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Capital Account Transaction [Section 6 of FEMA Act, 1999] - FEMA Ready Reckoner - FEMAExtract Permissible Capital Account Transaction T h e definitions of Capital Account Transactions and its opposite current account transactions are contained in clauses (e) and (j) of Section 2 . The regulations under FEMA apply to a transaction based on whether the transaction is Capital Account Transaction or a Current Account Transaction . T h e section gives a liberty by providing that any person may sell or draw foreign exchange to or from an authorised person for capital account transactions. the liberty to do so is subject to the provisions of section 6(2) and 6(2A) , which states that the Reserve Bank and the Central Government may specify class or classes of capital account transactions, which are permissible limit upto, which the foreign exchange shall be admissible for such transactions and the conditions which may be placed on such transactions. As per section Section 6(1) of FEMA Act, 1999 Capital account transactions means As per section 2(e) of FEMA Act, 1999 capital account transaction means a transaction which alters the assets or liabilities, including contingent liabili ties, outside India of persons resident in India or assets or liabilities in India of persons resident outside India, and includes transactions referred to in sub-section (3) of section 6; (The section 6(3) Omitted vide The Finance Act, 2015 w.e.f. 14th May 2015 , but such omission is not incorporated in the definition section 2(e) ) In terms of Section 6(1) , any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction is now permitted by the Reserve Bank in respect of the specified class of such transaction subject to the monetary limit upto which foreign exchange is admissible for such transaction. As per section 6(2A) of FEMA Act, 1999 Read with Rule 5 of Foreign Exchange Management (Overseas Investment) Rules, 2022 The Central Government may, in consultation with the Reserve Bank , prescribe- any class or classes of capital account transactions, not involving debt instruments, which are permissible; the limit up to which foreign exchange shall be admissible for such transactions; and any conditions which may be placed on such transactions. Non-Debt instruments , means define in section 6(7) of FEMA Act, 1999 read with clause (B) of rule 5 of Foreign Exchange Management (Overseas Investment) Rules, 2022, The following shall be the Non - debt instruments as determined by the Central Government in consultation with the Reserve Bank. All investments in equity in incorporated entities (public, private, listed and unlisted); Capital participation in Limited Liability Partnerships; All instruments of investment as recognised in the Foreign Direct Investment policy from time to time; Investment in units of Alternative Investment Funds and Real Estate Investment Trust and Infrastructure Investment Trusts; Investment in units of mutual funds and Exchange-Traded Fund which invest more than fifty per cent in equity; The junior-most layer (i.e. equity tranche) of securitisation structure; Acquisition, sale or dealing directly in immovable property; Contribution to trusts; and Depository receipts issued against equity instruments;
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