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

Meera, a resident of Pune, goes abroad for a three-month course and wants to remit funds for her tuition fees. She asks her authorised dealer whether this is allowed. Under FEMA, 1999 and the rules made under it, how is a remittance of this kind generally classified?

Remittance for foreign education is a current account transaction. Under FEMA, authorised persons may freely deal in foreign exchange for current account transactions, unless the Central Government, in consultation with the RBI, imposes restrictions. Case-by-case RBI approval is not the general requirement.

  1. ACapital account transaction, always requiring prior RBI approval
  2. BCurrent account transaction, which is generally permitted unless restricted by the Central Government under the ActCorrect
  3. CProhibited transaction, as no resident may remit foreign exchange for education
  4. DCurrent account transaction, but only if the RBI specifically approves each remittance

Explanation

Remittance for education abroad is a current account transaction. FEMA permits current account transactions freely, subject to reasonable restrictions imposed by the Central Government in consultation with RBI. Options requiring approval for every case or calling it a capital transaction misstate the rule.

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