Section 40 FEMA Act 1999 - Suspension of Operation of the Act
Section 40 of the Foreign Exchange Management Act, 1999 empowers the Central Government, by notification and subject to Parliamentary oversight, to suspend or relax the operation of all or any FEMA provisions when the statutory conditions in the section are satisfied.
What does Section 40 of FEMA provide?
Section 40 appears in Chapter VII, "Miscellaneous", of the Foreign Exchange Management Act, 1999. The provision creates a statutory mechanism by which the Central Government may suspend or relax the operation of one or more provisions of FEMA. The power must be exercised by notification and for the reasons contemplated by sub-section (1).
Text and meaning of Section 40
Section 40(1) - Power to suspend or relax FEMA provisions
If the Central Government is satisfied that circumstances have arisen making it necessary that a permission granted or restriction imposed by FEMA should cease to be granted or imposed, or considers suspension or relaxation necessary or expedient in the public interest, it may issue a notification suspending or relaxing the operation of all or any provisions of the Act. The notification may operate indefinitely or for a specified period.
Meaning: Sub-section (1) identifies both the authority and the legal method. The authority is the Central Government, and the action must be taken through a notification. The power can extend to all FEMA provisions or only specified provisions, and the notification can prescribe the extent and duration of the suspension or relaxation.
Section 40(2) - Removal of an indefinite suspension or relaxation
Where a FEMA provision has been suspended or relaxed indefinitely under sub-section (1), the Central Government may remove that suspension or relaxation at any time while the Act remains in force by issuing a notification.
Meaning: An indefinite measure under Section 40(1) is not necessarily permanent. Sub-section (2) expressly enables the Central Government to restore the operation of the affected provision through a later notification.
Section 40(3) - Parliamentary scrutiny of notifications
Every notification issued under Section 40 must be laid before each House of Parliament, as soon as may be after it is issued, for a total period of thirty days. That period may fall within one session or two or more successive sessions. Both Houses may agree to modify the notification or agree that it should not have been issued. Any modification or annulment operates prospectively in the manner stated in the section and does not invalidate anything previously done under the notification.
Key legal features of Section 40
- Central Government power: The statutory power under Section 40 is vested in the Central Government.
- Notification required: Suspension, relaxation, or removal of an indefinite measure must be effected by notification as provided in the section.
- Whole Act or selected provisions: The power may concern all provisions of FEMA or only particular provisions.
- Specified or indefinite duration: A Section 40(1) notification may operate for a notified period or indefinitely.
- Public interest ground: The section expressly permits action where the Central Government considers it necessary or expedient in the public interest.
- Parliamentary control: Every Section 40 notification is subject to the laying procedure and possible modification or annulment by both Houses under sub-section (3).
- Past action protected: Parliamentary modification or annulment does not prejudice the validity of anything previously done under the notification.
Meaning of important expressions
"Notification"
For Section 40, the Government's power is exercised through a formal notification. Readers should check the relevant notification itself to determine exactly which FEMA provision has been suspended or relaxed, the extent of the measure, its effective period, and any conditions attached to it.
"Suspend" and "relax"
In the context of Section 40, suspension refers to stopping the operation of a provision to the extent notified, whereas relaxation permits the provision to operate with the notified easing or modification of its application. The precise legal effect depends on the language of the notification issued under the section.
"Public interest"
Section 40(1) expressly refers to action that the Central Government considers necessary or expedient in the public interest. The statutory text therefore links the exercise of this exceptional power to the circumstances and purposes stated in the provision.
Practical effect of a Section 40 notification
A Section 40 notification does not, by itself, repeal FEMA. It changes the operation of the provision or provisions identified in the notification to the notified extent and for the notified duration. For compliance purposes, the FEMA provision and the applicable Section 40 notification should therefore be read together.
Parliamentary safeguard under Section 40(3)
The requirement to lay every notification before both Houses of Parliament provides legislative scrutiny after issuance. If both Houses agree to a modification, the notification thereafter operates in the modified form. If both Houses agree that it should not have been issued, it thereafter ceases to have effect. The section expressly preserves the validity of actions already taken under the notification before such modification or annulment.
Official FEMA resources
The Foreign Exchange Management Act, 1999 is administered within the Government of India framework, while the Reserve Bank of India issues FEMA regulations, directions and other regulatory material within its statutory sphere. For current compliance, use the latest official text and applicable subordinate legislation.
Department of Economic Affairs - Foreign Exchange Management Act, 1999
Reserve Bank of India - Official website
Page reviewed for statutory presentation and official-source references: 27 September 2026.