The legal framework for administration of foreign exchange transactions in India is provided by the Foreign Exchange Management Act, 1999. Under the Foreign Exchange Management Act, 1999 (FEMA), which came into force with effect from June 1, 2000, all transactions involving foreign exchange have been classified either as capital or current account transactions. All transactions undertaken by Indian resident that do not alter his / her assets or liabilities, including contingent liabilities, outside India are current account transactions. In terms of Section 5 of the FEMA, persons resident in India are free to buy or sell foreign exchange for any current account transaction except for those transactions for which drawal of foreign exchange has been prohibited by Central Government, such as remittance out of lottery winnings, remittance of income from racing/riding, etc., or any other hobby, remittance for purchase of lottery tickets, banned / proscribed magazines, football pools, sweepstakes, etc., payment of commission on exports made towards equity investment in Joint Ventures/ Wholly Owned Subsidiaries abroad of Indian companies, remittance of dividend by any company to which the requirement of dividend balancing is applicable, payment of commission on exports under Rupee State Credit Route, except commission up to 10% of invoice value of exports of tea and tobacco and payment related to “call back services” of telephones.
Foreign Exchange Management (Current Account Transactions) Rules, 2000 - Notification [GSR No.381(E)] dated May 3, 2000, as amended from time to time, is available in the Official Gazette as well as, as an Annex to our Master Circular on Miscellaneous Remittances from India–Facilities for Residents available at website www.mastercirculars.rbi.org.in