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Microlesson · 5-min read

Current Account Transactions — Schedule I (Prohibited Transactions)

# Current Account Transactions — Schedule I: Drawal of Foreign Exchange is Prohibited

FEM (Current Account Transactions) Rules, 2000 — Section 5 of FEMA

Schedule I lists the CUATs for which drawal of foreign exchange is prohibited outright. No authority can permit these.

## The Schedule I List

1. Remittance for purchasing banned items, e.g., banned magazines, lottery tickets, football pools, sweepstakes, etc.

2. Remittance out of lottery winnings, income from racing/riding, or any other hobby.

3. Remittance of dividend by a company to which the dividend balancing requirement is applicable.

4. Remittance of interest income on funds held in a Non-resident Special Rupee Scheme account.

5. Payment of commission on exports made towards:

  • Equity investment in a Joint Venture or Wholly Owned Subsidiary abroad of Indian companies, OR
  • Rupee State Credit Route
  • Exception: Commission up to 10% of invoice value for export of tea and tobacco is permitted.

6. Payments related to "call back services" of telephones.

7. Drawal for a private visit to Nepal or Bhutan.

## Important Note — What is "Export"?

For FEMA purposes, export means:

  • Taking any goods to a place outside India, OR
  • Making provision of services to any person outside India.

## Quick Memory Map

ThemeProhibition
Gambling-relatedLottery tickets, football pools, sweepstakes, remitting lottery winnings
Specific channelsDividend (where balancing applies), interest on Non-resident Special Rupee Scheme funds
Cross-border commissionsCommission on JV/WOS equity exports, Rupee State Credit Route (tea/tobacco upto 10% allowed)
TelephonyCall-back services payments
Neighbouring statesPrivate visits to Nepal/Bhutan

> Mnemonic: "Lottery, Hobby, Dividend-balancing, Special Rupee, Commission, Call-back, Nepal/Bhutan" — the 7 prohibited remittances.

Worked example

### Example 1

Example 1 — Lottery winnings: An Indian resident wins ₹5 lakh from an Indian state lottery and wants to remit it abroad as a gift. Answer: Prohibited — remittance of income from lottery is in Schedule I.

### Example 2

Example 2 — Private visit: A resident wants to draw forex for a holiday in Bhutan. Answer: Prohibited under Schedule I (private visits to Nepal or Bhutan are not eligible for forex drawal).

### Example 3

Example 3 — Tea export commission: An Indian tea exporter wants to pay a 7% commission on invoice value to an overseas agent. Answer: Permitted — the exception allows up to 10% for tea and tobacco exports.

### Example 4

Example 4 — JV equity commission: Indian Co. pays commission on exports made towards equity investment in its wholly owned subsidiary abroad. Answer: Prohibited.

⚠️ Common exam mistakes

  • Thinking commissions on exports are always permitted — they are prohibited for JV/WOS equity exports and Rupee State Credit Route (except 10% for tea/tobacco).
  • Allowing forex drawal for Nepal/Bhutan holidays — these are private visits and are expressly prohibited.
  • Treating all dividend remittances as freely permitted — those subject to dividend balancing are prohibited.
  • Forgetting that lottery winnings (even if legally won in India) cannot be remitted abroad.
  • Allowing payment for telephone call-back services — expressly prohibited.
Reference: Schedule I — Foreign Exchange Management (Current Account Transactions) Rules, 2000
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