Foreign Exchange Transactions : A foreign exchange transaction is ultimately the purchase or sale of one national currency against another arising out of import or export of goods and services, foreign remittances and foreign travel both inward and outward, etc. The goods refer to raw materials, intermediary or finished products capital goods, etc., appraising the visible items of a country's foreign trade.
Services refer to shipping, air travel, insurance, banking, supply of technical know-how, consultancy, and transfer of capital by way of lending and or investment, interest on such capital and dividends on such investment, tourist's income and expenses, cost of Indian students abroad and of foreign students in India, gifts and donations, remittances, etc., which taken together comprise the invisible items of a country's foreign trades. A foreign exchange transaction is thus transfer of purchasing power, i.e. acquisition or parting with the right to wealth in a foreign country. As you must know that the foreign exchange is precious for a country. Hence, government regulate and control the foreign exchange transactions. Let us learn what exchange control is ?