FDTI

• Capital Account Transaction


  A transaction which alters the assets or liabilities, including contingent liabilities, outside India or assets or liabilities in India of persons resident in India or of persons resident outside India
• Current Account Transaction


  A transaction other than a capital account transaction and includes transactions pertaining to business which are recurring, personal transactions such as travel, education, maintenance of family members
• Illustration


  • An Indian resident imports machinery from a vendor in UK for installing in his factory
• As per accounts and income-tax law, purchase of machinery is a "capital expenditure"
• However, under FEMA, it does not alter (create) an asset in India for the UK vendor
• It does not create, any liability to a UK vendor, for the Indian importer
• Once the payment is made, the Indian resident or the UK vendor neither owns nor owes anything in the other country
• Hence it is a Current Account Transaction
• Capital Account Transactions


  • Any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction
  • RBI or the Central Govt. shall not impose any restrictions on the drawal of foreign exchange for payment due on account of amortisation of loans or for depreciation of direct investments in the ordinary course of business
• Persons resident in India may


  • hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India
  • if such currency, security or property was acquired, held or owned by such person when he was resident outside India
  • inherited from a person who was resident outside India
• Persons resident outside India may


  • hold, own, transfer or invest in Indian currency, security or any immovable property situated in India
  • if such currency, security or property was acquired, held or owned by such person when he was resident in India
  • inherited from a person who was resident in India
• Drawal


  Means drawal of foreign exchange from an authorised person and includes opening of Letter of Credit or use of International Credit Card or International Debit Card or ATM card or any other thing by whatever name called which has the effect of creating foreign exchange liability
• Transferable Development Rights


  Certificates issued in respect of category of land acquired for public purpose either by Central or State Govt. in consideration of surrender of land by the owner without monetary compensation, which are transferable in part or whole
• Derivative


  A financial contract, to be settled at a future date, whose value is derived from one or more financial, or non-financial variables
• Permissible Capital Account Transactions for Persons resident in India

  • Investment by a person resident in India in foreign securities
  • Foreign currency loans raised in India and abroad by a person resident in India
  • Transfer of immovable property outside India by a person resident in India
  • Guarantees issued by a person resident in India in favour of a person resident outside India
  • Export, import and holding of currency/currency notes
  • Loans and overdrafts (borrowings) by a person resident in India from a person resident outside India
  • Maintenance of foreign currency accounts in India and outside India by a person resident in India
  • Taking out of insurance policy by a person resident in India from an insurance company outside India
  • Loans and overdrafts by a person resident in India to a person resident outside India
  • Remittance outside India of capital assets of a person resident in India
  • Undertake derivative contracts
• Permissible Capital Account Transactions for Persons resident outside India


  • Investment in India by a person resident outside India, that is to say, issue of security by a body corporate or an entity in India and investment therein by a person resident outside India; and investment by way of contribution by a person resident outside India to the capital of a firm or a proprietorship concern or an association of persons in India
  • Acquisition and transfer of immovable property in India by a person resident outside India
  • Guarantee by a person resident outside India in favour of, or on behalf of, a person resident in India
  • Import and export of currency/currency notes into/from India by a person resident outside India
  • Deposits between a person resident in India and a person resident outside India
  • Foreign currency accounts in India of a person resident outside India
  • Remittance outside India of capital assets in India of a person resident outside India
  • Undertake derivative contracts
• No person shall undertake or sell or draw foreign exchange to or from an authorised person for any capital account transaction
• A resident individual may, draw from an authorized person foreign exchange not exceeding USD 250,000 per FY or such amount as decided by RBI from time to time for a capital account transaction specified in Schedule I
• No part of the foreign exchange of USD 250,000 shall be used for remittance directly or indirectly to countries notified as non-co-operative countries and territories by Financial Action Task Force (FATF) from time to time and communicated by RBI to all concerned
• Currently FATF blacklisted countries: Iran and North Korea
• No person resident outside India shall make investment in India, in any form, in any company or partnership firm or proprietary concern or any entity, whether incorporated or not, which is engaged or proposes to engage in "real estate business"
• The Registrar of Chits or an officer authorised by the State Govt. in this behalf, may, in consultation with the State Govt. concerned, permit any chit fund to accept subscription from NRIs
• NRIs shall be eligible to subscribe, through banking channel and on non-repatriation basis, to such chit funds, without limit subject to the conditions stipulated by RBI
• No person resident in India shall undertake any capital account transaction which is not permissible, as per Govt. Order, with any person who is, a citizen of or a resident of, or an entity incorporated in Democratic People's Republic of Korea, unless specific approval from CG to carry on such transaction
• The existing investment transactions, with any person who is, a citizen of or a resident of, or an entity incorporated in, or any existing representative office or other assets possessed in Democratic People's Republic of Korea, by a person resident in India, which is not permissible as per Govt. Order shall be closed/liquidated/disposed/settled within a period of 180 days from the date of notification of order being 21/04/2017, unless specific approval from CG to continue
• The Govt. order was passed, for excluding Korea, based on resolutions sanctioned by the Security Council of the United Nations
• Method of payment


