Applicability and Key Definitions (Foreign Exchange, Currency, Foreign Security)

# FEMA, 1999 — Applicability and Key Definitions

The Foreign Exchange Management Act, 1999 (FEMA) primarily regulates transactions in foreign exchange, foreign security and immovable property outside India (IPOI) done by a Person Resident in India (PRII). It also regulates some transactions done by Persons Resident Outside India (PROI).

## What does FEMA Regulate?

FEMA regulates dealings of PRII in:

1. Foreign Exchange

2. Foreign Security

3. Immovable Property Outside India (IPOI)

## Key Definitions

### 1. Foreign Exchange

Foreign Exchange means foreign currency AND includes:

• Deposits, credit & balances payable in foreign currency.
• Drafts, traveller's cheques, letters of credit or bills of exchange expressed in Indian currency but payable in foreign currency.
• Drafts, traveller's cheques, letters of credit or bills of exchange drawn by banks, institutions or persons outside India but payable in Indian currency.

> Trick to remember: Foreign exchange isn't only foreign cash — instruments crossing the India/outside-India border also qualify if the payment leg or the drawing leg sits abroad.

### 2. Currency

Currency includes:

• Currency notes
• Postal notes, postal orders, money orders
• Cheques, drafts, traveller's cheques
• Letters of credit, bills of exchange, promissory notes
• Credit cards
• Instruments as notified by RBI

### 3. Foreign Security

A security denominated in foreign currency.

• Interest, dividend or redemption amount may or may not be payable in Indian currency.
• The defining feature is the denomination, not how the income is paid out.

### 4. Immovable Property Outside India (IPOI)

Real estate (land, buildings, etc.) located outside India.

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