The Foreign Exchange Management Act (FEMA) came into effect from 1st June 2000, extends to the whole India, applies to all branches, offices and agencies outside India, owned and controlled by a person resident in India.
The RBI proposed FEMA in 1999 to control or manage foreign trade and exchange transactions.
Objectives
- To promote external trade.
- To maintain or develop foreign market exchange in India.
Who is responsible for formulating regulations and guidelines under FEMA?
Reserve Bank of India.
Major Changes
The Finance Ministry has made major changes to the Foreign Exchange Management Act (FEMA) compounding rules through the Foreign Exchange (Compounding Proceedings) Rules, 2024. These updates are announced by Finance Minister Nirmala Sitharaman to simplify regulations and promote ease of doing business.
The Changes are:
Increased Filing Fees
The fees for filing a compounding application have been raised from Rs 5,000 to Rs 10,000 plus GST.
Higher Monetary Limits for RBI Officials
The increased monetary limits are:
- Assistant General Managers can now handle cases up to Rs 60 lakh which was previously Rs 10 lakh.
- Deputy General Managers are authorized for cases up to Rs 2.5 crore.
- General Managers can adjudicate cases up to Rs 5 crore.
- Chief General Managers will oversee cases exceeding Rs 5 crore.
Online Payment Option
The new rules also introduce the option for online payments for compounding applications, enhancing convenience for businesses and individuals.
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