Sections 40 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 40 lets the Central Government, by notification, suspend or relax the operation of all or any provisions of the Act, either indefinitely or for a period. Every such notification goes before Parliament. Section 41 lets the Central Government give the Reserve Bank general or special directions, which the Bank must comply with in discharging its functions under the Act.
Section 40(1) lets the Central Government suspend or relax the operation of all or any provisions of the Act, by notification, when circumstances make a permission or restriction unnecessary or it considers it necessary or expedient in public interest. Section 40(2) lets it remove an indefinite suspension. Section 40(3) requires the notification to be laid before each House of Parliament for thirty days. Section 41 lets it give the Reserve Bank general or special directions, which the Bank shall comply with.
About this article
This article is based on the consolidated text of the Act consulted (amendments shown up to Act 50 of 2019). Later amendments should be checked. Sections 40 and 41 are printed without a footnote of amendment. This is a power exercised by the Central Government; a business should read any notification issued under it, not only the Act. For the Act's restrictions on current account and capital account dealings, our guide on current account transactions gives the practical side. If you are unsure how a notification affects a transaction, our FEMA advisory team can help you read it.
Section 40(1): suspension or relaxation
The power arises in two situations:
- If the Central Government is satisfied that circumstances have arisen rendering it necessary that any permission granted or restriction imposed by the Act should cease to be granted or imposed; or
- If it considers necessary or expedient so to do in public interest.
In either case it may, by notification, suspend or relax, to such extent, either indefinitely or for such period as may be notified, the operation of all or any of the provisions of the Act. "Notify" means to notify in the Official Gazette (section 2(t)).
Four points follow from the words.
- Reach. "All or any of the provisions": the power is not limited to a chapter or to the sections on permissions. The text does not carve anything out.
- Extent. A relaxation may be partial ("to such extent"); a suspension may be total.
- Duration. The notification fixes whether the effect is indefinite or for a period. The Act sets no maximum.
- Mode. Only by notification. A relaxation or suspension without a notification is not described.
The Act does not say what circumstances qualify. It does not list examples, and it does not say who may ask for it.
Section 40(2): removing an indefinite suspension
Where the operation of any provision has under sub-section (1) been suspended or relaxed indefinitely, the suspension or relaxation may, at any time while the Act remains in force, be removed by the Central Government by notification. The sub-section speaks of an indefinite suspension. A suspension for a stated period ends at its end; the sub-section does not deal with ending it earlier.
Section 40(3): laying before Parliament
Every notification under the section shall be laid, as soon as may be after it is issued, before each House of Parliament, while it is in session, for a total period of thirty days, which may be comprised in one session or in two or more successive sessions. If, before the expiry of the session immediately following the session or successive sessions, both Houses agree in making any modification in the notification, or both Houses agree that the notification should not be issued, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be. Any such modification or annulment is without prejudice to the validity of anything previously done under that notification.
| Stage | What the text says |
|---|---|
| Laid | As soon as may be after issue, before each House |
| For how long | Thirty days in total, in one session or successive sessions |
| What Parliament may do | Both Houses agree on a modification, or that the notification should not be issued |
| Result | Notification has effect only in modified form, or is of no effect |
| Effect on the past | No prejudice to anything done under it before |
The same scheme of laying appears in section 48 for rules and regulations; see our article on sections 47 and 48. The last words matter to a business: a transaction completed under a relaxation stays valid even if Parliament later modifies or annuls the notification. What is not covered is a transaction that is still in progress when the modification takes effect; the Act does not say more.
Section 41: directions to the Reserve Bank
For the purposes of the Act, the Central Government may, from time to time, give to the Reserve Bank such general or special directions as it thinks fit, and the Reserve Bank shall, in the discharge of its functions under the Act, comply with any such directions.
- General or special. A general direction applies broadly; a special direction applies to a case or class.
- Binding. The word is "shall comply".
- Scope. The directions are for the purposes of the Act and bear on the Bank's functions under it, such as the powers in sections 3, 6, 7, 10, 11 and 12.
- No procedure. The section does not require a notification or laying before Parliament; section 40 does, but section 41 is silent. The Act does not say whether a direction must be published.
This is separate from the Reserve Bank's own directions to authorised persons under section 11, covered in our article on sections 11 and 12. Section 41 flows from the Government to the Bank; section 11 flows from the Bank to authorised persons.
Rules and regulations come from elsewhere
Section 40 does not itself make rules or regulations; those are for section 46 (the Central Government's rules) and section 47 (the Reserve Bank's regulations). See our articles on section 46 and sections 47 and 48. A suspension or relaxation under section 40 can touch any provision, but the Act does not say that it changes a rule or regulation already made.
Example. Suppose the Central Government considers that a restriction in the Act should cease in the public interest and issues a notification suspending its operation for a stated period. The notification is laid before both Houses for thirty days in total. Alpha Trading Pvt Ltd, a hypothetical company, completes a transaction during the period. If Parliament later modifies the notification, the company's completed transaction is not disturbed, because the modification is without prejudice to anything done under the notification. Separately, the Government gives the Reserve Bank a general direction on how it should discharge a function under the Act; the Bank must comply.
What the Act does not say
- It does not list the circumstances or the provisions that may be suspended.
- It does not set a maximum period for a suspension.
- It does not require a section 41 direction to be published or laid before Parliament.
- It does not say how a section 40 notification interacts with rules and regulations already made.
Need help reading a notification?
A notification under section 40 can change what is allowed for a period or without limit of time. Our FEMA advisory team can help you check how a notification applies to your transactions and for how long.
Key takeaways
- Section 40(1): the Central Government may suspend or relax all or any provisions by notification, indefinitely or for a notified period.
- Section 40(2): an indefinite suspension may be removed by notification at any time while the Act is in force.
- Section 40(3): the notification is laid before Parliament for thirty days; modification or annulment does not undo what was done before.
- Section 41: the Central Government may give the Reserve Bank general or special directions, which the Bank shall comply with.
Read next
- Sections 11 and 12: Reserve Bank directions to and inspection of authorised persons
- Section 46: power of the Central Government to make rules
- Sections 47 and 48: Reserve Bank regulations and laying before Parliament
- Current Account Transactions Under FEMA
Disclaimer: Based on a consolidated text of the Foreign Exchange Management Act, 1999 showing amendments up to Act 50 of 2019, as consulted on 2 October 2026. Limits, forms, timelines and procedures are set by rules, regulations and Reserve Bank directions made under the Act; they change from time to time and are not covered here. Later amendments should be checked. This article is general information, not legal advice; check the official text before acting.