FEMA (the Foreign Exchange Management Act, 1999) is the Indian law -- not the Income Tax Act -- that governs which Indian bank accounts an NRI can hold, how they can invest in India, and how they can move money between India and abroad, administered mainly through Reserve Bank of India regulations and Master Directions.
FEMA replaced the older, criminal-liability-based Foreign Exchange Regulation Act (FERA) in 1999,
shifting foreign-exchange contraventions to a civil-penalty framework. For NRIs, FEMA is the source of the
rules requiring resident accounts to be re-designated as NRO/NRE/FCNR on becoming an NRI, the USD 1 million
per financial year NRO repatriation limit, restrictions on NRIs purchasing agricultural land or farmhouses,
and the reporting requirements around foreign investment and property transactions. FEMA compliance is
separate from -- and in addition to -- Income Tax Act compliance: an NRI can be fully tax-compliant while
still being in breach of a FEMA rule (for example, by continuing to operate a resident savings account after
becoming an NRI), so both frameworks need to be tracked independently.
