Top FEMA Consultant in Ahmedabad

Best FEMA Consultant in Ahmedabad

Top Fema Consultant in Ahmedabad Gujarat and India by Mehul Thakkar and Associates. Transactions involving Current and Capital Accounts under FEMA.

 1. The RBI and the International Monetary Fund are required to maintain a record of the external assets and liabilities at the macro level. These records would show each nation's net position with regard to its foreign exchange commitment and surplus relative to other nations.

 2. With the aforementioned goal in mind, FEMA divides transactions into two categories: capital account transactions and current account transactions. These are governed by the rules of Sections 5 and 6 of the FEMA and are defined in Sections 2(e) and 2(j), respectively. The top Fema Consultant in Ahmedabad Gujarat and India by Mehul Thakkar and Associates.

3. What Constitutes a Capital Account Transaction?

  (e) "Capital account transaction" refers to any transaction that modifies an individual's assets or liabilities, including contingent liabilities, outside of India or their assets or liabilities inside India of an individual residing outside of India; this includes transactions covered by section 6 subsection (3);

  4. Current Account Transaction Definition -

(j) A "current account transaction" is any transaction that isn't related to a capital account. Without limiting the applicability of the previous sentence, examples of such transactions include:

  (i) remittances for the living expenses of parents, spouses, and children who reside abroad; (ii) payments due as interest on loans and as net income from investments; (iii) payments due in connection with short-term banking and credit facilities, other current business, services, and foreign trade; (iv) expenses related to foreign travel, education, and medical care of parents, spouse, and children;

 5. In light of this, we can see that the ideas of accounting and income tax are not the same as those of capital account transactions and current account transactions under the FEMA. Here, we must determine if the transaction would affect a person's assets or liabilities—including any contingent liabilities—relative to another nation from an economic perspective. As an example

 - A large-scale, upfront plant and machinery purchase. Under accountancy and income tax law, a current account transaction may be considered a capital account transaction, however in this instance, since both parts of the transaction are squared up and there is no receivable or payable, it would not change the assets or liabilities.

- Investing in equity in another nation – this would result in the creation of assets outside the nation and change the asset liability position, therefore it would be considered a capital account transaction.

6. There is no hard and fast rule for categorizing a transaction as capital or current; instead, the above principle must be carefully applied to the particular facts of each situation.

7. Control over Capital Account and Current Account Transactions: - generally speaking under FEMA –

Unless otherwise stated, all current account transactions are allowed; and

· Unless otherwise authorized, any transactions involving capital accounts are forbidden.