Capital And Current Account Transactions Under FEMA: Transactional Perspective

For professionals working on corporate transactions involving acquisitions, investments and involving non-residents, situations arise where one needs to determine if a particular transaction structure is permissible under the Foreign Exchange Management Act, 1999 and the regulations, rules, circulars, notifications and directions thereunder ("FEMA").

It is understandable that the law cannot possibly provide for every such situation. FEMA has classified the transactions into two broad categories, i.e. capital account and current account transactions.

Capital account and current account transactions constitute the fundamental concept of FEMA. Every transaction involving a non-resident and resident can be classified either as a capital account or a current account transaction.