An Act to merge and revise the law regulating certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency, for the conservation of the foreign exchange resources of the country and the proper utilization thereof in the interests of the economic development of the country.
Short title, extent, application and commencement
- This Act may be called the Foreign Exchange Regulation Act, 1973.
- It extends to the whole of India.
- It applies also to all citizens of India outside India and to branches and agencies outside India of companies or bodies corporate, registered or incorporated in India.
- It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint in this behalf:
The different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.
Foreign Exchange Regulation in India:
India has liberalized its foreign exchange controls. Rupee is liberally convertible on current account. Rupee is also nearly completely convertible on capital account for non-residents. Profits earned, dividends and proceeds out of the sale of investments are fully repatriable for FDI. There are some restrictions on capital account for resident Indians for incomes earned in India.
The Reserve Bank of India's Foreign Exchange Department administers Foreign Exchange Management Act 1999(FEMA) as amended from time to time regulates transfer for issue of any security by a person resident outside India.
Repatriation of investment capital and profits earned in India:
- All foreign investments are liberally repatriable, subject to sectoral policies and except for cases where Non Resident Indians choose to invest specifically under non-repatriable schemes. Dividends declared on foreign investments can be remitted liberally through an Authorized Dealer.
- Non-residents can sell shares on stock exchange without prior agreement of RBI and repatriate through a bank the sale proceeds if they hold the shares on repatriation basis and if they have compulsory NOC/ tax clearance certificate issued by Income Tax authorities.
- For sale of shares through private arrangements, Regional offices of RBI grant permission for recognized units of foreign equity in Indian company in terms of guidelines indicated in Regulation 10.B of Notification No. FEMA.20/2000 RB dated May 2000. The sale price of shares on recognized units is to be determined in accordance with the guidelines prescribed under Regulation 10B (2) of the above Notification.
- Profits and dividends can be freely repatriated.