# Holding of Foreign Exchange [Section 4 of FEMA, 1999]

## The General Prohibition

Section 4 lays down a blanket prohibition:

> No person resident in India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India — except as provided in the Act.

## Five Restricted Actions

The section bars a Person Resident in India (PRII) from doing any of the following with foreign exchange, foreign securities, or immovable property abroad:

1. Acquire

2. Hold

3. Own

4. Possess

5. Transfer

## How the Regime Actually Works

Though Section 4 imposes a sweeping prohibition, the law operates by carve-outs:

The Act itself permits certain acquisitions.
Separate notifications issued under FEMA permit acquisition/holding of these assets subject to:
Specified conditions, and
Compliance rules.

The effect: the default is prohibition; permission flows from specific notifications.

## Link with Section 8 (Realisation and Repatriation)

Where a resident comes into possession of foreign exchange (e.g., a gift from abroad) and is not otherwise permitted to hold it, Section 8 requires the resident to bring back (repatriate) the funds to India.

Worked example

### Example 1

Example: An Indian resident receives a bank balance of US$ 10,000 from his uncle in London.

Under Section 4, the resident cannot simply hold on to the foreign funds abroad.
He is required to bring back the funds to India as provided in Section 8.
This illustrates that even unsolicited receipts of foreign exchange must be repatriated unless a specific exemption applies.

⚠️ Common exam mistakes

Assuming that 'no person resident in India shall acquire... foreign exchange' is an absolute bar — it is actually subject to numerous notifications that permit holding under conditions.
Confusing Section 4 (the prohibition on holding) with Section 8 (the duty to repatriate). The two operate together — Section 4 forbids holding abroad; Section 8 forces the funds back to India.
Forgetting that the prohibition covers immovable property situated outside India, not just cash and securities.
Thinking the restriction depends on how the foreign asset was acquired (e.g., gift vs. purchase). All five verbs — acquire, hold, own, possess, transfer — are caught equally.

Bare-Act text Section 4 · Foreign Exchange Management Act, 1999 · click to expand

Save as otherwise provided in this Act, no person resident in India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India.

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Holding of Foreign Exchange — Section 4

Worked example

⚠️ Common exam mistakes