As international students travelling to study abroad, you must be aware of the FEMA. The full form of FEMA is the Foreign Exchange Management Act of 1999. It was passed by the Reserve Bank of India and helps the government to make decisions in matters of foreign trade policy of India.
It lays a set of rules and regulations relating to foreign exchange and prevents cases of money laundering by keeping a tight check on the amount of currency taken out from the country. Let’s dive into more important details about what is FEMA and other necessary details that must be known.
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FEMA Full Form
The full form of FEMA is the Foreign Exchange Management Act. It was an act passed by the RBI and was the replacement of the FERA – Foreign Exchange Regulation Act. FERA did not comply with the post-liberalization policies of the Government, thus FEMA replaced FERA.
The new 1999 FEMA aligns with the World Trade Organisation (WTO) frameworks, demonstrating India’s commitment to international trade regulations. This act also laid the groundwork for the Prevention of Money Laundering Act of 2002, which came into effect on July 1, 2005.
What is FEMA?
FEMA is a Foreign Exchange Management Act passed on 29 December 1999 by the Reserve Bank of India. It is a set of regulations on foreign exchange and the amount of money that can be taken out of the country for business purposes, travelling, medical reasons, or to study abroad. It lays out all important guidelines and procedures for all foreign transactions in India. Here are some features of FEMA-
- FEMA empowers authorised dealers, typically banks, to facilitate foreign exchange transactions. Students should engage with these authorized channels for their financial dealings.
- FEMA classifies transactions into current account and capital account transactions. Current account transactions include day-to-day expenses, while capital account transactions involve major financial investments.
- The act defines the residential status of individuals, impacting their eligibility for certain transactions which pose some financial regulations. For example, international students become NRIs when they settle in another country and the limit is set for making yearly transactions.
- FEMA outlines penalties for violations, emphasising the importance of adhering to regulations. It is important to stay informed about these provisions to avoid legal complications.
- FEMA permits students to use foreign exchange for educational expenses, ensuring smooth financial transactions for tuition fees, accommodation, and other related costs.
Structure of FEMA
The FEMA structure ensures that it has a nationwide presence to effectively manage foreign exchange regulations.
- Head Office: It is located in New Delhi and is led by a Director. The head office is also called as Enforcement Directorate.
- Zonal Offices: Five zonal offices are spread across major cities – Delhi, Mumbai, Kolkata, Chennai, and Jalandhar. Each zone is headed by a Deputy Director.
- Sub-Zonal and Field Units: Each zone is further divided into seven sub-zonal offices managed by Assistant Directors. Additionally, there are five field units headed by Chief Enforcement Officers.
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FEMA Regulations for International Students
If you are going to foreign countries to study abroad, you are treated as NRIs and are eligible for all facilities under FEMA. Let’s know about FEMA regulations you must know as NRI as it can affect the flow of funds (sending or receiving foreign currency).
Limits to Remittances Provision
Foreign Remittance means to send or receive money across borders. Under the Foreign Exchange Management Act, students are entitled to receive a remittance of up to INR 10 lakhs per year from their NRO or NRE accounts. Let’s know about these accounts in the next pointer.
Applicable Bank Account
Once you become a NRI, FEMA rules do not allow NRIs to hold a savings account. This means that transactions cannot be made through savings accounts but through NRO (Non-Resident Ordinary) or NRE accounts (Non-Resident External).
NRO and NRE account allows you to proceed with remittances received in any permitted currency from outside India and permits for money transfers. The only difference is that the deposits made in an NRE account are free from income tax, including the principal amount and the interest earned. The interest earned on an NRO account, however, is subject to Tax Deductible at Source (TDS).
Investment Provision
Under FEMA, NRIs are not allowed to make investments in small savings accounts or PPF schemes of the government.
Property Laws
NRIs are entitled to immovable property as gifts of inheritance from relatives and can also purchase property (residential or commercial) in India. However, purchasing agricultural lands, plantations, and farmhouse lands is not permitted.
Also Read: Check out the FAQs on the Restructuring 2.0 Scheme of RBI that provides benefits to the borrowers affected by the COVID-19 pandemic.
FAQs on FEMA
The full form of FEMA is the Foreign Exchange Management Act. It was an act passed by the RBI and was the replacement of the FERA – Foreign Exchange Regulation Act.
FEMA is a Foreign Exchange Management Act passed by the Reserve Bank of India. It is a set of regulations on foreign exchange and the amount of money that can be taken out of the country for business purposes, travelling, medical reasons, or to study abroad. It lays out all important guidelines and procedures for all foreign transactions in India.
It enables the government to make decisions in matters of the foreign trade policy of India. It lays a set of rules and regulations relating to foreign exchange and prevents cases of money laundering by keeping a tight check on the amount of currency taken out from the country.
If you are going to foreign countries to study abroad, you are treated as NRIs and are eligible for all facilities under FEMA. They are entitled to receive a remittance of up to INR 10 lakhs per year.
RBI ensures orderly conditions in the foreign exchange market. For this purpose, it monitors the developments in the financial markets in the home country and abroad. When necessary, it intervenes in the market by buying or selling foreign currencies.
FEMA applies to all Indians and all branches, offices and agencies outside India owned or controlled by a person who is resident in India.
This was all about the full form of FEMA, regulations, limits of remittance and important FEMA details for international students.
To know about the loan application process, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
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