FERA vs FEMA
- Purpose/Objective of FERA and FEMA
The primary difference between FERA and FEMA is that FERA was enacted to facilitate all the payments and other foreign exchange activities in India.
On the other hand, despite being an improvement of FERA, which means that it also covers payments and facilitation of foreign exchange activities, FEMA has a specific role of ensuring that external trade and payments are correctly executed.
FEMA has the responsibility of ensuring that there is the orderly management of foreign exchange market in the country.
- Residential Status of FERA and FEMA
The basis for determining residential status in both acts shows significant levels of differences. For FERA, the citizenship of a person is the basis for deciding the residential status of the person. This means that any person who is citizenship is subjected to all the provisions of the foreign exchange regulation act.
For a person to be subjected to the provisions of foreign exchange management act, he or she must stay in India for more than six months. This means that any person performing foreign exchange transactions for less than six months is not subjected to foreign exchange management act.
- Foreign Exchange Reserve of FERA and FEMA
Foreign Exchange Regulation Act was formulated and implemented when the country was experiencing challenges in its foreign exchange reserves. This means that FERA was a countermeasure that came into force to liberate the country from foreign exchange challenges.
The Foreign Exchange Management Act was formulated and implemented when the foreign exchange reserve of India was satisfactory. It was expressed to increase effectiveness and efficiency of the existing Foreign Exchange Regulation Act (FERA).
- Approach/Methodology if FERA and FEMA
FERA executes and controls foreign exchange transactions quietly and conservatively, which do many foreign exchange experts as restrictive consider. The act has a large number of sections (81), which portrays how detailed and exhaustive the law is.
FEMA is considered to be a flexible act that incorporates other measures towards the management and control of the foreign exchange market. Additionally, FEMA is short with 49 sections, which are not detailed or restrictive.
- Violation and Punishment
FERA is a non-compoundable offense, which means that the complainant cannot enter into a compromise and drop the case against the accused. However, FEMA is a compoundable violation where the accused can choose to agree with the accused and drop the charges.
Any attempt to act against the provisions of FEMA attracts a monetary penalty, which may change to imprisonment if the accused fails to pay the financial penalty on time. On the other hand, contravening the provisions of FERA results to jail term with no requirement of monetary charges.
- Origin/Year of Enactment
The Foreign Exchange Regulation Act (FERA) is the older of the two provisions enacted to control and facilitate foreign exchange in India. The act was formulated and implemented in 1973.
The Foreign Exchange Management Act is an extension of the earlier foreign exchange regulation act. It was formulated and implemented to increase efficiency and effectiveness in the foreign exchange market. This statute was enacted in 1999.
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