FEMA (Foreign Exchange Management Act, 1999)

FEMA is the statute that regulates all cross-border money movement involving India — inward remittance, outward remittance, foreign-currency holdings, non-resident bank accounts, and overseas investment. It replaced the earlier draconian FERA in 1999 and shifted the framework from criminal-control to civil-regulation.

For an individual investor, FEMA governs four big things: (1) the LRS USD 250,000 annual outbound cap, (2) the type of bank account a resident vs non-resident can hold (NRE / NRO / FCNR for non-residents, regular savings for residents), (3) repatriation limits on Indian assets owned by non-residents (USD 1 million per FY from NRO), and (4) reporting of foreign assets via Schedule FA in the Indian tax return.

RBI is the operating regulator under FEMA; enforcement sits with the Enforcement Directorate. Penalties for FEMA contravention are typically three times the amount involved plus regularisation under the compounding mechanism.

Example 1: A resident wires USD 100,000 to a US broker to buy Apple shares. This is a capital-account LRS remittance — within the USD 250,000 FY cap and permitted under FEMA Schedule III.

Example 2: An NRI sends USD 500,000 from their US salary to an NRE account in India. This is freely permitted inward remittance — NRE is fully repatriable and FEMA-compliant by design.

Common FEMA traps: Resident holding a US brokerage account opened before becoming a resident (must convert or close); non-resident continuing to operate a resident savings account (must be redesignated NRO); failure to report foreign assets on Schedule FA (which is a FEMA + Income Tax issue).

Disclaimer: Educational content from MintByte (ARN-314872, MFD). Examples are illustrative. SEBI Investment Adviser registration is in process; we do not provide personalized FEMA or cross-border advice. Consult a FEMA-qualified CA or lawyer.