Chapter 10: Foreign Currency Accounts for Residents and Other Aspects (JAIIB - Paper 2)
1. Which of the following is NOT a type of foreign currency account permitted for Residents in India?
A. Resident Foreign Currency (RFC) Account
B. Exchange Earner’s Foreign Currency (EEFC) Account
C. Foreign Currency Non-Resident (FCNR) Account
D. Resident Foreign Currency (Domestic) Account
FCNR (Foreign Currency Non-Resident) accounts are for NRIs, not for Residents.
Residents can hold RFC, EEFC, and RFC(D) accounts as permitted by RBI.
2. A returning Indian resident can open which type of account to hold foreign exchange earned abroad?
A. EEFC Account
B. NRO Account
C. FCNR Account
D. Resident Foreign Currency (RFC) Account
A Resident Foreign Currency (RFC) account allows a returning resident to hold foreign exchange in permitted currencies.
This helps in retaining foreign income without conversion into INR.
3. Which of the following statements about an EEFC account is correct?
A. It can be opened by any individual resident in India
B. It can be opened by an exporter to retain a portion of export earnings in foreign currency
C. It is denominated only in US Dollars
D. Balances can be freely converted into INR but not reconverted
An Exchange Earner’s Foreign Currency (EEFC) account can be opened by exporters to retain export proceeds in foreign currency.
It is a non-interest-bearing account and can be maintained in permitted currencies.
4. Which of the following is true about Resident Foreign Currency (Domestic) [RFC(D)] account?
A. It is opened in INR but denominated in foreign currency
B. It can be opened only by NRIs
C. Balances cannot be used for permissible foreign exchange transactions
D. It is a special scheme discontinued by RBI
RFC(D) account is maintained in INR but linked to foreign currency transactions.
It allows residents to credit foreign exchange received as gifts, honorarium, or payments for services.
5. A person resident in India receives payment in foreign exchange for consultancy services provided to a foreign company.
Into which account can this foreign exchange be credited without conversion into INR?
A. NRO Account
B. RFC Account
C. Resident Foreign Currency (Domestic) Account
D. Savings Bank Account
Under FEMA guidelines, such receipts in foreign exchange by a resident can be credited to an RFC(D) account.
This helps residents use foreign exchange for permissible outward remittances or expenses abroad.
6. Which of the following is a foreign currency denominated account that can be maintained by an NRI in India?
A. Resident Foreign Currency (RFC) Account
B. Exchange Earner’s Foreign Currency (EEFC) Account
C. Resident Foreign Currency (Domestic) Account
D. Foreign Currency Non-Resident (FCNR) Account
FCNR accounts are term deposits maintained in designated foreign currencies by NRIs/PIOs with Indian banks.
They are fully repatriable and provide protection against currency risk.
7. FCNR accounts in India can be maintained in which form?
A. Term deposits only
B. Savings and Current accounts
C. Both Term deposit and Current account
D. Only Savings account
FCNR accounts can be opened only as **term deposits**, not as savings or current accounts.
Maturity ranges between 1 to 5 years.
8. Which currencies are generally permitted for FCNR deposits in India?
A. Only US Dollar and Pound Sterling
B. Only Euro, Japanese Yen, and US Dollar
C. Designated freely convertible currencies like USD, GBP, EUR, JPY, AUD, CAD
D. Any currency including non-convertible ones
FCNR deposits can be maintained in freely convertible currencies as permitted by RBI, such as USD, GBP, EUR, JPY, AUD, CAD, etc.
9. Which of the following is TRUE regarding Foreign Currency Non-Resident (FCNR) accounts?
A. Interest earned is taxable in India
B. Principal and interest are fully repatriable
C. They can be opened by residents
D. They can be opened in INR
Both principal and interest in FCNR deposits are fully repatriable, and the interest earned is exempt from Indian income tax.
10. What is the minimum and maximum maturity period allowed for FCNR deposits?
A. Minimum 1 year, Maximum 5 years
B. Minimum 6 months, Maximum 10 years
C. Minimum 3 months, Maximum 7 years
D. Minimum 1 year, Maximum 10 years
As per RBI guidelines, FCNR deposits have a minimum maturity of 1 year and a maximum of 5 years.
