROI: No person shall make any payment

to or for the credit of any person resident outside India in any manner. [Clause (b)] Restriction on receiving any payment on behalf of PROI : No person shall receive

otherwise than through an authorised person, any payment by order or on behalf of any person resident outside India in any manner. [Clause (c)] Where any person in, or resident in, India receives any payment by order or on behalf

of any person resident outside India through any other person (including an authorised person) without a corresponding inward remittance from any place outside India, then, such person shall be deemed to have received such payment otherwise than through an authorised person; Restriction on entering into any financial transaction in India as consideration for

acquisition or transfer or creation of asset abroad: No person shall enter into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire, any asset outside India by any person. [Clause (d)] “Financial transaction” means making any payment to, or for the credit of any person,

or receiving any payment for, by order or on behalf of any person, or drawing, issuing or negotiating any bill of exchange or promissory note, or transferring any security or acknowledging any debt.

Holding of foreign exchange, etc.

4. Save as otherwise provided in this Act, no person resident in India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India.

FOREIGN EXCHANGE MANAGEMENT ACT 1999 WITH RULES – BARE ACT WITH SECTION NOTES AUTHOR PUBLISHER DATE OF PUBLICATION EDITION ISBN NO NO. OF PAGES BINDING TYPE

: : : : : : :

TAXMANN’S EDITORIAL BOARD TAXMANN NOVEMBER 2025 2026 EDITION 9789371268264 356 PAPERBACK

Rs. 425

DESCRIPTION Foreign Exchange Management Act 1999 with Rules [Bare Act with Section Notes] by Taxmann is a compact yet authoritative statutory compilation that presents the complete and updated text of FEMA along with all relevant Rules, Regulations and Section Notes. This Edition brings together the full ecosystem of FEMA—covering Current Account Transactions, Non-Debt Instruments, Overseas Investment, Adjudication, Compounding, Guarantees, Derivative Contracts, and several other regulatory frameworks—in a single, easy-to-navigate reference. Designed as a Bare Act with Section Notes, each provision is supplemented with clear explanations, interpretative guidance and practical illustrations, making this an essential handbook for anyone dealing with India’s foreign exchange laws.

This book is intended for the following audience: • Legal Practitioners & FEMA Litigators • Authorised Dealers, Bankers & Treasury Teams • Corporate Finance, Secretarial & Compliance Departments • Multinational Enterprises, Start-ups & NRIs • Enforcement Officers, Adjudicating Authorities & Regulatory Professionals • Students, Academicians, & Researchers The Present Publication is the 2026 Edition, covering the amended and updated text of the Foreign Exchange Management Act [Act No. 42 of 1999] and Rules, with the following noteworthy features: • [Complete & Updated Text of FEMA 1999], incorporating all amendments notified up to date • [Pre-amendment Provisions] are reproduced in footnotes to explain the earlier legal position and its applicability • [Insightful Section Notes] offering statutory interpretation, applicability tests and practical clarity • [Coverage of All Major Rules & Regulations], including: o FEMA (Adjudication Proceedings & Appeal) Rules 2000 o FEMA (Current Account Transactions) Rules 2000 o FEMA (Non-Debt Instruments) Rules 2019 o FEMA (Overseas Investment) Rules 2022 o FEMA (Compounding Proceedings) Rules 2024 o FEMA (Foreign Exchange Derivative Contracts) Regulations 2000 o FEMA (Guarantees) Regulations 2000 o 15 additional essential FEMA Regulations • [Clean & Systematic Arrangement] to support quick referencing and practical use

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