What is current account transaction under Foreign Exchange Management Act, 1999.

The term current account transaction has been defined under Section 2(j) of the Foreign Exchange Management Act, 1999, to mean a transaction other than a capital account transaction and includes: payments due in connection with foreign trade, other current business, services and short term banking and credit facilities in the ordinary course of business; payments due as interest on loan and as net income from investments; remittances for living expenses of parents, spouse and children residing abroad; and expenses in connection with foreign travel, education and medical care of parents, spouse and children. All these are considered as part of current account transaction. Under the Foreign Exchange Management Act, 1999, freedom has been granted for selling and drawing of foreign exchange to or from an authorized person for undertaking current account transactions. However, the Central Government has been vested with powers in consultation with Reserve Bank to impose reasonable restrictions on current account transactions. The Central Government has framed Foreign Exchange Management (Current Account Transactions) Rules, 2000 dealing with various aspects of current account transactions.