Bhargav Ltd. had total foreign exchange earnings of USD 12,000,000 in the last three financial years. What is the maximum amount the company can…

As per the Foreign Exchange Management (Current Account Transactions) Rules, 2000, certain (current account) remittances by persons other than individuals require prior approval of the Reserve Bank of India (RBI). (1) As per the Rules, donations made by persons other than individuals require prior approval of the RBI where the amount exceeds: One per cent of the foreign exchange earnings during the preceding three financial years, or USD 5,000,000, whichever is less. In the given case, Bhargava Ltd. has earned foreign exchange of USD 12,000,000 during the last three financial year. One per cent of USD 12,000,000 is USD 120,000. Accordingly, Bhargava Ltd. can donate up to USD 120,000 without obtaining prior approval of the RBI. Any donation in excess of USD 120,000 would require prior approval of the RBI.