The exchange of foreign stocks and money is important. Some limits are imposed by the government. We should follow all the protocols issued by the government for sending the money and also for receiving the money. The two acts that are issued by the government for foreign exchange activities are FERA, and the other one is FEMA.
FERA vs FEMA
The difference between FERA and FEMA is that FERA is used to manage foreign exchange transactions and securities. But FEMA was introduced as a replacement for FERA. FERA has a total of 49 sections. But FEMA has a total of 81 sections. The offence type for FERA is a criminal offence. But the offence type of FEMA is a civil offence.
FERA is an exchange act used to deal with foreign transactions. They have solved many problems during their period, such as by providing adequate relief measures they gave work to the people on relief rolls, they diversified their relief problems. Their initial purpose was to distribute 500 million dollars. But on the contrary, they distributed billion dollars eventually to the United States of America.
FEMA is a management activity that is introduced as a replacement for FERA. Their main objective is to help external trade and payments in India. It is also used for maintaining the foreign exchange market in India. They define the procedure, dealings, and formalities of all the foreign exchange transactions in India. They also have a separate act called FEMA Act 1999.
Comparison Table Between FERA and FEMA
|Parameters of Comparison||FERA||FEMA|
|Evolution||January 1, 1974||June 2000|
|Reason for introduction||It got introduced when foreign exchange reserves became low||It got introduced when the foreign exchange position got satisfied|
|Offence type||It comes under criminal offence||It comes under the civil offence|
|Enactment||It is under old enactment||It is under the new enactment|
What is FERA?
The expansion of FERA is the foreign exchange regulation act. This act was passed to take strict regulations to some payments, to deal with foreign exchange transactions and securities. They used to have a direct impact on imports, export of currency, and foreign exchange. These companies are corporate under India. But FERA got abolished in the year 1988, and it was replaced by FEMA, which is nothing but a foreign exchange management act.
FERA has many features. They have authorisation for any person working in the RBI. They deal with the people in RBI for transacting foreign currencies. They will relocate that in the case of non-compliance. They have restrictions on importing and exporting currencies. Other than the authorised dealers, no person will have access. They are all restricted. They also have restrictions in making or receiving payments in India.
FERA has a total of 49 sections. Under these 49 sections, 12 belong to the operational part, and 37 belong to penal provisions. The reason why it got replaced is that it could not survive policies of post-liberalization. Also, there were some criminal offences. FERA was successful when it was in charge. It has employed over million people and distributed over billion people. All these things happened during the launch of FERA.
What is FEMA?
The expansion of FEMA is a foreign exchange management act. This was introduced after FERA as a replacement. Their main purpose and responsibility are to protect the nation from both natural and manmade disasters and also from terrorist events. They also give power to the central government. They use that power to restrict activities like making payments to the people who are not inside the country or getting money from those people.
They also restrict foreign exchange and foreign security deals as well. They provide federal grants to the victims of temporary housing, personal property loss, emergency home repairs, medical expenses, and funeral expenses, and other things. They will not help you in restoring your home to its original condition. But the victims don’t have to pay any FEMA grants.
FEMA used to get their fund from the revenue department, housing development department, urban development department, and transportation department. A qualified FEMA agent can receive monetary aid in the form of a check or direct deposit. It depends on the type of form you applied for aid. You must spend the money only on eligible expenses. This will also be noted in the decision letter provided to you. Also, FEMA has some limits for foreign exchange facilities provided to individuals.
Main Differences Between FERA and FEMA
- FERA was first introduced on January 1, 1974. On the other hand, FEMA was first introduced in June 2000.
- FERA has a total of 49 sections, and they are divided into sub-sections. On the other hand, FEMA has a total of 81 sections.
- FERA was introduced because the foreign exchange reserves got low. On the other hand, FEMA was introduced when the position of foreign exchange got satisfied.
- FERA comes under criminal offence. On the other hand, FEMA comes under civil offence.
- FERA is called an old enactment. On the other hand, FEMA is called a new enactment.
- FERA is the expansion of the Foreign Exchange Reservation Act. On the other FEMA is the expansion of the Foreign Exchange Management Act.
Now only FEMA is used widely in the country. Because it is the one that replaced FERA. But during the working time, FERA has contributed the amount more than what they have told the government. It could not meet some standards and the post-liberalization policies. These things are the many reasons for its replacement in the act.
FEMA is very strict. Any small violations are not possible. They also give money to individuals who are got affected by natural calamities. For that, they don’t have to pay any repay grant. Their money will be issued either in the form of checks or cash. Remember that the money that is received in terms of natural calamities should be used only for natural calamities and not for their own needs.