# Procedure for Drawal/Remittance and Account-Based Exemptions

After laying down the three Schedules, the Rules set out the procedure for drawing or remitting foreign exchange and create important account-based exemptions where the source of funds is an RFC or EEFC account.

## (a) Procedure — Same as LRS

> The procedure for drawal or remittance of any foreign exchange under Schedule III shall be the same as applicable for remitting any amount under the Liberalised Remittance Scheme.

## (b) Residual Rule — Unlisted Transactions are FREE

> If the transaction is not listed in any of the three Schedules, it can be freely undertaken.

This reaffirms the golden rule: Current Account transactions are free unless restricted.

## (c) Exemption — Remittance from RFC Account

Where any remittance for a transaction listed in Schedule II or Schedule III is made from an RFC (Resident Foreign Currency) account, no approval is required.

## (d) Exemption — Remittance from EEFC Account

Where any remittance for a Schedule II or Schedule III transaction is made from an EEFC (Exchange Earners' Foreign Currency) account, no approval is required — with two carve-outs.

### EEFC Carve-Outs (Approval Required Even From EEFC)

Even if funded out of an EEFC account, prior approval is still required for:

1. Remittance for membership of P & I Club (Schedule II item), and

2. Commission, per transaction, to agents abroad for sale of residential flats (Schedule III item — non-individuals).

## Decision Logic Cheat-Sheet

Step	Question	If YES →	If NO →
1	Is the transaction in Schedule I?	Prohibited. Stop.	Go to Step 2
2	Is funding from RFC account, and transaction is in Sch II/III?	No approval needed.	Go to Step 3
3	Is funding from EEFC account, and transaction is in Sch II/III?	No approval needed UNLESS P&I Club or commission on flat sale → approval still needed.	Go to Step 4
4	Is the transaction in Schedule II?	Need prior Government Ministry approval.	Go to Step 5
5	Is the transaction in Schedule III?	Within limit → free; above limit → prior RBI approval.	Freely permitted (residual rule).

Worked example

### Example 1

Example — RFC funded payment:

A returning NRI holds an RFC account. He wishes to remit USD 3,00,000 to maintain his close relatives abroad (a Schedule III item, otherwise capped at USD 2,50,000).

Because the remittance is from his RFC account, no approval is required, even though the amount exceeds the Schedule III ceiling.

### Example 2

Example — EEFC funded P&I Club membership:

XYZ Shipping Ltd, a frequent EEFC user, wishes to pay annual membership of a P&I Club from its EEFC account.

P&I Club membership is a Schedule II item.
Funding from EEFC normally exempts the transaction, but P&I Club is a carve-out — prior approval of Ministry of Finance (Insurance Division) is still required.

### Example 3

Example — Unlisted Current Account Transaction:

A business wants to pay subscription fees to a foreign professional journal — not listed in Schedules I, II, or III.

Under the residual rule, the transaction is freely undertaken through an Authorised Dealer.

⚠️ Common exam mistakes

Assuming RFC and EEFC funding fully exempts all Schedule II/III items. EEFC funding has two carve-outs: P & I Club membership and commission on sale of residential flats by non-individuals.
Believing that Schedule I prohibition can be cured by routing funds through RFC/EEFC. Schedule I is an absolute prohibition — no source-of-funds exemption helps.
Forgetting the residual rule — if a transaction is not in any Schedule, no approval is needed at all.
Confusing RFC (Resident Foreign Currency — typically held by returning Indians) with EEFC (Exchange Earners' Foreign Currency — held by exporters). They are different accounts with similar but not identical exemption regimes.

Reference: Schedule III — Procedure clause — Foreign Exchange Management (Current Account Transactions) Rules, 2000

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Procedure for Drawal / Remittance and Account-Based Exemptions (RFC / EEFC)

Worked example

⚠️ Common exam mistakes