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

Rohit, resident in India, receives a payment by order of a person resident outside India through another person in India, with no corresponding inward remittance from any place outside India. Under Section 3 of FEMA, 1999, how is this treated?

He is deemed to have received the payment otherwise than through an authorised person. Where payment on behalf of a non-resident arrives through another person without a corresponding inward remittance from outside India, the Explanation to Section 3(c) treats it as received outside the authorised channel.

  1. AHe is deemed to have received the payment otherwise than through an authorised personCorrect
  2. BIt is treated as a valid receipt if the other person is a resident Indian
  3. CIt is exempt because the payment was received within India
  4. DIt is treated as a payment received through an authorised person if made by bank transfer

Explanation

The Explanation to Section 3(c) states that where a person in or resident in India receives a 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, he is deemed to have received it otherwise than through an authorised person. Bank transfer or domestic location does not change this.

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