Capital Account Transactions:
As
per Section 2(e) of
FEMA “capital account transaction” means a transaction which alters the assets or
liabilities, including contingent
liabilities, outside India of persons resident in
India or assets or liabilities in India of
persons resident outside India, and includes transactions
referred to in sub-section
(3) of
section 6;
Section 6 of FEMA provides that:
(1) Subject
to the provisions of sub-section (2), any person may sell
or draw foreign exchange to
or from an authorized person
for
a capital account
transaction.
(2) The
Reserve Bank may, in consultation
with the Central Government, specify: (a) any
class or classes of
capital account
transactions which
are permissible;
(b) the limit up to which foreign exchange shall
be admissible for such
transactions
:
Provided that the Reserve Bank shall not impose any restriction on the drawal of
foreign exchange for
payments
due
on account of amortization of loans
or for depreciation of
direct investments in
the ordinary course of business.
(3) Without prejudice to the generality of the provisions of sub-section (2), the Reserve
Bank may, by regulations,
prohibit, restrict or regulate
the following:
(a) transfer or
issue of any
foreign security
by a
person resident in India; (b)
transfer
or issue of any security by
a person resident outside India;
(c) transfer or issue of any security or foreign security by any branch, office or agency in
India of a person
resident outside India;
(d) any borrowing or lending
in foreign exchange in
whatever form or by
whatever name called;
(e) any borrowing or lending in rupees in whatever form or by whatever name called between a person
resident in India and a person resident outside India;
(f)
deposits between
persons resident in India and persons resident
outside India;
(g) export, import or holding of currency or currency notes;
(h) transfer of immovable property outside India, other than a lease not exceeding five years, by a person
resident in India;
(i) acquisition or transfer
of immovable
property in India, other than a lease not exceeding
five years, by a person resident outside India;
(j) giving of a guarantee or surety in respect of any debt, obligation or other liability incurred:
(i)
by a person resident in India and owed
to a person resident
outside India; or
(ii)
by a person resident outside India.
