Capital Account Transaction Means:  The capital account transactions for better understanding can be are defined under the following two categories:

1. For persons resident in India

2. For person resident outside India


1. In case Person Resident In India [ PRI ]

  • A transaction which alters the assets; or
  • A transaction which alter the liability; or
  • A transaction which alters contingent liability

                 Outside India.

2. In case Person Resident Outside India [ PROI ]

  • – A transaction which alters the assets or
  • – A transaction which alters the liability or
  • – A transaction which alters contingent liabilities ,

                 In India.

Includes : Transaction referred to in section 6 subsection 3 i.e. 6(3) of the Foreign Exchange Management Act, 1999. Transaction under this section called deemed Capital Account transaction whether they increase assets & liability or not.

Provided that 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.
Definition as FEMA

“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 referred to in subsection (3) of section 6;”

Current Account Transaction

Current account transaction means a transaction other than capital account transaction and includes:

  • Payment due as interest on loan and as net income from investment.
  • Remittance for living expenses of parents , spouse and children residing aboard
  • Expenses in connection with :
    • Foreign travel
    • Education, and
    • Medical case of parent spouse and children
  • Payment due in connection with
  • foreign trade
  • Other current business, service
  • Short term banking and
  • Credit facility in the ordinary course of business.

Provided that the Central Government may, in public interest and in consultation with the Reserve Bank, impose such reasonable restrictions for current account transactions as may be prescribed.


Definition as FEMA

“current account transaction” means a transaction other than a capital account transaction and without prejudice to the generality of the foregoing such transaction includes,-

1. payments due in connection with foreign trade, other current business, services, and short-term banking and credit facilities in the ordinary course of business,

2. payments due as interest on loans and as net income from investments,

3. remittances for living expenses of parents, spouse and children residing abroad, and

4. expenses in connection with foreign travel, education and medical care of parents, spouse and children;