Skip to content

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

Mr. Raghav Menon left India in April 2024 for a two-year job in Dubai and became a person resident outside India under FEMA. He holds a savings account in Kochi opened when he was resident. Under FEMA, what should happen to this account?

The account must be redesignated as a Non-Resident Ordinary (NRO) account. Once a person becomes resident outside India, resident rupee accounts cannot continue in that form, and FCNR(B) deposits are created only from freely convertible foreign currency, not by conversion.

  1. AIt must be redesignated as an NRO accountCorrect
  2. BIt must be closed immediately and funds remitted abroad
  3. CIt may continue as a resident savings account without any change
  4. DIt must be converted into an FCNR(B) account

Explanation

When a resident Indian becomes a person resident outside India, the existing resident savings account must be redesignated as an NRO account. It cannot remain a resident account, and FCNR(B) accounts are opened afresh with foreign currency funds, not by converting a rupee savings account.

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