Section 5 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.
Section 5 is the Act's general permission for current account transactions. Any person may sell or draw foreign exchange to or from an authorised person if the sale or drawal is a current account transaction. The Central Government may, however, impose reasonable restrictions by rules. The section is only two sentences long, so most of its working content sits in the definition of a current account transaction and in the rules made under it.
Any person may sell or draw foreign exchange to or from an authorised person for a current account transaction. The proviso lets the Central Government, in public interest and in consultation with the Reserve Bank, impose such reasonable restrictions as may be prescribed. The hook for those rules is section 46(2)(a). The Act itself prints no list of restrictions and no limits.
About this article
This article is based on the consolidated text of the Act consulted (amendments shown up to Act 50 of 2019). Later amendments should be checked. Section 5 carries no amending footnote in the copy consulted. If you are planning a payment abroad for services, travel or education and want to check the position, our FEMA advisory team can help.
The text of section 5
Section 5 reads: "Any person may sell or draw foreign exchange to or from an authorised person if such sale or drawal is a current account transaction." The proviso then says: "Provided that the 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."
| Part | What it says | What to read with it |
|---|---|---|
| Main part | Any person may sell or draw foreign exchange to or from an authorised person for a current account transaction | Section 2(j) (current account transaction), section 2(c) (authorised person), section 2(n) (foreign exchange) |
| Proviso | The Central Government may impose reasonable restrictions | Section 2(x) ("prescribed" means prescribed by rules); section 46(2)(a) |
The main part: a general permission
The words "any person" are not limited to residents. The permission is for any person, and it is limited in two ways: the other party must be an authorised person, and the transaction must be a current account transaction.
"To or from an authorised person"
Section 2(c) says an authorised person means an authorised dealer, money changer, off-shore banking unit or any other person for the time being authorised under sub-section (1) of section 10 to deal in foreign exchange or foreign securities. So the permission does not extend to dealing with someone who is not an authorised person. That limit links to section 3(a), which bars dealing in or transferring foreign exchange to a person who is not an authorised person. Our article on section 3 sets out the four prohibitions, and section 5 is one of the Act's own exceptions to them.
"Sell or draw"
The words "sell or draw" cover both directions: selling foreign exchange to an authorised person for rupees, and drawing (obtaining) foreign exchange from one. A resident exporter who sells foreign exchange received for services is selling it; a resident importer who obtains foreign exchange to pay a supplier abroad is drawing it.
"A current account transaction"
Section 2(j) defines a current account transaction as a transaction other than a capital account transaction, and says it includes four kinds: 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. Our article on section 2(e) and 2(j) deals with the definition and the line between current and capital account. Anything that alters assets or liabilities outside India of residents, or in India of non-residents, is capital account and is dealt with in section 6, not section 5.
Example. Brightline Software Private Limited, resident in India, needs to pay a foreign vendor for a cloud service used in its ordinary business. The payment is due in connection with services in the ordinary course of business and is a current account transaction. Section 5 lets Brightline draw the foreign exchange from an authorised person for it. The restrictions that apply, if any, depend on the rules made under the proviso, not on section 5 itself.
The proviso: reasonable restrictions by rule
The proviso gives the Central Government a power with four conditions packed into it.
- Who acts. The Central Government, not the Reserve Bank.
- Why. In public interest.
- With whom. In consultation with the Reserve Bank.
- How much. Only such reasonable restrictions as may be prescribed.
"Prescribed" is defined in section 2(x) as prescribed by rules made under the Act. Section 46(2)(a) is the rule-making hook for restrictions on current account transactions under section 5. The Act therefore gives a general permission and leaves any narrowing of it to rules.
The rules made for this purpose are the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time. This article names them only; it does not describe their contents, and a reader who wants to know what is restricted, what needs approval and what limits apply should read the rules as currently in force. Our guides on current account transactions and on permissible payments and remittances cover the practical side; the facts in those guides are not repeated here.
What section 5 does not say
- It does not list any restricted transaction, any approval route or any limit.
- It does not say how a sale or drawal is documented; that is left to the rules, regulations and the authorised person's own procedures.
- It does not say what happens on a breach. The consequences of a contravention are in section 13, which has its own post: see our guide on contravention and penalties under section 13.
How section 5 differs from section 6
| Feature | Section 5 | Section 6 |
|---|---|---|
| Subject | Current account transactions | Capital account transactions |
| Starting point | Any person may sell or draw foreign exchange to or from an authorised person | Subject to sub-section (2), any person may sell or draw foreign exchange for a capital account transaction |
| Who may narrow it | Central Government by rules under the proviso, in public interest and in consultation with the Reserve Bank | Reserve Bank (for debt instruments) and the Central Government (for other instruments), as explained in the article on section 6 |
| Rule-making hook | Section 46(2)(a) | Sections 46(2)(aa), 46(2)(ab) and 47(2)(a) |
Our article on section 6 covers the second column.
Need help with a remittance or a payment abroad?
Most day-to-day payments abroad by a business or an individual are current account transactions, but whether a particular restriction applies is a question of the rules as they stand today. If you want a check before you remit, our FEMA advisory team can read the facts against the Act and the rules.
Key takeaways
- Section 5 lets any person sell or draw foreign exchange to or from an authorised person for a current account transaction.
- The proviso lets the Central Government, in public interest and in consultation with the Reserve Bank, impose reasonable restrictions as prescribed.
- "Prescribed" means prescribed by rules; the hook is section 46(2)(a).
- The Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time, are the rules made for the purpose; check them as currently in force.
- The Act prints no list of restrictions and no limits.
Read next
- Section 6: capital account transactions, debt and non-debt instruments
- Section 46: power of the Central Government to make rules
- Restricted Transactions Under FEMA
- FEMA Current Account Transactions: Permissible Payments and Remittances
Disclaimer: Based on a consolidated text of the Foreign Exchange Management Act, 1999 showing amendments up to Act 50 of 2019, as consulted on 2 October 2026. Limits, forms, timelines and procedures are set by rules, regulations and Reserve Bank directions made under the Act; they change from time to time and are not covered here. Later amendments should be checked. This article is general information, not legal advice; check the official text before acting.