Definition of capital account transaction:
capital account transaction” means a transaction which alters:
- the assets or liabilities, including contingent liabilities, outside India of persons resident in India; or
- assets or liabilities in India of persons resident outside India, and includes transactions as below.
Capital Account Transactions:
Any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction subject to conditions.
The Reserve Bank may, in consultation with the Central Government, specify—
(a) any class or classes of capital account transactions which are permissible;
(b) the limit up to which foreign exchange shall be admissible for such transactions:
The Reserve Bank shall not impose any restriction on the drawal of foreign exchange for payments due on account of amortization of loans or for depreciation of direct investments in the ordinary course of business.
The Reserve Bank may, by regulations, prohibit, restrict or regulate the following—
(a) transfer or issue of any foreign security by a person resident in India;
(b) transfer or issue of any security by a person resident outside India;
(c) transfer or issue of any security or foreign security by any branch, office or agency in India of a person resident outside India;
(d) any borrowing or lending in foreign exchange in whatever form or by whatever name called;
(e) any borrowing or lending in rupees in whatever form or by whatever name called between a person resident in India and a person resident outside India;
(f) deposits between persons resident in India and persons resident outside India;
(g) export, import or holding of currency or currency notes;
(h) transfer of immovable property outside India, other than a lease not exceeding five years, by a person resident in India;
(i) acquisition or transfer of immovable property in India, other than a lease not exceeding five years, by a person resident outside India;
(j) giving of a guarantee or surety in respect of any debt, obligation or other liability incurred—
(i) by a person resident in India and owed to a person resident outside India; or
(ii) by a person resident outside India.
A person resident in India may, if the following all conditions are fulfilled,-
- hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India,
- if such currency, security or property was acquired, held or owned by such person when he was resident outside India or,
- inherited from a person who was resident outside India.
A person resident outside India may, if the following all conditions are fulfilled,-
- hold, own, transfer or invest in Indian currency, security or any immovable property situated in India,
- if such currency, security or property was acquired, held or owned by such person when he was resident in India or,
- inherited from a person who was resident in India.
The Reserve Bank may, by regulation, prohibit, restrict, or regulate establishment in India of a branch, office or other place of business by a person resident outside India, for carrying on any activity relating to such branch, office or other place of business.
