On June 1, 2000, the Foreign Exchange Management Act came into force. This act was enabled to manage different and various aspects that are related to foreign exchange. The Foreign Exchange Management Act replaced the existing Foreign Exchange Regulation Act. The process of liberalisation of the Indian economy was started in the year 1991 by the Government of India, which had allowed foreign exchange to take place in India at an increased and rapid pace. This increase of pace, in turn resulted in the collection of many exchange reserves. This increase in exchange reserves further resulted in the cancellation of Foreign Exchange Regulation Act which was replaced with the introduction of Foreign Exchange Management Act.
Foreign Exchange Management has its head offices in the national capital of New Delhi. There are a total of five zonal offices of the Foreign Exchange Management Act, across India, which are situated in the cities of Delhi, Mumbai, Kolkata, Chennai, and Jalandhar. These offices are managed by a Deputy Director. Moreover, these zonal offices are further sub-divided into seven sub-zonal offices which are managed by Assistant Directors and five field units that are managed by Chief Enforcement Officers.
The objectives of the Foreign Exchange Management Act are mentioned below:
Firstly, it improves all the laws which are related to the foreign exchange which in turn would promote external trade and payments.
Also, it develops and maintains the foreign exchange market within India.
The applicability of the Foreign Management Act is across the whole country also including all of the branches, offices, and agencies which would are located outside India and owned by a resident of India.
Some of the major regulations under the Foreign Exchange Management Act are mentioned below:
First, an individual should not be involved in any kind of foreign exchanges or foreign securities with any other individual unless they are an authorised person to do so.
Secondly, an individual should not credit any money to an Non Resident Indian and/or make any payments.
Thirdly, no money should be received by any individual until authorised, on behalf of an Non Resident Indian.
Fourth, there should not be any interference by any individual in any matter of financial transactions in India for an Non Resident Indian.
Lastly, no individual in India can acquire, hold, own, possess and/or transfer any security of immovable property outside India.
If there has been found to be any kind of commitment of an offence under this act, any individual would be liable and indebted for remitting a penalty which should be equivalent to thrice the amount which had been occurred due to such default, this is in case the amount of quantifiable or a sum of Rs. 2lakhs, if the amount is not quantifiable. The penalty can be extended up to Rs. 5,000 for each day of default, in case the taxpayer continues with his offence. Any currency, security or property which may be belonging to the assessee, in favor of the Central Government, can be confiscated by the concerned authority. In addition to this, the concerned officer is also empowered to bring back the defaulters of foreign exchange earnings back to India.
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