Difference between Capital and Current Account transactions under FEMA
Capital account: alters assets/liabilities of resident outside India (FDI, ODI, ECB, NRI deposits). Current account: rest (trade, services, dividends, salaries).
FresherFree
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FEMA & RBI
Master cross-border business regulations. Foreign Direct Investment (FDI), Overseas Direct Investment (ODI), External Commercial Borrowings (ECB), FEMA, RBI Master Directions, and reporting compliances.
12 questions1 Fresher4 Intermediate7 Senior
Annual Return on Foreign Liabilities and Assets (FLA)
Filed on RBI FLAIR portal by Indian entities with FDI/ODI/foreign assets/liabilities by 15 July each year. Required even if no transactions during the year.
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Automatic Route vs Approval Route for FDI
Automatic: no prior approval; only post-investment reporting. Approval route: government clearance via FIFP for sensitive sectors and from land-border countries.
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Liberalised Remittance Scheme (LRS) for resident individuals
Allows resident individuals to remit up to USD 250,000 per FY for permissible capital and current account transactions, with TCS applicable above ₹7 lakh.
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FDI reporting — FC-GPR and FC-TRS
FC-GPR: report receipt of FDI and allotment within 30 days. FC-TRS: report transfer of shares between resident and non-resident within 60 days.
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FEMA implications in cross-border M&A — inbound and outbound
Inbound: FDI routes apply; valuation as per DCF / SEBI norms. Outbound: ODI framework with 400% net-worth cap and Form FC. Cross-border mergers per RBI 2018 Regulations.
SeniorUnlocks
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Cross-border merger under FEMA Cross Border Merger Regulations, 2018
Enables Indian-foreign company mergers (inbound and outbound). Inbound: foreign assets get 2-year compliance window. Outbound: resident shareholders via LRS / ODI.
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Overseas Direct Investment (ODI) under FEMA
Indian entities can invest abroad up to 400% of net worth (automatic) under FEM (OI) Rules 2022. New ODI/OPI bifurcation, financial services restrictions and Form FC.
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External Commercial Borrowings (ECB) framework
Foreign-currency or INR-denominated borrowings by eligible Indian entities, under tenor / pricing / end-use restrictions per RBI Master Direction.
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Compounding of contraventions under FEMA
Voluntary admission of contravention; compounded by RBI/Directorate of Enforcement; no criminal prosecution post-compounding; quantum based on Master Direction matrix.
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Foreign Currency Convertible Bonds (FCCBs) — structure and regulation
Debt instrument denominated in foreign currency, convertible into equity at predetermined ratio. Issued under ECB framework with conversion price floor.
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Foreign Contribution (Regulation) Act, 2010 — applicability and renewal
FCRA regulates receipt of foreign contributions by associations / NGOs / individuals. Registration via Form FC-3A; valid 5 years, renewable.
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