FEMA_Practicle Problems_1

Examine whether the following transactions are permissible or not under the above Act as Capital Account transactions :
i investment by person resident in India in Foreign Securities.

ii Foreign currency loans raised in India and abroad by a person resident in India.

iii Export, import and holding of currency/currency notes.

iv Trading in transferable development rights.

v Investment in a Nidhi Company.

i Investment by person resident in India in Foreign Securities is a capital account transaction. It is permitted within the limit, subject to the compliance of conditions and if declaration is made as per the provisions contained in the Regulations relevant to the transaction (viz., Foreign Exchange Management (Investment in Foreign Securities by a person resident in India) Regulations, 2000). However, drawal upto $ 2,00,000 is permitted without requiring any compliance with these Regulations, in accordance with the provisions contained in the Liberalised Remittance Scheme for Resident Individuals.

ii Foreign currency loans raised in India and abroad by a person resident in India is a capital account transaction. It is permitted within the limit, subject to the compliance of conditions and if declaration is made as per the provisions contained in the Regulations relevant to the transaction.

iii Export, import and holding of currency/currency notes is a capital account transaction. It is permitted 'within the limit, subject to the compliance of conditions and if declaration is made as per the provisions contained in the Regulations relevant to the transaction.

iv trading in transferable development rights is prohibited since no person resident outside India shall make investment in India in any entity which is engaged, or proposes to engage in trading in Transferable Development Rights (TDRs) (Regulation 4 of Foreign Exchange Management 'Permissible Capital Account Transactions Regulations, 2000).

v investment in a Nidhi Company is prohibited since no person resident outside India shall make investment in India in any entity which is engaged, or proposes to engage as Nidhi company (Regulation 4 of Foreign Exchange Management (Permissible Capital Account Transactions Regulations, 2000).