Foreign Exchange Management Act, 1999 MCQ Quiz - Objective Question with Answer for Foreign Exchange Management Act, 1999 - Download Free PDF

The correct answer is June 2000.

Key Points

• The Foreign Exchange Management Act (FEMA) was introduced in India as a replacement for the older Foreign Exchange Regulation Act (FERA).
• FEMA officially came into force on June 1, 2000, marking a significant change in India's approach to foreign exchange management.
• It was enacted to facilitate external trade, payments, and promote orderly development and maintenance of the foreign exchange market in India.
• The Act applies to all branches, offices, and agencies outside India owned or controlled by an Indian resident, as well as Indian citizens residing abroad.
• FEMA is administered by the Reserve Bank of India (RBI) and the central government to regulate foreign exchange transactions.

Additional Information

• Key Terminology under FEMA:
  • Capital Account Transactions: Transactions that alter the assets or liabilities outside India.
  • Current Account Transactions: Transactions involving payments for goods, services, and short-term credits.
  • Authorized Dealer: Entities authorized by the RBI to deal in foreign exchange.
  • Foreign Exchange: All currency transactions involving foreign nations.
• Difference between FERA and FEMA:
  • FERA was a restrictive law, while FEMA is more liberal and promotes foreign trade.
  • FERA's violation was considered a criminal offense, whereas FEMA treats violations as civil offenses.
• Objectives of FEMA:
  • To facilitate external trade and payments.
  • To promote orderly development and maintenance of the foreign exchange market.
  • To ensure the conservation and effective utilization of foreign exchange resources.
• Penalties under FEMA:
  • For violations, FEMA imposes fines up to thrice the sum involved in the contravention.
  • In case of non-payment, further penalties may include imprisonment of up to six months.

The correct answer is Foreign Exchange Management Act.

Foreign Exchange Regulations Act (FERA) is an act that imposes strict regulations on

• Foreign exchange dealings
• Securities and transactions having an indirect impact on foreign exchange
• Import and export of foreign currency
• On conservation and optimal utilization of foreign exchange so as to promote economic development and growth
• Certain kinds of payment in foreign currency.
• FERA was passed in India in the year 1973 and it came into effect from 1st January 1974.

Foreign Exchange Management Act (FEMA) is the act of the Parliament of India

• To amend and consolidate regulations and laws related to foreign exchange
• To facilitate external trade and payments for promoting the orderly maintenance
• To develop foreign exchange markets in India.
• FEMA was passed in the winter session of Parliament on 29th December 1999.
• FEMA paved the way for the introduction of the Prevention of Money Act, 2002 which became effective from 1st July 2005.
• FEMA acts as a regulatory mechanism enabling the Reserve Bank of India (RBI) and the Central Government to pass rules related to Foreign exchange as per the Foreign Trade Policy of India.
• FERA was replaced by FEMA in 1998 by the Government of Atal Bihari Vajpayee.

 

The correct answer is Foreign Exchange Management Act.

Foreign Exchange Regulations Act (FERA) is an act that imposes strict regulations on

• Foreign exchange dealings
• Securities and transactions having an indirect impact on foreign exchange
• Import and export of foreign currency
• On conservation and optimal utilization of foreign exchange so as to promote economic development and growth
• Certain kinds of payment in foreign currency.
• FERA was passed in India in the year 1973 and it came into effect from 1st January 1974.

Foreign Exchange Management Act (FEMA) is the act of the Parliament of India

• To amend and consolidate regulations and laws related to foreign exchange
• To facilitate external trade and payments for promoting the orderly maintenance
• To develop foreign exchange markets in India.
• FEMA was passed in the winter session of Parliament on 29th December 1999.
• FEMA paved the way for the introduction of the Prevention of Money Act, 2002 which became effective from 1st July 2005.
• FEMA acts as a regulatory mechanism enabling the Reserve Bank of India (RBI) and the Central Government to pass rules related to Foreign exchange as per the Foreign Trade Policy of India.
• FERA was replaced by FEMA in 1998 by the Government of Atal Bihari Vajpayee.

 

The correct answer is June 2000.

Key Points

• The Foreign Exchange Management Act (FEMA) was introduced in India as a replacement for the older Foreign Exchange Regulation Act (FERA).
• FEMA officially came into force on June 1, 2000, marking a significant change in India's approach to foreign exchange management.
• It was enacted to facilitate external trade, payments, and promote orderly development and maintenance of the foreign exchange market in India.
• The Act applies to all branches, offices, and agencies outside India owned or controlled by an Indian resident, as well as Indian citizens residing abroad.
• FEMA is administered by the Reserve Bank of India (RBI) and the central government to regulate foreign exchange transactions.

