Economics · Economy
A software firm in Bangalore registered as an Export Oriented Unit (EOU) receives USD 500,000 for a foreign project and credits it to its Exchange Earners' Foreign Currency (EEFC) account. The firm needs to pay a domestic consultant in Bangalore in USD who also holds an EEFC account, and wishes to use USD 10,000 to pay foreign university tuition fees for a director's son. Under Foreign Exchange Management Act (FEMA) regulations, which statement correctly describes the permitted use of these EEFC funds?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Both payments are permitted as long as the total balance remains within foreign exchange limits.
- 2Domestic payments in USD between residents are prohibited, and personal education fees cannot be debited as corporate business expenses.✓
- 3The company cannot pay the local consultant in USD but can use the EEFC funds for the son's education as a business expense.
- 4The company can pay the local consultant in USD from the EEFC account and the education fee is a permitted debit.
Correct answer
Domestic payments in USD between residents are prohibited, and personal education fees cannot be debited as corporate business expenses.
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