Skip to content

CMA Final · Corporate and Economic Laws · Foreign Exchange Management Act, 1999

Ravi Traders in Chennai receives a payment on behalf of a person resident outside India through a local intermediary, with no corresponding inward remittance from any place outside India. Under the Explanation to Section 3(c) of FEMA, how is this receipt treated?

The receipt is deemed to have been received otherwise than through an authorised person. Without a corresponding inward remittance from outside India, routing the payment through another person, even an authorised person, does not make it a permitted receipt under Section 3(c).

  1. AIt is treated as received through an authorised person because an intermediary was used
  2. BIt is deemed to have been received otherwise than through an authorised personCorrect
  3. CIt is exempt because the intermediary is resident in India
  4. DIt is treated as a current account receipt requiring no regulation

Explanation

The Explanation to Section 3(c) says that where a person in or resident in India receives payment by order or on behalf of a person resident outside India through any other person (including an authorised person) without a corresponding inward remittance from outside India, the person is deemed to have received it otherwise than through an authorised person. Using an intermediary therefore does not cure the lack of inward remittance.

Did you get it right without looking?

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

Practise Foreign Exchange Management Act, 1999Free diagnostic mock

More Foreign Exchange Management Act, 1999 questions