# Prohibited & Non-Restrictable Capital Account Transactions
## Part A: Transactions on Which Restrictions CANNOT Be Imposed (Proviso to Section 6(2))
RBI/CG cannot restrict drawal of foreign exchange for:
1. Amortisation of loans (i.e., loan repayment installments)
2. Depreciation of direct investments in ordinary course of business
These are treated as inevitable economic obligations and are kept free of restrictions.
## Part B: Prohibited Capital Account Transactions
### (a) USD 250,000 Cap for Residents – with FATF Bar
- A resident individual may draw foreign exchange not exceeding USD 250,000 per financial year (or such amount as RBI may decide) for any capital account transaction in Schedule I.
- Para 1 of Schedule III of FEM (CAT) Rules 2000 is subsumed within this USD 250,000 limit.
- If a Schedule I capital account drawal exceeds USD 250,000, the limit prescribed in the specific regulation governing that transaction applies to the excess.
FATF Bar: No part of this USD 250,000 may be remitted (directly or indirectly) to countries notified as Non-Cooperative Countries and Territories (NCCTs) by FATF and communicated by RBI.
### (b) Prohibited Activities for Non-Resident Investments into India
A person resident outside India is PROHIBITED from investing in any company/firm/proprietary concern/entity (incorporated or not) engaged or proposing to engage in:
| # | Prohibited Activity | Carve-Out / Note |
|---|---|---|
| 1 | Chit fund business | Registrar of Chits (with State Govt. consent) may permit NRIs to subscribe to chit funds via banking channel on non-repatriation basis, without limit, subject to RBI conditions |
| 2 | Nidhi company | Absolute prohibition |
| 3 | Agricultural or plantation activities | Absolute prohibition |
| 4 | Real estate business OR construction of farm houses | 'Real estate business' excludes: development of townships, construction of residential/commercial premises, roads or bridges (these are permitted) |
| 5 | Trading in Transferable Development Rights (TDRs) | Absolute prohibition |
### (c) North Korea (DPRK) Restriction
- No person resident in India may undertake any capital account transaction with a citizen, resident, or entity of the Democratic People's Republic of Korea, except as permitted under Order S.O. 1549(E) dated 21 April 2017 of the Ministry of External Affairs, OR with specific Central Government approval.
### (d) Winding Down Existing DPRK Exposure
- Any existing investments, representative offices, or other assets in DPRK held by Indian residents — which are not permitted under the said MEA Order — must be closed/liquidated/disposed/settled within 180 days from the date of the relevant Notification, unless specifically approved by the Central Government.
## Crucial Closing Principle
> A capital account transaction is permitted ONLY if it is specifically permitted under the regulations. If a transaction is NOT generally permitted, a prior specific approval is required.
This is the opposite of the rule for current account transactions (which are generally permitted unless prohibited).
## Quick Recap Table
| Category | Rule |
|---|---|
| No restriction allowed | Loan amortisation; depreciation of direct investment |
| Cap for resident individuals | USD 250,000 per FY |
| FATF non-cooperative countries | No remittance from the USD 250,000 |
| Non-resident investment ban | Chit fund (NRI carve-out), Nidhi, agriculture/plantation, real estate business / farm houses, TDR trading |
| DPRK | Prohibited; existing exposure to be wound up in 180 days |