Budget 2015: FEMA Act to be Amended

Presenting the Union Budget 2015-16 on the floor of Parliament, the Finance Minister mentioned that there would be an amendment in Section 6 of FEMA (Foreign Exchange Management Act). 1999, through the Finance Bill. According to the proposal, the government would exercise control on capital flows as equity in consultation with the RBI.

As per Section 6 of FEMA, capital account transactions are i) subject to the provisions of the sub-section ii) any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction. Besides, The Reserve Bank may, in consultation with the Central Government, specify a) any class or classes of capital account transactions which are permissible b) the limit up to which foreign exchange shall be admissible for such transactions, provided that the Reserve Bank shall not impose any restriction on the drawal of foreign exchange for payments due on account of amortization of loans or for depreciation of direct investments in the ordinary course of business.

As per the amendment proposal, reigning in of black money as well as keeping a tab on benami investments would also get immediate consideration. This is likely to have an impact on the real estate sector as well. However, at the moment it is not clear how it will have an immediate impact on the sector. This can be gauged only after the Finance Bill is presented.