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FEMA – Capital & Current Account Transactions – Quiz!

CAPITAL & CURRENT ACCOUNT TRANSACTIONS -FEMA

Foreign Exchange Management Act, 1999 is the main Act which regulates the foreign Exchange transactions in India. There are two types of transactions taking place under this Act, Namely the Capital Account Transactions and The Current Account Transactions.

A capital account transaction is a transaction

  1. Which alters the assets or liabilities ( including the contingent liabilities)
    – outside India of person resident in India and
    – inside India of persons resident outside India
  2. Transactions specified in Section 6(3) of the Act

A transaction other than a capital account transaction is a current account transaction and includes

  1. Payments due in connection with foreign trade, other business transactions, and services and short term borrowings and credit facilities in the ordinary course of business.
  2. Payments due as interest on loans and as net income from investments.
  3. Remittance for living expense of parents, spouse and children residing abroad.
  4. Expenses in connection with foreign travel, education and medical care of parents, spouse and children.

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