# Applicability of FEMA — Section 1

## Territorial Extent

FEMA extends to the whole of India.

## Extra-territorial Application

FEMA also applies to all branches, offices and agencies outside India which are owned or controlled by a Person Resident in India (PRI).

### Visualising the Rule

```

PRI (Person Resident in India)

--------------------+------------------

| | |

Branch Office Agency

(outside) (outside) (outside)

\____________|________________/

All subject to FEMA

```

## Practical Effect

Even if a branch is physically located in London or Dubai, if it is owned or controlled by a person resident in India, FEMA will apply to its forex transactions.

Worked example

### Example 1

Example: State Bank of India (an Indian entity / PRI) has a branch in New York. FEMA applies to that branch since it is owned/controlled by a PRI.

### Example 2

Example: A foreign company's branch in Mumbai is NOT a branch of a PRI outside India — but FEMA still applies to its India operations because FEMA extends to the whole of India.

⚠️ Common exam mistakes

Treating FEMA as applying only within India — it has extra-territorial reach for PRI-controlled branches.
Confusing a branch of a PRI outside India (covered by extra-territorial reach) with a foreign branch operating in India (covered by territorial reach).

Bare-Act text Section 1 · Foreign Exchange Management Act, 1999 · click to expand

(1) This Act may be called the Foreign Exchange Management Act, 1999. (2) It extends to the whole of India. (3) It shall also apply to all branches, offices and agencies outside India owned or controlled by a person resident in India and also to any contravention thereunder committed outside India by any person to whom this Act applies.

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