1999 Indian legislation regulating all foreign-exchange transactions, including export proceeds realization and import payments.
Definition
FEMA — Foreign Exchange Management Act, 1999 — is the Indian legislation that governs all cross-border currency transactions. It replaced the more restrictive FERA (Foreign Exchange Regulation Act, 1973) and shifted India's foreign-exchange regime from criminal-liability-first to civil-penalty-first.
What FEMA governs (relevant to exporters)
Realization of export proceeds within the RBI-prescribed window (currently 9 months, extendable to 15)
Valuation of exports — declared value must reflect actual transaction value; under-invoicing violates FEMA
Repatriation of earned foreign exchange to India
Write-off and extension mechanisms for legitimate cases where full realization isn't feasible
FEMA violations are civil, not criminal — but penalties can be up to 3× the amount involved. Repeat violations can escalate to imprisonment.
The RBI Master Directions
RBI publishes Master Directions under FEMA — the operational rulebook for AD Banks and exporters. The Master Direction on Export of Goods and Services is the reference document for EDPMS closure, permitted write-offs, and multiple-realization patterns.
For Indian FBA exporters
Two FEMA red lines to know:
Don't under-invoice to make bank reconciliation easier. It violates FEMA export-valuation norms and creates GST/customs exposure. See our discussion of workarounds and why they don't hold up.
File write-offs proactively for shipping bills where Amazon's fees create a permanent shortfall vs FOB. The write-off pathway is the correct legal instrument — ignoring the gap is what triggers caution-listing.