Did you know that not all foreign transactions are permitted under Indian regulations? Sending money abroad for certain activities like gambling or speculative investments can land you in legal trouble!
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- Different categories of foreign transactions (Permitted, Restricted, and Prohibited)
- Liberalized Remittance Scheme (LRS) limits and rules
- How to legally invest abroad or send money for education & medical expenses
- Common mistakes to avoid while transacting internationally
💡 Watch the full video below and drop your questions in the comments! 👇
👉 Before we dive in, watch this video for a complete breakdown:
Understanding Foreign Exchange Transactions Under FEMA
🔹 What Are Foreign Exchange Transactions? (00:01:00)
Foreign exchange transactions refer to any monetary exchange between India and other countries. These transactions fall under FEMA (Foreign Exchange Management Act), which governs all cross-border money transfers.
🔹 Categories of Foreign Exchange Transactions (00:02:00)
Under FEMA, transactions are categorized into three groups:
- Prohibited Transactions (Schedule 1) – These transactions are strictly forbidden by law and include gambling, lottery, and speculative trades.
- Restricted Transactions (Require Prior Approval) (Schedule 2) – These transactions need government or RBI approval, such as investments in overseas businesses.
- Permitted Transactions with Limits (Schedule 3) – Allowed under certain conditions, such as remittances for education, medical treatment, and personal travel.
🔹 The Liberalized Remittance Scheme (LRS) Explained (00:06:30)
The LRS allows resident Indians to send money abroad up to $250,000 per financial year for permitted purposes.
✅ Allowed under LRS:
- Education, medical treatment, and travel expenses
- Investments in foreign stocks and real estate
- Gifts and donations to relatives
- Emigration or job relocation
🔹 Using International Credit & Debit Cards Abroad (00:10:10)
International credit and debit cards allow Indians to transact in foreign currency, but with some restrictions:
- ✅ Permitted Uses: Travel, education, online purchases, business expenses.
- ❌ Restricted Uses: Lottery ticket purchases, gambling transactions, and illegal activities.
Additionally, Indian residents must ensure that credit card payments comply with FEMA laws, particularly while dealing with foreign merchants.
JAIIB PPB | Foreign Exchange Remittance Facilities | Unit 8 Part [FREE EPDF]
🔹 Common Fraudulent Remittance Scams to Avoid (00:27:30)
- ❌ Fake emails requesting “tax clearance charges“
- ❌ Unsolicited prize-winning notifications demanding payment
- ❌ Scammers posing as RBI officials asking for banking details
🚨 Stay alert and always verify with your bank before making international payments!
Conclusion
Understanding FEMA and foreign exchange rules is crucial for smooth international transactions. Whether you’re a banker, business owner, or an investor, staying informed helps you avoid penalties and legal issues.
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