11. Under FEMA, residents in India are permitted to hold foreign currency accounts outside India in which situation?
A. Always, without restrictions
B. Only with RBI’s specific approval in all cases
C. When permitted by general or special approval, such as employment abroad or foreign travel allowance
D. Only if the account is in Indian Rupees
FEMA permits residents to maintain foreign currency accounts outside India under specific circumstances, such as when employed abroad, receiving honorarium, or permitted under general/special RBI approval.
12. A resident Indian goes abroad for employment. Can he open and maintain a foreign currency account overseas?
A. Yes, permitted under FEMA
B. No, prohibited for residents
C. Only if RBI issues a special circular
D. Only if income is above USD 50,000
A resident going abroad for employment is permitted to open and maintain a foreign currency account outside India, as such persons are treated as Non-Residents under FEMA.
13. Which of the following foreign exchange transactions allow a resident to open a foreign currency account abroad without prior RBI approval?
A. Use of Liberalised Remittance Scheme (LRS)
B. Foreign travel allowance and maintenance expenses abroad
C. Remittances for education or medical treatment abroad
D. All of the above
Under LRS and other FEMA provisions, residents can open and maintain foreign currency accounts abroad for travel, education, medical treatment, or other permitted purposes, without RBI approval.
14. What is the current limit under the Liberalised Remittance Scheme (LRS) for a resident individual to remit abroad per financial year?
A. USD 100,000
B. USD 250,000
C. USD 500,000
D. USD 50,000
As per RBI’s LRS guidelines, resident individuals can remit up to USD 250,000 per financial year for permitted current and capital account transactions, including opening foreign currency accounts abroad.
15. A resident Indian receives a foreign scholarship directly credited to his overseas account. Is this permissible under FEMA?
A. No, the amount must be repatriated to India immediately
B. Yes, but only after RBI approval
C. Yes, such credits are permitted in foreign currency accounts abroad
D. Only permissible if converted to INR
Foreign scholarships, stipends, or grants received abroad by a resident can be credited to a foreign currency account outside India, as permitted by FEMA and RBI rules.
16. A foreign national of non-Indian origin (other than Nepal/Bhutan/PIO) who has retired from employment in India may remit assets abroad up to what limit?
A. USD 250,000 per financial year
B. USD 1,000,000 per financial year
C. USD 2,000,000 per financial year
D. No monetary limit
FEMA/RBI permit remittance of assets up to USD 1 million per financial year for eligible foreign nationals, subject to conditions and taxes.
17. Which of the following is NOT an eligible source for remittance under the “remittance of assets” facility for such foreign nationals?
A. Balances in NRO account
B. Sale proceeds of assets held in India
C. Assets acquired by inheritance/legacy/settlement
D. Borrowed funds raised in India to remit abroad
Remittable sources include NRO balances, sale proceeds, and inherited/settled assets. Borrowed funds in India cannot be remitted under this facility.
18. A non-resident widow of foreign nationality (not being PIO) inherits assets from her Indian-national spouse who was resident in India. Which statement is correct?
A. She may remit up to USD 1 million per financial year from such inherited assets, subject to documents and taxes.
B. Remittance is not permitted because she is not a PIO.
C. Remittance requires prior RBI approval in all cases.
D. Only interest income can be remitted, not principal.
RBI allows non-resident widow/widower of foreign nationality to remit inherited assets up to USD 1 million per FY via AD Category–I banks, after taxes and documentation.
19. For permitting remittance of assets by an eligible foreign national, an AD Category–I bank will generally require which compliance/document set?
A. Only a passport copy; no tax documents
B. A self-declaration; Form A1
C. Undertaking by remitter, and Chartered Accountant’s certificate in prescribed Form 15CB along with applicable Form 15CA
D. No documents if amount is below USD 1 million
AD banks permit such remittances on obtaining the remitter’s undertaking and a CA certificate (Form 15CB) with Form 15CA, evidencing taxes paid and eligibility.
