Section 46 FEMA Act 1999 - Power to Make Rules
Section 46 of the Foreign Exchange Management Act, 1999 authorises the Central Government to make rules by notification for carrying out the provisions of FEMA. The section also identifies specific subjects on which rules may be framed.
Text of Section 46 - Power to Make Rules
46. Power to make rules.
(1) The Central Government may, by notification, make rules to carry out the provisions of this Act.
(2) Without prejudice to the generality of the foregoing power, such rules may provide for,-
(a) the imposition of reasonable restrictions on current account transactions under section 5;
(aa) the instruments which are determined to be debt instruments under sub-section (7) of section 6;
(ab) the permissible classes of capital account transactions in accordance with sub-section (2A) of section 6, the limits of admissibility of foreign exchange, and the prohibition, restriction or regulation of such transactions;
(b) the manner in which the contravention may be compounded under sub-section (1) of section 15;
(c) the manner of holding an inquiry by the Adjudicating Authority under sub-section (1) of section 16;
(d) the form of appeal and fee for filing such appeal under sections 17 and 19;
(e) the salary and allowances payable to and the other terms and conditions of service of the Special Director (Appeals) under section 23;
(f) the salaries and allowances and other conditions of service of the officers and employees of the office of the Special Director (Appeals) under sub-section (3) of section 27;
(g) the additional matters in respect of which the Appellate Tribunal and the Special Director (Appeals) may exercise the powers of a civil court under clause (i) of sub-section (2) of section 28;
(gg) the aggregate value of foreign exchange referred to in sub-section (1) of section 37A;
(h) the authority or person and the manner in which any document may be authenticated under clause (ii) of section 39; and
(i) any other matter which is required to be, or may be, prescribed.
Meaning and Scope of Section 46
Section 46 is the Central Government's general rule-making provision under FEMA. Sub-section (1) gives the Government authority to make rules by notification for implementing the Act. Sub-section (2) gives a non-exhaustive list of matters that may be covered by those rules.
The words "without prejudice to the generality of the foregoing power" mean that the specific subjects listed in sub-section (2) do not exhaust the wider rule-making authority conferred by sub-section (1). However, delegated rules must remain within the authority of FEMA and cannot override the parent Act.
Key Legal Terms
- Notification
- For FEMA, a notification is the formal instrument through which the competent authority brings a rule, regulation or other notified measure into legal operation in accordance with the Act.
- Prescribed
- Section 2 of FEMA uses "prescribed" for matters prescribed by rules made under the Act. Section 46 is therefore central to provisions that leave procedural or other details to rules.
- Current account transaction
- Section 2(j) broadly covers a transaction other than a capital account transaction and includes specified payments connected with foreign trade, services, interest, living expenses and travel, education or medical care abroad.
- Capital account transaction
- Section 2(e) concerns transactions that alter assets or liabilities, including contingent liabilities, outside India of persons resident in India or in India of persons resident outside India, and includes transactions referred to in Section 6(3).
- Compounding
- Section 15 permits a contravention under Section 13 to be compounded on an application by the person who committed the contravention, subject to the Act and the applicable rules.
Important Rule-Making Areas Under Section 46
The rule-making subjects include restrictions on current account transactions, specified aspects of capital account transactions, compounding procedure, adjudication procedure, appeal forms and fees, service conditions connected with the Special Director (Appeals), matters linked to Section 37A, authentication of documents and other matters that FEMA requires to be prescribed.
A practical example is the Foreign Exchange Management (Current Account Transactions) Rules, 2000, made under Section 5 read with Section 46. Another current example is the Foreign Exchange (Compounding Proceedings) Rules, 2024, which replaced the earlier 2000 compounding rules and prescribe the present framework for compounding eligible FEMA contraventions.
Section 46 and Section 47 - Rules Versus Regulations
Section 46 empowers the Central Government to make rules. Section 47, by contrast, empowers the Reserve Bank of India to make regulations to carry out FEMA and the rules made under it. The subject matter allocated to each authority must be read from the current provisions of the Act.
Parliamentary Control Under Section 48
Section 48 of FEMA requires every rule and regulation made under the Act to be laid before each House of Parliament for the statutory period. Parliament may agree to modify the instrument or agree that it should not be made, subject to the saving contained in Section 48 for actions already taken.
Related FEMA Provisions
Legal Reference
Section 46 forms part of Chapter VII, "Miscellaneous", of the Foreign Exchange Management Act, 1999. For compliance or litigation, the current Act should be read together with the rules, regulations, directions and notifications applicable to the particular foreign exchange transaction.