Section 13 FEMA Act 1999 - Penalties for Contraventions
Section 13 of the Foreign Exchange Management Act, 1999 (FEMA) lays down the monetary penalties and related consequences that may follow when a person contravenes FEMA or instruments issued under it. It also contains a special penalty provision concerning certain foreign assets situated outside India.
What does Section 13 of FEMA cover?
Chapter IV of FEMA deals with contraventions and penalties. Section 13 is the principal penalty provision. It applies where a person contravenes a provision of FEMA, a rule, regulation, notification, direction or order made under FEMA, or a condition attached to an authorisation issued by the Reserve Bank of India.
The liability under Section 13(1) arises upon adjudication. The provision therefore states the maximum penalty that may be imposed after the statutory adjudication process; it does not mean that the maximum amount automatically becomes payable in every case.
Section 13(1) - General penalty for FEMA contraventions
Section 13(1), in substance, provides: a person who contravenes FEMA or any rule, regulation, notification, direction or order issued under FEMA, or a condition of an RBI authorisation, is liable upon adjudication to a penalty up to three times the sum involved where the amount is quantifiable, or up to Rs. 2 lakh where it is not quantifiable. For a continuing contravention, an additional penalty up to Rs. 5,000 may be imposed for every day after the first day for which the contravention continues.
| Situation | Maximum penalty stated in Section 13 |
|---|---|
| Amount involved is quantifiable | Up to three times the sum involved in the contravention |
| Amount involved is not quantifiable | Up to Rs. 2 lakh |
| Continuing contravention | Further penalty up to Rs. 5,000 for every day after the first day during which the contravention continues |
Section 13(1A) - Certain foreign assets outside India
Section 13(1A), inserted with effect from 9 September 2015, specifically addresses a person found to have acquired foreign exchange, a foreign security or immovable property situated outside India where the aggregate value exceeds the threshold prescribed under the proviso to Section 37A(1).
In such a case, the provision permits a penalty up to three times the sum involved in the contravention and confiscation of the value equivalent situated in India of the relevant foreign exchange, foreign security or immovable property.
Section 13(2) - Confiscation and directions concerning foreign exchange
In addition to a penalty under Section 13(1), the Adjudicating Authority may direct that currency, security, money or other property in respect of which the contravention took place be confiscated to the Central Government. The authority may also direct that foreign exchange holdings of the person committing the contravention, or a part of those holdings, be brought back into India or retained outside India in accordance with its directions.
Meaning of property for Section 13(2)
The Explanation to Section 13(2) gives the expression "property" an extended meaning. It includes:
(a) bank deposits into which the relevant property has been converted;
(b) Indian currency into which the property has been converted; and
(c) any other property resulting from conversion of that property.
Adjudication, enforcement and compounding
Section 13 must be read with the connected FEMA provisions. Section 14 deals with enforcement of orders of the Adjudicating Authority, while Section 15 provides for compounding of contraventions in accordance with the prescribed framework.
The Central Government notified the Foreign Exchange (Compounding Proceedings) Rules, 2024, superseding the 2000 Rules subject to the saving stated in the notification. RBI also issued Directions on compounding of contraventions under FEMA on 1 October 2024, subsequently amended, including by its circular dated 22 April 2025.
Compounding is a separate statutory process and should not be confused with the maximum penalty prescribed by Section 13. Eligibility, the competent compounding authority, procedure and the amount payable are governed by Section 15, the 2024 Rules and applicable RBI directions.
Official legal resources
For the current statutory text and regulatory material, refer to the Foreign Exchange Management Act, 1999 on India Code, the Department of Economic Affairs notification for the Foreign Exchange (Compounding Proceedings) Rules, 2024, and the RBI amendment to the compounding directions dated 22 April 2025.
Frequently asked questions
What is the penalty under Section 13 of FEMA?
If the sum involved is quantifiable, the penalty may extend to three times that sum. If it is not quantifiable, it may extend to Rs. 2 lakh. A continuing contravention can attract a further penalty up to Rs. 5,000 per day after the first day.
Is the maximum penalty automatic?
No. Section 13(1) states that liability arises upon adjudication and prescribes the maximum limits. The penalty actually imposed depends on the adjudication and the applicable legal framework.
Can property be confiscated under FEMA?
Yes. Section 13(2) empowers the Adjudicating Authority, in addition to imposing a penalty for a contravention under Section 13(1), to issue specified confiscation and foreign exchange directions.
Can a FEMA contravention be compounded?
Section 15 provides a statutory mechanism for compounding contraventions, subject to the Foreign Exchange (Compounding Proceedings) Rules, 2024 and applicable RBI directions.
Updated: 27 September 2026. This page is an informational guide. For a particular transaction or proceeding, the current Act, rules, regulations, notifications, directions and orders should be checked.