20. Which condition is specifically excluded from eligibility under the “remittance of assets by foreign nationals not being PIOs”?
A. Citizens of Nepal or Bhutan
B. Foreign nationals retiring from employment in India
C. Foreign nationals remitting from inherited assets
D. Non-resident widow/widower remitting inherited assets
RBI excludes citizens of Nepal and Bhutan (and PIOs for this specific clause). Others meeting conditions may use the USD 1 million per FY facility.
21. Which of the following is a permitted mode for a resident in India to acquire property outside India?
A. By borrowing from an Indian bank abroad
B. By using NRE account balances
C. By way of gift or inheritance from a person resident outside India
D. By remittance through hawala channels
A resident can acquire property outside India through gift or inheritance from a person resident outside India, subject to FEMA guidelines.
22. Under FEMA, a resident individual may acquire immovable property outside India from which of the following sources?
A. Income earned outside India while being resident outside India
B. Loan from a friend abroad
C. Encashment of NRE deposits
D. Lottery winnings abroad
A resident can acquire property outside India using income earned while he/she was a resident outside India, provided it was acquired in a legitimate manner.
23. Which of the following is NOT a permitted mode for a resident to acquire property outside India?
A. By inheritance from a person resident outside India
B. Out of income earned abroad when resident outside India
C. By way of gift from a person resident outside India
D. Through remittances sent under LRS from India beyond permissible limits
Acquisition of property outside India is not permitted if it involves remittances beyond the limits set under Liberalised Remittance Scheme (LRS).
24. Under the Liberalised Remittance Scheme (LRS), how much can a resident individual remit per financial year to acquire property abroad?
A. USD 125,000
B. USD 250,000
C. USD 500,000
D. No limit
Under the LRS, a resident individual can remit up to USD 250,000 per financial year for permissible current and capital account transactions, including purchase of property abroad.
25. If a resident acquires property abroad while being resident outside India, what is required when he becomes resident in India again?
A. Property must be immediately sold
B. Property must be jointly held with an NRI
C. Property can be retained, provided it was acquired as per local laws of that country
D. RBI approval is mandatory to retain
A resident returning to India may continue to hold property acquired abroad when he was a resident outside India, provided it was acquired lawfully as per that country’s regulations.
26. The main objective of the Foreign Contribution (Regulation) Act, 2010 is:
A. To regulate stock market investments by NRIs
B. To promote foreign direct investment in India
C. To regulate acceptance and utilization of foreign contribution or hospitality by individuals and organizations
D. To control foreign trade in goods and services
FCRA, 2010 aims to regulate the acceptance and utilization of foreign contribution and foreign hospitality to safeguard national interest.
27. Under FCRA 2010, which authority grants registration or prior permission to receive foreign contribution?
A. Ministry of Home Affairs, Government of India
B. Reserve Bank of India
C. Ministry of Finance
D. NITI Aayog
The Ministry of Home Affairs (MHA) administers FCRA and grants registration or prior permission to organizations for receiving foreign contributions.
28. Which of the following is not permitted to accept foreign contribution under FCRA 2010?
A. NGOs with valid registration
B. Educational institutions with approval
C. Religious trusts with registration
D. Candidates for election to legislature
Candidates for elections, journalists, judges, and government servants are prohibited from accepting foreign contributions under FCRA.
29. Under FCRA 2010, foreign contribution must be received in which type of account?
A. Any existing current account of the NGO
B. A designated FCRA account in SBI, New Delhi branch
C. Any savings account in a nationalized bank
D. A foreign currency account abroad
As per amended FCRA rules, all foreign contributions must first be received in a designated FCRA account with the State Bank of India, New Delhi Main Branch.
30. Organizations registered under FCRA 2010 are required to submit annual returns to:
A. NITI Aayog
B. Reserve Bank of India
C. Ministry of Home Affairs (MHA)
D. Ministry of Corporate Affairs
Registered organizations must file annual returns in prescribed format to the MHA detailing foreign contributions received and utilized.
