What is current account transaction?

​As defined in Section 2(j)​ of the FEMA, "current account transaction" means a transaction other than a capital account transaction and without prejudice to the generality of the foregoing such transaction includes :–

Payments due in connection with foreign trade, other current business, services and short-term banking and credit facilities in the ordinary course of business,

Payments due as interest on loans and as net income from investments,

Remittances for living expenses of parents, spouse and children residing abroad, and

Expenses in connection with foreign travel, education and medical care of parents, spouse and children.

In terms of section 5 of the FEMA, Any person may sell or draw foreign exchange to or from an authorized person if such sale or drawl is a current account transaction provided that Central Government may, in public interest and in consultation with the Reserve Bank, impose such reasonable restrictions for current account transactions as may be prescribed.