Skip to content

CA Intermediate · Corporate and Other Laws · The Foreign Exchange Management Act, 1999

Arjun, resident in India, wishes to make a remittance abroad. Under FEMA, 1999, transactions are classified as current account or capital account transactions. Which of the following is a current account transaction?

Payments due as interest on loans in the normal course of business, and expenses for foreign travel, education and medical care of parents, spouse and children, are current account transactions under FEMA. Loan principal movements and acquiring property abroad change assets or liabilities and are capital account transactions.

  1. APayment of fees for foreign education tuition abroad is excluded and treated as capital account only
  2. BRemittance of a loan taken by Arjun's Indian company from a foreign lender
  3. CPayment due as interest on loans in the normal course of business, and expenses on foreign travel, education and medical care of parents, spouse and childrenCorrect
  4. DAcquisition of immovable property outside India by an Indian resident

Explanation

Section 2(j) defines a current account transaction to include payments due as interest on loans and as net income from investments, remittances for living expenses of parents, spouse and children residing abroad, and expenses in connection with foreign travel, education and medical care. Loans and acquisition of foreign property are capital account transactions. Option A wrongly excludes education.

Did you get it right without looking?

One question tells you little. A timed set on The Foreign Exchange Management Act, 1999 shows your real accuracy, how long you take and where you lose marks.

Practise The Foreign Exchange Management Act, 1999Free diagnostic mock

More The Foreign Exchange Management Act, 1999 questions