Skip to content

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

Ms. Tanvi Shah, a resident individual, wishes to remit money abroad for her son's education and also to buy a flat in London. She asks which of these is a current account transaction under FEMA. Which option is correct?

Remittance for education is a current account transaction, while buying immovable property in London is a capital account transaction. Education expenses are listed among current account items, whereas acquiring foreign assets alters assets or liabilities outside India and so falls under capital account.

  1. ABoth remittances are capital account transactions
  2. BRemittance for education is a current account transaction; purchase of immovable property abroad is a capital account transactionCorrect
  3. CBoth remittances are current account transactions
  4. DPurchase of the flat is current account; education is capital account

Explanation

A current account transaction covers payments for trade, services, short-term banking, remittances for living expenses, education and medical care. Acquiring immovable property abroad changes assets of the person outside India and is therefore a capital account transaction. The other options reverse or merge these categories.

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