The "Alteration" Test: Section 2(e) defines a Capital Account Transaction based on the impact on the Balance Sheet (Assets/Liabilities). 1. For a Resident: Does it change their Assets/Liabilities outside India? (e.g., buying a house in London). 2. For a Non-Resident: Does it change their Assets/Liabilities inside India? (e.g., investing in Indian shares). 3. Inclusion: It explicitly includes "Contingent Liabilities" (like Guarantees). Contrast: Any transaction that is not a Capital Account Transaction is deemed a Current Account Transaction (Section 2(j)), which typically involves trade, interest payments, and expenses.