Capital Account

1. A capital account transaction means a transaction which alters the assets and liabilities including contingent liabilities outside India of persons resident in India or assets and liabilities in India but of a person resident outside India. Thus, any transaction that changes the overseas assets and liabilities for an Indian resident in a foreign country, or vice versa, is classified as a capital account transaction.

2. As per the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations of 2000, “no person shall undertake or sell or draw foreign exchange to or from any unauthorized person for any capital account transaction”. It did allow for transactions carried out by Indian residents that included investments in foreign securities, foreign currency loans raised in and out of India, transfer of immovable property outside India, the issue of guarantees in favor of anybody living outside India.