  The payment for investment shall be made by remittance from abroad through normal banking channels or by debit to an account of the investor maintained with an authorised person in India in accordance with the regulations made by RBI under the Act
• Declaration


  Every person selling or drawing foreign exchange to or from an authorised person for a capital account transaction shall furnish to RBI, a declaration in the form and within the time specified in the regulations relevant to the transaction
• Current Account Transactions


  • Any person may sell or draw foreign exchange to or from an authorised person if such sale or drawal is a current account transaction
  • The CG may, in public interest and in consultation with RBI, impose such reasonable restrictions for current account transactions as may be prescribed
• Prohibition on Drawal of Foreign Exchange for Current Account Transactions


  • Travel to Nepal and/or Bhutan; or Transaction with a person resident in Nepal or Bhutan
  • Remittance out of lottery winnings
  • Remittance of income from racing/riding, etc., or any other hobby
  • Remittance for purchase of lottery tickets, banned/prescribed magazines, football pools, sweepstakes etc.
  • Payment of commission on exports made towards equity investment in Joint Ventures/Wholly Owned Subsidiaries abroad of Indian companies
• Current Account Transactions


  Any person may sell or draw foreign exchange to or from an authorised person if such sale or drawal is a current account transaction
• Restrictions on Current Account Transactions


  CG may, in public interest and in consultation with RBI, impose such reasonable restrictions for current account transactions as may be prescribed
• Prohibited Drawal of Foreign Exchange


  • Travel to Nepal and/or Bhutan
  • Transaction with a person resident in Nepal or Bhutan
  • Remittance out of lottery winnings
  • Remittance of income from racing/riding, etc., or any other hobby
  • Remittance for purchase of lottery tickets, banned/prescribed magazines, football pools, sweepstakes etc.
  • Payment of commission on exports made towards equity investment in Joint Ventures/Wholly Owned Subsidiaries abroad of Indian companies
  • Remittance of dividend by any company to which the requirement of dividend balancing is applicable
  • Payment of commission on exports under Rupee State Credit Route, except commission up to 10% of invoice value of exports of tea and tobacco
  • Payment related to "Call Back Services" of telephones
  • Remittance of interest income on funds held in Non-resident Special Rupee Scheme a/c
• Prior Approval of Government of India


  No person shall draw foreign exchange for Schedule II transactions without prior approval of the Govt. of India
• Transactions Requiring Prior Approval of Government of India


  • Cultural Tours
  • Advertisement in foreign print media for the purposes other than promotion of tourism, foreign investments and international bidding (exceeding US$ 10,000) by a State Govt. and its Public Sector Undertakings
  • Remittance of freight of vessel charted by a PSU
  • Payment of import through ocean transport by a Govt. Department or a PSU on cost insurance & freight basis (i.e., other than free on board and free alongside ship basis)
  • Multi-modal transport operators making remittance to their agents abroad
  • Remittance of hiring charges of transponders by TV Channels and Internet service providers
  • Remittance of container detention charges exceeding the rate prescribed by Director General of Shipping
  • Remittance of prize money/sponsorship of sports activity abroad by a person other than International/National/State Level sports bodies, if the amount involved exceeds US $ 100,000
  • Remittance for membership of Protection & Indemnity Insurance Club
• Prior Approval of RBI


  Every drawal of foreign exchange for transactions included in Schedule III shall be governed as provided therein
• Transactions Requiring Prior Approval of RBI


  • Private visits to any country (except Nepal and Bhutan)
  • Gift or donation
  • Going abroad for employment
  • Emigration
  • Maintenance of close relatives abroad
  • Travel for business, or attending a conference or specialised training or for meeting expenses for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/check-up
  • Expenses in connection with medical treatment abroad
  • Studies abroad
  • Any other current account transaction
• Liberalised Remittance Scheme (LRS)


  Individuals can avail of foreign exchange facility for the purposes within the limit of USD 2,50,000 only
• Resident but not permanently resident


  A person resident in India on account of his employment or deputation of a specified duration or for a specific job or assignments, the duration of which does not exceed 3 years
• Remittance by persons other than individuals


  Shall require prior approval of RBI for certain transactions exceeding specified limits