CA Intermediate (Batch Mar 2025)

Test – Chapter 15 (FEMA)

Maximum Time = 1 hour

Attempt All MCQs (1 marks each X 10 MCQs = 10 Marks)

Case Study Based MCQ

Mr. Arun Kumar, a software engineer from Bangalore, has been working with a US-based technology company in
Silicon Valley for the past 4 years. In April 2023, he returned to India to establish a technology startup, Global Ventures
Pvt. Limited He maintained his foreign currency accounts in the US, containing earnings from his previous employment.
His wife continues to work in the US.

During August 2023, Mr. Kumar undertook several transactions:

o He received USD 200,000 from his US savings account to invest in his Indian startup
o He gifted USD 75,000 to his brother in India for purchasing property
o He imported specialized software equipment worth USD 150,000 from a Singapore-based supplier on 3 months'
credit
o He helped his wife (US-based) remit USD 40,000 for her parents' medical treatment in India

Global Ventures also set up a branch office in Singapore in October 2023, fully controlled and managed from its
Bangalore headquarters. The company plans to raise foreign currency loans and explore various overseas investment
opportunities.

Q1: Under FEMA, what would be Mr. Kumar's residential status for FY 2023-24?
(a) Person Resident in India from April 2023
(b) Person Resident Outside India throughout the year
(c) Person Resident in India only after completing 182 days
(d) Person Resident Outside India till August 2023

Q2: Which of the following transactions by Mr. Kumar requires prior RBI approval?
(a) Receiving USD 200,000 from his own foreign account
(b) Gift of USD 75,000 to his brother
(c) Import of equipment on credit terms
(d) Setting up a branch office in Singapore

Q3: Mr. Kumar's wife's remittance of USD 40,000 for her parents' medical treatment in India:
(a) Is a capital account transaction requiring RBI approval
(b) Is a current account transaction permitted without any limit
(c) Is a prohibited transaction under FEMA
(d) Requires approval since it exceeds USD 25,000

Q4: For raising foreign currency loans for Global Ventures, which regulatory framework would apply?
(a) Only RBI regulations for debt instruments
(b) Only Central Government regulations
(c) Both RBI and Central Government regulations based on the type of instrument
(d) No regulations since it's a technology company

CA Harsh Gupta CA_Law_HarshGupta

 Case Study Based MCQ

Neha Sharma, an Indian citizen and successful fashion designer in Paris for the past 8 years, decided to expand her
business to India. In January 2024, she incorporated Glamour Designs Private Limited (GDPL) in Mumbai. Her business
plan includes:
• Setting up a design studio in Mumbai
• Importing luxury fabrics from France
• Establishing an online retail platform
• Collaborating with European fashion houses

Initial transactions in February 2024 included:

• Received EUR 500,000 from her French business account
• Purchased commercial property in Mumbai for studio
• Hired French designers as consultants
• Opened a foreign currency account in Mumbai branch of an international bank

The company also plans to participate in international fashion shows and accept advance payments from foreign
buyers.

Q5: What would be Neha's residential status under FEMA when she relocates to Mumbai in March 2024?
(a) Immediately becomes Person Resident in India
(b) Remains Person Resident Outside India for 182 days
(c) Has dual residential status
(d) Retains French residential status until business setup

Q6: GDPL's receipt of advance payments from foreign buyers would be classified as:
(a) Capital Account Transaction requiring RBI approval
(b) Prohibited Transaction under FEMA
(c) Current Account Transaction permitted freely
(d) Special Category Transaction requiring government permission

Q7: Regarding the foreign currency account opened in Mumbai:

(a) Can hold unlimited foreign currency without restriction
(b) Must convert all receipts to INR immediately
(c) Can maintain balances as per FEMA regulations
(d) Must close account within 180 days

CA Harsh Gupta CA_Law_HarshGupta

 Case Study Based MCQ

TechFront Solutions, a Hyderabad-based startup founded by Mrs. Priya Reddy, specializes in blockchain technology
and artificial intelligence solutions. After operating successfully in India for five years and achieving a turnover of 500
crore in FY 2022-23, the company initiated international expansion in December 2023.

Mrs. Reddy, holding a PhD in Computer Science from MIT and having worked with leading tech companies in Silicon
Valley for a decade, returned to India in 2018 to establish TechFront Solutions. The company has grown from a team
of 5 to over 500 employees, with expertise in blockchain, AI, and emerging technologies.

