Rule 4 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 4 says that no person may draw foreign exchange for a transaction included in Schedule II without the prior approval of the Government of India. Schedule II names each purpose and the Ministry or Department whose approval is required. Two exceptions, for funds held in a Resident Foreign Currency account and in an Exchange Earners' Foreign Currency account, are in the proviso to rule 4 and in rule 6. For a payment that may need a Ministry's approval, you can take the facts to our FEMA advisory team at the outset.
Under rule 4 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, no one may draw foreign exchange for a Schedule II transaction without the prior approval of the Government of India. Schedule II prints nine live purposes, each paired with a Ministry, and two items printed as omitted. Payment out of the remitter's Resident Foreign Currency (RFC) account is outside rule 4, and payment out of an EEFC account is outside it too, except for the purposes that rule 6(2) keeps.
The text and its source
The Rules are made by the Central Government under section 5 and sub-section (1) and clause (a) of sub-section (2) of section 46 of the Foreign Exchange Management Act, 1999. Our articles on section 5 and section 46 explain the enabling provisions.
Text used here: the Rules as reproduced by the Reserve Bank in Annex 1 of its Master Direction - Other Remittance Facilities, updated as on May 06, 2026 (Notification No. G.S.R. 381(E) dated May 3, 2000, "as amended from time to time"). Later amendments and circulars should be checked on the Reserve Bank and Gazette sites.
What rule 4 says
Rule 4 is headed "Prior approval of Government of India". It has one operative sentence: no person shall draw foreign exchange for a transaction included in Schedule II without prior approval of the Government of India. "Drawal", under rule 2(b), means drawal from an authorised person and includes opening a letter of credit or using an international credit, debit or ATM card that creates a foreign exchange liability. The approval is therefore a condition to the bank releasing the exchange, not a matter to be sorted out afterwards.
The proviso says that rule 4 does not apply where the payment is made out of funds held in the Resident Foreign Currency (RFC) account of the remitter. The same words appear in the proviso to rule 5.
Schedule II as printed
The Schedule is headed "Transactions which require prior approval of the Central Government (see Rule 4)". It is a two-column table of purpose against Ministry or Department.
| Item | Purpose of remittance | Approval required from |
|---|---|---|
| 1 | Cultural tours | Ministry of Human Resources Development (Department of Education and Culture) |
| 2 | Advertisement in foreign print media for purposes other than promotion of tourism, foreign investments and international bidding (exceeding USD 10,000) by a State Government and its Public Sector Undertakings | Ministry of Finance (Department of Economic Affairs) |
| 3 | Remittance of freight of vessel chartered by a PSU | Ministry of Surface Transport (Chartering Wing) |
| 4 | Payment of import through ocean transport by a Government Department or a PSU on c.i.f. basis (that is, other than f.o.b. and f.a.s. basis) | Ministry of Surface Transport (Chartering Wing) |
| 5 | Multi-modal transport operators making remittance to their agents abroad | Registration Certificate from the Director General of Shipping |
| 6 | Remittance of hiring charges of transponders by (a) TV channels, (b) Internet Service Providers | Ministry of Information and Broadcasting; Ministry of Communication and Information Technology |
| 7 | Remittance of container detention charges exceeding the rate prescribed by Director General of Shipping | Ministry of Surface Transport (Director General of Shipping) |
| 8 | Omitted | - |
| 9 | Remittance of prize money or sponsorship of sports activity abroad by a person other than International, National or State Level sports bodies, if the amount involved exceeds USD 100,000 | Ministry of Human Resources Development (Department of Youth Affairs and Sports) |
| 10 | Omitted | - |
| 11 | Remittance for membership of P&I Club | Ministry of Finance (Insurance Division) |
All Ministry names are printed as above in the Annex; the text does not say whether any Ministry or Department has since been renamed or reorganised. Treat the names as the names in the Rules and confirm the present body with the bank.
