# FEMA vs FERA — Comparison

## Background Timeline

Year	Statute
1947	FERA, 1947 (first foreign exchange regulation post-Independence)
1973	FERA, 1973 (replaced 1947 Act; stricter)
1999	FEMA, 1999 (replaced FERA, 1973; liberalised approach)

## Point-wise Comparison

#	Point	FERA, 1973	FEMA, 1999
1	Objective	To conserve foreign exchange	To promote and develop the forex market
2	Residential Status	Based on citizenship	Based on stay in India (number of days)
3	Strictness	Forex transactions prohibited unless specifically permitted	Forex transactions permitted unless specifically restricted
4	Mens Rea (guilty mind)	Presumed — the accused had to disprove guilty intent	Not presumed — prosecution must prove mens rea
5	Compounding of Offences	Not allowed	All offences are compoundable

## Mnemonic / Trick

FEMA flips FERA on every count: promote (not conserve), stay (not citizenship), permitted-unless-restricted (not prohibited-unless-permitted), no presumption of guilt, and compounding allowed.

Worked example

### Example 1

Example (Residential Status): Mr. X is an Indian citizen who has lived in Dubai for the past 5 years.

Under FERA → Resident (because Indian citizen).
Under FEMA → Non-resident (because he did not stay 182+ days in India).

### Example 2

Example (Strictness): A small remittance for foreign travel.

Under FERA → Prohibited unless RBI permitted.
Under FEMA → Permitted up to LRS limit unless specifically restricted.

### Example 3

Example (Compounding): A company contravenes FEMA by delayed reporting of FDI.

Under FERA → Could not compound; full prosecution had to be faced.
Under FEMA → Can apply to RBI/ED for compounding by paying penalty.

⚠️ Common exam mistakes

Saying FEMA also uses citizenship for residential status — it uses physical stay (182 days test).
Stating mens rea is presumed under FEMA — it is the opposite; under FEMA, prosecution must prove it.
Confusing the direction of the rule — FEMA = permitted unless restricted; FERA = prohibited unless permitted.
Saying compounding is allowed under FERA — only FEMA permits compounding.

Reference:

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FEMA vs FERA — Key Differences

Worked example

⚠️ Common exam mistakes