a. Capital account transaction It relates to movement of capital eg.

. transactions in property and investment and lending and borrowing money. b. Current account transaction All others transaction which do not fall into capital amount category are current account transactions. They are freely subject to few restrictions . 2.Some other features of FEMA area. The FEMA and rules give full freedom to a person residing in India who was earlier resident out side India to hold or own or transfer any foreign security or immovable property situated out side India . b. Similar freedom is also given to a residen

who inherits such security or immovable property from a person resident outside India. c. A person resident outside India is permitted to hold shares, security and properties acquired by him d. A person resident outside India is also permitted to hold such properties inherited from a person resident in India. e. Certain prescribed limits have been substantially enhanced. for instance, residents now going abroad for business purpose or for participating in conferences /seminars will not need the reserve bank permission to avail foreign exchange up to US dollars25000 per trip.

 The Exchange Earner Foreign Currency account holder and Resident Foreign exchange account holder are permitted to freely use the funds held in EEFC/RFC accounts for payment of all permissible current amount transactions . The rules for foreign investments in India and Indian investment abroad are also comprehensive, transparent and permit Indian companies engaged in certain specified sectors to acquire shares of foreign companies. Definitions 1. Authorized person Means an authorized dealer, money changer , off shore banking unit authorized to deal in foreign exchange or foreign securities .

2. Currency Includes all currency notes , postal order , money order, cheques , drafts , travelers cheques , letters of credit ,bill of exchange and promissory notes ,credit cards or such other similar instruments, as may be notified by reserve bank. Foreign exchange Means foreign currency and include 1. Deposits , credits and balances payable in any foreign currency . 2.Drafts , letters of credit or bills of exchange expressed or drawn in Indian currency but payable in foreign currency.

3. Drafts , letters of credit or bills of exchange drawn by banks , institutions or person outside India but payable in Indian currency . Foreign Currency - Any currency others than Indian currency. person -include. a. An individual b. A Hindu undivided family c. A company d. A firm e. An association of a person or a body of individuals f. Any agency office or branch , owned or controlled by such persons.

 Security Means shares , stocks , bonds and debentures , govt. security or any mutual fund.

Regulation and management of foreign exchanges-- following aspects are discussed in the Act.
1. Dealing in foreign exchange Act. 2. Restriction on holding of foreign exchange 3. Current account transactions 4. Capital account transaction . 5. export of goods and services. 6. Realization and repatriation of foreign exchange

(Meaning of Repatriation selling of realized foreign exchange to an authorized person in India in exchange for rupee or the holding of realized amount in an account with authorized person in India to the extent notified by the reserve bank) Exemption from realization and repatriation in certain cases. Directorate of Enforcement Sec 36 deals with the establishment of a directorate of enforcement. The various offices that may be appointed by the central govt. for the purpose of this Act are a. Directors of enforcement b. Additional directors of enforcement

c. Special directors of enforcement d. Deputy directors of enforcement e. Assistance directors of enforcement f. Below assistance directors . The powers conferred up on enforcement officers under this Act are 1. powers of search , seizure etc The director of enforcement and other officers of enforcement shall take up for investigation in case there is contravention 2. They have the powers like income tax authorities 3. Powers to compound contraventions

 Any contravention under sec 13 and an application made by the person committing such contravention be compounded with in one hundred and 80 days from the date of receipt of application by the director of enforcement . 4. The central govt. can authorize any office of custom or any central excise officer or any police officer or any other officer of the central govt. or state govt. to exercise and discharge the duties of the directors of enforcement .

Contravention and penalties

1. If any person contravenes any provision of this Act , any rules regulations, notification , direction or order issued in exercise of the powers under this Act or any condition

subject to which an authorization is issued by the reserve bank, he shall upon adjudication be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable or up to two lake rupees where amount is not quantifiable . 2. Any authority adjudging any contravention under the Act , can direct the penalty in the from of currency , security or any other money to the central govt. .