Note the two kinds of entry. Items 1, 2, 3, 4, 6, 7, 9 and 11 are approvals of a Ministry. Item 5 is different: what the Schedule names is not an approval but a "Registration Certificate from the Director General of Shipping", which the multi-modal transport operator must hold.
Items 2, 7 and 9 have thresholds that decide whether the entry is triggered: advertisements exceeding USD 10,000, container detention charges above the rate prescribed by the Director General of Shipping, and sports prize money or sponsorship above USD 100,000. The Rules print no approval requirement below those lines, so the transaction is then judged against the other Schedules and the Master Direction.
Exceptions: RFC account and EEFC account
RFC account. Rule 4 and rule 5 each carry a proviso that the rule does not apply where the payment is made out of funds held in the remitter's RFC account.
EEFC account. Rule 6(1) says nothing in rule 4 or rule 5 applies to drawal out of funds held in the remitter's Exchange Earners' Foreign Currency account. Rule 6(2) then keeps the restrictions of rule 4 and rule 5 alive where the drawal from that account is for the purposes specified "in items 10 and 11 of Schedule II, or item 3, 4, 11, 16 & 17 of Schedule III, as the case may be".
Two points in rule 6(2) do not match the Schedules as printed. Item 10 of Schedule II is printed "Omitted", and the Schedule III printed in the Annex has no items numbered 3, 4, 11, 16 or 17, because its purposes appear without item numbers. This article therefore repeats the rule as printed and does not guess which purposes it means; for the live position on EEFC accounts, read our article on remittance limits for individuals and the Reserve Bank's own text. Item 11 (P&I Club membership) is the only live Schedule II item that rule 6(2) clearly keeps.
Example
Coastal Cable Services Ltd, an Internet Service Provider in India, wants to pay hiring charges for a satellite transponder to a foreign operator. This falls in item 6(b) of Schedule II, so prior approval of the Ministry of Communication and Information Technology (as printed) is needed before the bank draws the exchange. If the company instead paid the charges out of funds in its own RFC account, the proviso to rule 4 would take it out of the rule. The Rules themselves print nothing more on that route.
Another example: a public sector undertaking imports machinery by ocean transport on a c.i.f. basis. Item 4 puts the payment under the approval of the Ministry of Surface Transport (Chartering Wing). Had the import been on an f.o.b. or f.a.s. basis, item 4 would not apply.
Where Schedule II sits among the others
Rule 3 and Schedule I prohibit; see prohibited current account transactions. Schedule II requires approval of the Government of India. Schedule III provides the facilities for individuals and the approvals of the Reserve Bank for persons other than individuals; see also remittances by companies and firms. For a wider view of the subject, read current account transactions under FEMA.
Need help with an approval or a Schedule II remittance?
Identifying which Ministry has to approve a payment, and presenting the case to the authorised bank, is often the slowest part of a cross-border payment. Our FEMA advisory team can map your transaction to the Schedule and prepare the file before you approach the bank.
Key takeaways
- Rule 4 requires prior approval of the Government of India for each Schedule II transaction.
- Schedule II prints nine live items and two printed as "Omitted" (items 8 and 10).
- Payment out of the remitter's RFC account is outside rule 4; rule 6 gives EEFC account funds a similar exception, subject to rule 6(2).
- Rule 6(2) cites item 10 of Schedule II and items of Schedule III that do not match the printed Schedules.
- Thresholds in items 2, 7 and 9 decide when approval is needed.
Read next
- Prohibited current account transactions: rule 3 and Schedule I
- Remittance limit for individuals: rule 5 and Schedule III
- Current account transactions under FEMA
- Section 46 of FEMA: power of the Central Government to make rules
Disclaimer: Based on the rules, regulations and Reserve Bank Master Directions under the Foreign Exchange Management Act, 1999 that this article names, each in the version and up to the date stated in the article, as consulted on 2 October 2026. Some texts are third-party copies or older prints and are identified as such. Limits, forms and time limits change by amendment and circular; later changes should be checked on the Reserve Bank and Gazette sites. This article is general information, not legal advice; check the official text before acting.