Additional Information

• Key Terminology under FEMA:
  • Capital Account Transactions: Transactions that alter the assets or liabilities outside India.
  • Current Account Transactions: Transactions involving payments for goods, services, and short-term credits.
  • Authorized Dealer: Entities authorized by the RBI to deal in foreign exchange.
  • Foreign Exchange: All currency transactions involving foreign nations.
• Difference between FERA and FEMA:
  • FERA was a restrictive law, while FEMA is more liberal and promotes foreign trade.
  • FERA's violation was considered a criminal offense, whereas FEMA treats violations as civil offenses.
• Objectives of FEMA:
  • To facilitate external trade and payments.
  • To promote orderly development and maintenance of the foreign exchange market.
  • To ensure the conservation and effective utilization of foreign exchange resources.
• Penalties under FEMA:
  • For violations, FEMA imposes fines up to thrice the sum involved in the contravention.
  • In case of non-payment, further penalties may include imprisonment of up to six months.

The correct answer is Foreign Exchange Management Act.

Foreign Exchange Regulations Act (FERA) is an act that imposes strict regulations on

• Foreign exchange dealings
• Securities and transactions having an indirect impact on foreign exchange
• Import and export of foreign currency
• On conservation and optimal utilization of foreign exchange so as to promote economic development and growth
• Certain kinds of payment in foreign currency.
• FERA was passed in India in the year 1973 and it came into effect from 1st January 1974.

Foreign Exchange Management Act (FEMA) is the act of the Parliament of India

• To amend and consolidate regulations and laws related to foreign exchange
• To facilitate external trade and payments for promoting the orderly maintenance
• To develop foreign exchange markets in India.
• FEMA was passed in the winter session of Parliament on 29th December 1999.
• FEMA paved the way for the introduction of the Prevention of Money Act, 2002 which became effective from 1st July 2005.
• FEMA acts as a regulatory mechanism enabling the Reserve Bank of India (RBI) and the Central Government to pass rules related to Foreign exchange as per the Foreign Trade Policy of India.
• FERA was replaced by FEMA in 1998 by the Government of Atal Bihari Vajpayee.

 

The correct answer is June 2000.

Key Points

• The Foreign Exchange Management Act (FEMA) was introduced in India as a replacement for the older Foreign Exchange Regulation Act (FERA).
• FEMA officially came into force on June 1, 2000, marking a significant change in India's approach to foreign exchange management.
• It was enacted to facilitate external trade, payments, and promote orderly development and maintenance of the foreign exchange market in India.
• The Act applies to all branches, offices, and agencies outside India owned or controlled by an Indian resident, as well as Indian citizens residing abroad.
• FEMA is administered by the Reserve Bank of India (RBI) and the central government to regulate foreign exchange transactions.

Additional Information

• Key Terminology under FEMA:
  • Capital Account Transactions: Transactions that alter the assets or liabilities outside India.
  • Current Account Transactions: Transactions involving payments for goods, services, and short-term credits.
  • Authorized Dealer: Entities authorized by the RBI to deal in foreign exchange.
  • Foreign Exchange: All currency transactions involving foreign nations.
• Difference between FERA and FEMA:
  • FERA was a restrictive law, while FEMA is more liberal and promotes foreign trade.
  • FERA's violation was considered a criminal offense, whereas FEMA treats violations as civil offenses.
• Objectives of FEMA:
  • To facilitate external trade and payments.
  • To promote orderly development and maintenance of the foreign exchange market.
  • To ensure the conservation and effective utilization of foreign exchange resources.
• Penalties under FEMA:
  • For violations, FEMA imposes fines up to thrice the sum involved in the contravention.
  • In case of non-payment, further penalties may include imprisonment of up to six months.

Participatory notes (P-notes) are instruments used by foreign funds and investors who are not registered with the Securities and Exchange Board of India (SEBI) but are interested in taking exposure in Indian securities. They have attracted significant market attention recently because of huge inflow of foreign funds into Indian stock markets through his route. Since the ultimate beneficiary of transactions carried out using participatory notes is not known to the market regulator and the tax authorities, there is scope for misuse and tax avoidance. Also, since participatory notes do not attract the attention of the market regulators of the countries in which they are issued, the entities holding participatory notes virtually go unregulated.

The Foreign Exchange Management Act, 1999 (FEMA) is an Act of the Parliament of India "to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India". It was passed in the winter session of Parliament in 1999, replacing the Foreign Exchange Regulation Act (FERA). This act makes offences related to foreign exchange civil offenses. It extends to the whole of India, replacing FERA, which had become incompatible with the pro-liberalization policies of the Government of India.

Under the foreign exchange guidelines, a foreign resident of Indian origin is called Non- Resident Indian.

As per FEMA 1999, foreign exchange means foreign currency and include (a) all deposits (b) credits and balances payable in foreign currency (c) any drafts, travelers cheques, Letter of credits and Bill of Exchange, payable in foreign currency.

The Foreign Exchange Management Act (1999) or in short FEMA has been introduced as a replacement for earlier Foreign Exchange Regulation Act (FERA). FEMA came into force on the 1st day of June, 2000.

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