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LEGAL CHAT
FEMA and property transactions
N.C.S. RAGHAVAN
ARVIND RAGHAVAN
The legal status of an individual under the Foreign Exchange Management Act, 1999 (FEMA) and the related regulations, circulars and notifications are taken up for discussion with specific reference to capital and current transactions in foreign exchange including transactions in immovable property.
Originally such foreign exchange transactions were covered by the Foreign Exchange Regulation Act, 1973 (FERA).
This enactment focused on the protection and preservation of meagre foreign exchange reserves India had at that point of time.
It was a very stringent legislation mainly intended to control foreign exchange outflows. However, in the wake of substantial remittances from Non-Resident Indians (NRIs) and from Foreign Direct Investments (FDIs) arising out of economic liberalisation policies, India has acquired substantial foreign exchange reserves and a very liberalised Foreign Exchange Management Act, 1999, came into force with effect from June 1, 2000. The emphasis has been one of management of foreign exchange rather than control.
Definitions
Some of the important definitions under FEMA are given below:
“Person”: An individual, a Hindu undivided family, a company, a firm, an association of persons or a body of individuals, every artificial juridical person not falling within any of the aforesaid categories, any agency, office or branch owned or controlled by such person.
“Person Resident in India”: It includes any person who has been residing in India for more than 182 days during the course of the preceding financial year.
“Person Resident in India” includes any person or body corporate registered or incorporated in India and any office, branch or agency in India owned or controlled by a person resident outside India and any office, branch or agency outside India owned or controlled by an person resident in India.
The term “immovable property” is used in FEMA but is not defined therein. However, the true meaning of the term as defined in Section 3 of the Transfer of Property Act, 1882, read with Section 3 (25) of the General Clauses Act, 1897, has to be understood and applied.
It would mean that it includes land, benefits arising out of land and things attached to the earth and permanently fastened to anything attached to the earth. It does not include standing timber, growing crops or grass.
The term “transfer” is defined to include sale, purchase, exchange, mortgage, pledge, gift, loan, lease or any other form of transfer of rights, title, possession or lien.
(N.C.S. Raghavan is a chartered accountant and Arvind Raghavan, an advocate)
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