# FERA vs FEMA: Key Distinctions
FEMA (1999) replaced FERA (1973). Understanding the philosophical shift between the two helps grasp why FEMA is structured the way it is.
## Comparison Table
| Basis | FERA | FEMA |
|---|---|---|
| Residential Status | Based on citizenship | Based on stay in India |
| Strictness | Forex transactions are prohibited unless permitted | Forex transactions are permitted unless restricted |
| Mens Rea (Guilty Mind) | Presumption of existence of mens rea (accused presumed guilty) | Mens rea is NOT presumed; prosecution must prove it |
| Compounding of Offences | Not allowed | All offences are compoundable |
## Why This Matters
- Philosophy shift: FERA was a control-oriented regulatory regime suited to a foreign-exchange-scarce economy. FEMA is a management-oriented regime aligned with liberalisation and reserve sufficiency.
- Residential basis: A citizen of India living permanently abroad may NOT be PRI under FEMA, whereas under FERA citizenship alone could attract jurisdiction.
- Burden of proof: Under FEMA, the Department must prove guilty intention; the assessee is not automatically guilty.
- Compounding: Under FEMA, contraventions can be settled by paying a penalty without prolonged litigation.
## Memory Aid
Think FERA = Forbidden Unless Permitted and FEMA = Free Unless Restricted.