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Fema relaxes guidelines forcurrent account transactions
Prashant Kothari
Mumbai, May 29: With the introduction of Fema (Foreign Exchange Management Act) from June 1, 2000, you will now be able to take that lavish holiday in the US which you always wanted to, but were unable to do so because of RBI regulations on the amount of foreign exchange available under the BTQ (basic travel quota).The newly-introduced Fema has changed the role of RBI from a regulator to a facilitator, says Ketan Dalal, partner, RSM & Co. All foreign exchange transactions are now classified under two heads viz, capital and current, adds Dalal. The presumption of a ``culpable state of mind,'' when any of the provisions of the erstwhile Fera (Foreign Exchange Regulation Act) were violated, has also been done away with. The law now recognises that every mistake is not a fraud and accordingly should not be punished. Most of the administrative formalities associated with Fera have been done away with under this Act. This would reduce the workload of the RBI as also it would facilitate business operations. Some of the major improvements of Fema over Fera are listed below. p Fera allowed an amount of $350 per day for a maximum of 45 days plus an entertainment allowance of $2000 for business visits abroad. Thus, if one went on a business trip for 45 days at a stretch, he could have taken a maximum of $17750 along with him. But now he can take $25000 per trip irrespective of the period of stay and without the permission of RBI. Thus it is now possible to go for a two-day visit to Singapore and spend $25000 by staying in a suite of the best hotel, without the interference of the RBI, unless, of course, it questions the genuineness of the expenditure.
The amount allowed under the BTQ for going on private visits abroad has also been raised from $3000 to $5000.
Revenue payments such as claims payable by exporters to foreign buyers can now be freely made.
Under Fera, any other consultancy services availed from abroad could be paid upto a maximum of $25000 without RBI's prior approval. This limit has been increased to $100000 under Fema.
Any amount of export commission can be paid under Fema, which was not the case under Fera where it was restricted to a maximum of 12.5 per cent of invoice value.Several notifications have been recently issued under Fema and while it will take a while to understand their true impact,a preliminary reading seems to indicate "free" days ahead. Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.
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