All transactions are to be routed through AD’s (Authorised Dealer). Transactions can be classified into two categories i.e. Current A/c & Capital A/c.
A) Current A/c Transaction:
These transactions are those that are not capital in nature & mainly related to the Import & Export of goods & services.
There are 4 types of Current A/c Transactions:
1) Prohibitory Category
It Includes transactions with Nepal & Bhutan, remittance of earning from Lottery/Racing etc.
e.g. A person travel to Nepal &/or Bhutan or
A transaction with a person resident of Nepal or Bhutan
2) Schedule II
Transactions requiring government approval
3) Schedule III
The transactions where AD’s can allow remittance up to prescribed limits & RBI permission requirement will be for remittance exceeding the limit
4) All other current a/c transactions for which AD’s can allow remittance without monetary limit. The importers & exporters can get most of their transactions through the AD’s & there will be fewer cases of permission from RBI
Current A/c transaction includes transaction such as
i) Payment due in connection with foreign trade (Import/Export), other foreign business, services & short term banking & credit facilities in the ordinary course of business.
ii) Payment due as interest on loans & as net income from investments,
iii) Remittance for living expenses of parents, spouse & children residing abroad &
iv) The expense in connection with Foreign Travel, Education & Medical care of parent, Spouse & Children.
B) Capital A/c Transactions
It’s classified into two classes:
(i). Capital Account Transactions of a person resident in India.
- Investment in foreign securities
- Foreign Currency loans raised in India and abroad
- Transfer of Immovable properties outside India
- Guarantees issued by a person resident in India in favor of a person resident outside India.
- Loans and overdrafts (borrowings) by a person resident in India from a person resident outside India
- Taking out an insurance policy from an insurance company outside India.
- Loan to a person resident outside India
- Remittance outside India of capital assets of a person resident in India.
- Sale and purchase of foreign exchange derivatives in India and abroad and commodity derivatives abroad
(ii). Capital Account Transactions of a person resident outside India.
(a) Investment in India by way of
- Issue of securities by a body corporate or an entity in India and investment therein by a person resident outside India; and
- Investment by way of contributions by a person resident outside India to the capital of a firm or proprietorship concern or an association of person in India.
(b) acquisition and transfer of immovable property in India in favor of, on behalf of a person resident in India.
(c) Guarantee by a person resident outside India in favor of, or on behalf of a person resident in India,
(d) Import / Export of Currency/Currency Notes/ into/from India by a person resident outside India
(e) Deposit between a person resident in India and the person resident outside India.
(f) Foreign Currency Accounts in India of a person resident outside India
(g) Remittance outside India of capital assets in India of a person resident outside India.