What is Foreign Direct Investment?
Foreign Direct Investment (FDI) refers to investment from an individual or a firm located in a foreign country, in the Indian economy.
According to Section 2(e) of FEMA 1999, Capital Account transaction means a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or alters the assets or liabilities in India of persons resident outside India.
Capital Account transactions include transactions such as Indian Party making investment in equity shares/capital contribution in a foreign entity, i.e., undertaking an Overseas Direct Investment (ODI) or acquiring an immovable property outside India, thereby increasing overseas assets. It also includes commercial loans raised by eligible resident entity from recognised non-resident entity through External Commercial Borrowings (ECBs), thereby creating a liability outside India. NRI/OCI/Person resident outside India acquiring shares of an Indian company, i.e., undertaking a Foreign Direct Investment (FDI) or acquiring immovable property in India, thereby increasing assets in India is also included in Capital Account transactions.
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Rajesh’s only daughter Piya has been residing in France for several years now and intends to pursue her Ph.D. While she has received a full scholarship for her tuition, her living expenses need to be looked after.
According to Section 2(e) of FEMA, Capital Account transactions are those which alter the assets or liabilities, including contingent liabilities outside India, of persons resident in India or alter the assets or liabilities in India, of persons resident outside India.
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