# Schedule II – Permissible Capital Account Transactions for Persons Resident Outside India

## Source

Framed under Section 6(2) of FEMA via the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000.

## The 8 Permissible Classes (Schedule II)

#	Transaction
(a)	Investment in India by a person resident outside India, i.e.: (i) issue of security by a body corporate or entity in India and investment therein by a non-resident; AND (ii) investment by way of contribution to the capital of a firm, proprietorship concern, or association of persons in India
(b)	Acquisition and transfer of immovable property in India by a person resident outside India
(c)	Guarantee by a person resident outside India in favour of, or on behalf of, a person resident in India
(d)	Import and export of currency/currency notes into/from India by a non-resident
(e)	Deposits between a person resident in India and a person resident outside India
(f)	Foreign currency accounts in India of a person resident outside India
(g)	Remittance outside India of capital assets in India of a person resident outside India
(h)	Undertake derivative contracts

## Coverage Highlights

Item (a) covers both equity (security issue) and non-equity contributions to Indian firms/sole proprietorships/AOPs.
Item (b) covers both acquisition AND transfer of Indian immovable property — i.e., the entire lifecycle.
Item (e) captures NRE/FCNR/NRO type deposit relationships at the framework level.
Item (g) allows a non-resident to repatriate capital assets in India outside India (subject to conditions).

## Logic of Schedule II

Whereas Schedule I tells us what a resident may do outwards, Schedule II tells us what a non-resident may do into India (and the corresponding remittance out).

The two schedules together create a mirror framework for cross-border capital flows.

## Memory Aid

"INVEST · ACQUIRE · GUARANTEE · CURRENCY · DEPOSIT · ACCOUNT · REMIT · DERIVATIVE" — same eight as listed in (a) to (h).

Worked example

### Example 1

Example 1: A US-based company wishes to subscribe to equity shares issued by an Indian start-up. Is this permitted under FEMA?

Answer: Yes, this falls squarely within Schedule II item (a)(i) — issue of security by a body corporate/entity in India and investment therein by a person resident outside India. Subject to FDI rules, sectoral caps, and reporting under the Non-Debt Instruments Rules.

### Example 2

Example 2: An NRI wishes to sell his residential flat in Delhi (originally purchased while NRI) and remit the sale proceeds abroad. Is this permitted?

Answer: Acquisition/transfer is covered under Schedule II item (b); remittance of capital assets outside India is covered under item (g). Subject to specific conditions (e.g., source of acquisition, repatriation limits prescribed by RBI).

### Example 3

Example 3: A non-resident wants to give a guarantee to an Indian bank on behalf of his Indian-resident brother for a business loan. Is this permitted?

Answer: Yes — Schedule II item (c) — Guarantee by a person resident outside India in favour of, or on behalf of, a person resident in India. Subject to conditions in the relevant regulation.

⚠️ Common exam mistakes

Forgetting that item (a) covers BOTH securities issued by a body corporate AND contributions to a firm/proprietorship/AOP — students often miss the second limb.
Treating Schedule II as covering only inward investment — it also covers outward remittance of capital assets (item g) and export of currency (item d).
Mixing up Schedule I (resident → outside) and Schedule II (non-resident → into India).
Assuming all Schedule II transactions are automatically permitted — they remain subject to prohibited categories (chit fund, Nidhi, agriculture, real estate business, TDR trading) and to the specific regulations.
Missing that derivative contracts (item h) are equally available to non-residents.

Bare-Act text Schedule II to FEM (Permissible Capital Account Transactions) Regulations, 2000 · Foreign Exchange Management Act, 1999 / FEM (PCAT) Regulations, 2000 · click to expand

SCHEDULE II — Classes of capital account transactions of persons resident outside India: (a) Investment in India by a person resident outside India, that is to say, (i) issue of security by a body corporate or an entity in India and investment therein by a person resident outside India; and (ii) investment by way of contribution by a person resident outside India to the capital of a firm or a proprietorship concern or an association of a person in India; (b) Acquisition and transfer of immovable property in India by a person resident outside India; (c) Guarantee by a person resident outside India in favour of, or on behalf of, a person resident in India; (d) Import and export of currency/currency notes into/from India by a person resident outside India; (e) Deposits between a person resident in India and a person resident outside India; (f) Foreign currency accounts in India of a person resident outside India; (g) Remittance outside India of capital assets in India of a person resident outside India; (h) Undertake derivative contracts.

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Permissible Capital Account Transactions – Schedule II (Non-Residents)

Worked example

⚠️ Common exam mistakes