Direct Answer
A Capital Account Transaction is defined as one that alters: 1. The assets or liabilities (including contingent liabilities) outside India of a person resident in India; OR 2. The assets or liabilities in India of a person resident outside India
Capital Account: Impacts the Balance Sheet (Assets/Liabilities). Includes FDIs, ECBs, and immovable property. Current Account: Everything other than capital account (e.g., trade, short-term credit, family remittances). Historical Context: This definition is the “gatekeeper” clause. If a transaction fits this definition, it falls under the restrictive regime of Section 6. If it does not, it falls under the generally free regime of Section 5 (Current Account).