Foreign Exchange Advisory

FEMA, 1999 draws its core statutory line between current account and capital account transactions. Section 5 makes current account transactions freely permitted unless specifically restricted, subject to the Foreign Exchange Management (Current Account Transactions) Rules, 2000, which classify draw of foreign exchange into three schedules: Schedule I (transactions prohibited outright — e.g., remittance out of lottery winnings), Schedule II (transactions requiring prior Central Government approval, such as cultural tours and certain advertisement remittances above prescribed limits), and Schedule III (transactions permitted only with prior RBI approval once they exceed prescribed monetary ceilings, per Rule 5).

Section 6 separately regulates capital account transactions, which are permitted only to the extent prescribed by RBI regulations made under that section (e.g., the NDI Rules 2019 for inbound investment, the Overseas Investment Rules 2022 for outbound investment).

For resident individuals, the Liberalised Remittance Scheme (operated under FEMA s.5/s.6 read with RBI regulations) permits remittance of up to USD 250,000 per financial year (April-March) in aggregate, across permitted current and capital account purposes, without prior RBI approval; remittance beyond this ceiling, or for a non-permitted purpose, requires specific RBI approval. All foreign exchange dealing must be routed through an Authorised Person under s.3 — dealing in foreign exchange outside this channel is itself a contravention.

Foreign exchange advisory is the guidance a business or individual needs for every cross-border money movement — the receipts and payments in foreign currency, the remittances, the investments, and the compliance that each requires under the Foreign Exchange Management Act 1999. The advisory covers the practical questions: how a payment to a foreign vendor is routed, how an export receipt is realised, how a remittance is made within the law, and how the regulations apply to the specific transaction. Section 6 of FEMA 1999 and the regulations under it are the map.

The value of the advisory is that it answers before the transaction, not after. A business planning a payment to a foreign service provider needs to know the permitted channel and the documentation; an individual remitting abroad needs the form and the limit; an exporter needs the realisation rules; an importer needs the payment route. Each answer keeps the transaction out of the contravention file.

The cost of getting a foreign exchange transaction wrong is the FEMA exposure and the practical friction: a payment made through the wrong channel is held at the bank, a remittance without the documentation is rejected, and a transaction that contravenes the Act is a contravention with the penalty framework attached. The advisory is the cheapest layer of the transaction.

This service is for businesses and individuals with foreign exchange needs. We advise on the permitted channels and documentation for payments, receipts and remittances under FEMA 1999, handle the forms and the bank coordination, advise on export realisation and import payments, and keep the transactions within the law and the records in order.