Glossary · FEMA & International Tax
FEMA
Foreign Exchange Management Act, 1999 — the central law that regulates foreign exchange transactions and capital flows in India, replacing the earlier FERA.
FEMA is administered by the RBI and applies to all foreign-exchange transactions by Indian residents and non-residents in India. FEMA classifies offences as civil (not criminal) and the enforcement is through the Enforcement Directorate. The Act is supplemented by 30+ RBI regulations covering current account transactions, capital account transactions, FDI, FPI, NRI investments, external commercial borrowings, and overseas direct investment. Compared to FERA, FEMA is more liberal and procedural, with most transactions allowed subject to sectoral caps and reporting requirements.
Examples
An Indian company raising $5 million in FDI from a US investor must comply with FEMA's reporting requirements (Form FC-GPR) and sectoral caps under FEMA 20(R)/2017.