Key Features of FEMA

Key Features of FEMA

1. Civil Law Framework

• Violations are treated as civil offences, not criminal (unlike FERA)
• Focus on penalties and compliance, not imprisonment (except in extreme non-payment cases)

2. Classification of Transactions

FEMA divides forex transactions into two categories:

a) Current Account Transactions

• Related to trade, services, income and remittances
• Generally permitted, unless specifically restricted
  Examples:
• Import/export payments
• Travel, education and medical expenses abroad
• Interest and dividend payments

b) Capital Account Transactions

• Involve capital flows and asset/liability creation
• Regulated and controlled by RBI and Government
  Examples:
• Foreign Direct Investment (FDI)
• External Commercial Borrowings (ECBs)
• Acquisition of immovable property abroad
• Issue or transfer of securities to non-residents