The Foreign Exchange Management Act (FEMA) came into force with effect from 1st June 2000, thereby replacing the earlier enactment – the Foreign Exchange Regulation Act, 1973.

The introduction of FEMA has been welcomed by all sections of people – both the industry and the professionals. FEMA has led to considerable liberalisation of the foreign exchange regime in India, coinciding with the comfortable foreign exchange reserves of India. The object behind introduction of FEMA is to free all current account transactions, while capital account transactions would continue to be regulated by the RBI. However, the process of approvals has been made simpler.

FEMA is broadly divided into 7 Chapters and 49 Sections. Under FEMA, there are the Rules which are notified by the Government of India relating to Current Account Transactions. With regard to Capital Account Transactions, the RBI has issued notifications and circulars permitting certain capital account transactions.

The countries boundaries are shrinking rapidly and the horizon of business investments have been extended beyond the domestic territories. Thus, the right blends of services comprising of tax efficient structure, transaction planning and compliance with the regulatory framework boost the revenue of an entity which results into increased profitability and financial competency.