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Permissible transaction of capital account - FEMA Ready Reckoner - FEMAExtract Permissible transaction of capital account under FEMA Act, 1999 As per section Section 6(2) of FEMA Act, 1999 read with Rule 5 of Foreign Exchange Management (Overseas Investment) Rules, 2022 The Reserve Bank may, in consultation with the Central Government , specify- any class or classes of capital account transactions, involving debt instruments , which are permissible; the limit up to which foreign exchange shall be admissible for such transaction: any conditions which may be placed on such transactions; Exception:- The Reserve Bank or the Central Government shall not impose any restrictions on the drawal of foreign exchange for following purposes: for payment due on account of amortisation of loans or for depreciation of direct investments in the ordinary course of business . [(Section 6(2)] Debt instruments , means define in section 6(7) of FEMA Act, 1999 read with clause (A) of rule 5 of Foreign Exchange Management (Overseas Investment) Rules, 2022, The following shall be the debt instruments as determined by the Central Government in consultation with the Reserve Bank.: Government bonds; Corporate bonds; All tranches of securitisation structure which are not equity tranche; Borrowings by firms through loans; and Depository receipts whose underlying securities are debt securities; Permissible Transactions Permissible transaction of capital account Read with Regulation 3 of Foreign Exchange Management (Permissible Account Transaction) Regulation, 2000 In exercise of the powers under section 6(2), the Reserve Bank has framed the a Regulation 3 of Foreign Exchange Management (Permissible Capital Account Transaction) Regulation, 2000, which classify the capital account transaction separately for person resident in India Schedule I ; and a person resident outside India Schedule II . any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction specified in the Schedules; Provided that the transaction is within the limit , if any, specified in the regulations relevant to the transaction. Classes of Capital account Transaction for person resident in India ( Residents) Schedule I (a) Investment by a person resident in India in foreign securities (b) Foreign currency loans raised in India and abroad by a person resident in India (c) Transfer of immovable property outside India by a person resident in India (d) Guarantees issued by a person resident in India in favour of a person resident outside India (e) Export, import and holding of currency/currency notes (f) Loans and overdrafts (borrowings) by a person resident in India from a person resident outside India (g) Maintenance of foreign currency accounts in India and outside India by a person resident in India (h) Taking out of insurance policy by a person resident in India from an insurance company outside India (i) Loans and overdrafts by a person resident in India to a person resident outside India (j) Remittance outside India of capital assets of a person resident in India (k) Undertake derivative contracts Classes of Capital account Transaction for person resident Outside India (Non - Residents) Schedule II (a) Investment in India by a person resident outside India, that is to say, (i) issue of security by a body corporate or an entity in India and investment therein by a person resident outside India; and (ii) investment by way of contribution by a person resident outside India to the capital of a firm or a proprietorship concern or an association of persons in India. (b) Acquisition and transfer of immovable property in India by a person resident outside India. (c) Guarantee by a person resident outside India in favour of, or on behalf of, a person resident in India. (d) Import and export of currency/currency notes into/from India by a person resident outside India. (e) Deposits between a person resident in India and a 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. (h) Undertake derivative contract
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