In pursuit of global expansion, TechFront Solutions has undertaken several strategic initiatives:
• Established a research center in Estonia focusing on quantum computing and blockchain integration, with an
investment of EUR 2 million
• Launched cryptocurrency consulting services for institutional clients, navigating complex regulatory frameworks
across jurisdictions
• Acquired 15% stake in Singapore-based Quantum Technologies Pte Limited for USD 5 million
• Created a wholly-owned subsidiary in Dubai (TechFront DMCC) for Middle East operations with an initial
investment of USD 10 million

The current company structure includes:

• Indian parent company (TechFront Solutions) headquartered in Hyderabad's HITEC City
• Wholly-owned foreign subsidiary (TechFront DMCC, Dubai) managing Middle East and North Africa operations
• Research collaboration with three prominent Estonian universities, involving annual funding of EUR 1 million
• Strategic investment partnership with Quantum Technologies Pte Limited in Singapore, including technology
transfer agreements

The company's expansion plans for 2024 include:

• Setting up a development center in Abu Dhabi through the Dubai subsidiary
• Expanding research partnerships to other European universities
• Launching a global blockchain certification program
• Developing cross-border payment solutions using blockchain technology

Q8: For the research collaboration with Estonian universities:

(a) Only RBI approval needed
(b) Only government approval needed
(c) Both RBI and government approval needed
(d) No prior approval needed if within LRS limits

Q9: The Singapore investment would be classified as:

(a) Automatic route investment
(b) Current account transaction
(c) Portfolio investment
(d) Restricted sector investment

Q10: For repatriating profits from Dubai subsidiary:

(a) Requires special permission
(b) Must wait for 3 years
(c) Can freely repatriate through normal banking channels
(d) Must reinvest in India immediately

CA Harsh Gupta CA_Law_HarshGupta

 Questions 1 is compulsory
Attempt any 4 out of remaining 5

1. Examine the given situations in the light of the FEMA, 1999:

a. LMN Ltd. had total foreign exchange earnings of USD 600 million in the last three financial years. What is the
maximum amount the company can donate without RBI approval?
b. STU Ltd. had foreign exchange earnings of USD 250 million over the last three financial years. It plans to donate
USD 3 million to a university fund. Does it need RBI approval?

2. Mr. Sane, an Indian National desires to obtain Foreign Exchange for the following purposes –
a. Remittance of US Dollar 50,000 out of winnings on a lottery ticket.
b. US Dollar 1,00,000 for sending a cultural troupe on a tour of U.S.A. Advise him whether he can get Foreign
Exchange and if so, under what conditions?

3.
(i) Mr. Amrish has been admitted to a postgraduate program at a foreign university and intends to join soon. The
annual course fee is approximately 3,50,000. Kindly advise his parents on how they can make the remittance
for the fees under the provisions of the Foreign Exchange Management Act (FEMA), 1999.

(ii) After completing his studies, Mr. Amrish is employed by a joint venture of a foreign company in India. The company
intends to send him on deputation to handle business operations abroad. His family resides in India, and he would
like to know if he can remit his salary to support their maintenance in India. Advise Mr. Amrish as per the provisions
of the Foreign Exchange Management Act, 1999.

4. List any seven permissible classes of Capital account transactions that a person resident in India can undertake, under
the Foreign Exchange Management Act (FEMA), 1999.

5. Analyse the following situations and comment upon the legal validity of the transactions in the light of the FEMA,1999.
 John, a foreign national (not of Indian origin), wants to buy agricultural land in India.
 An NRI wants to open a fixed deposit account in an Indian bank using foreign currency.

6. Toy Ltd. is a Japanese company having several business units all over the world. It has a robotic unit with its head
quarter in Mumbai and has a branch in Singapore. Headquarter at Mumbai controls the branch of robotic unit. What
would be the residential status of robotic unit in Mumbai and that of the Singapore branch?
or
Mr. P resided in India during the Financial Year 2023-2024. He left India on 15th July 2024 for Switzerland for pursuing
higher studies in Biotechnology for 2 years. What would be his residential status under the Foreign Exchange
Management Act, 1999 during the Financial Years 2024-2025 and 2025-2026?
Mr. P requires every year USD 25,000 towards tuition fees and USD 30,000 for incidental and stay expenses for
studying abroad. Is it possible for Mr. P to get the required Foreign Exchange and, if so, under what conditions?
Give your answer as per the provisions of the Foreign Exchange Management Act, 1999.

(4 marks each)

CA Harsh Gupta CA_Law_HarshGupta