Economic, Commercial and Intellectual Property Laws · Law relating to Foreign Exchange Management

FEMA Section 37A: Holding Assets Outside India

Updated 11 October 2026 · Fact-checked

Section 4 of FEMA bars a person resident in India from acquiring, holding, owning, possessing or transferring foreign exchange, foreign security or immovable property outside India, unless the Act allows it. Section 37A lets an Authorised Officer seize equivalent-value assets in India, subject to confirmation by a Competent Authority within set time limits.

Understand Holding of Foreign Exchange and Assets Outside India

FEMA is built on one idea: a resident in India cannot freely hold foreign assets unless the Act permits it. Section 4 states this. It says that, save as otherwise provided in the 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.

There are exceptions. Under section 6(4), a resident in India may hold, own, transfer or invest in foreign currency, foreign security or immovable property outside India if it was acquired, held or owned when he was resident outside India, or inherited from a person who was resident outside India. Section 6(5) is the mirror rule for a person resident outside India holding Indian assets.

The problem is enforcement. If a person hides assets abroad, the authorities cannot easily reach them. Section 37A (inserted in 2015) solves this by allowing seizure of the value equivalent, situated within India, of the suspected foreign asset. The foreign asset itself is not seized. Indian assets of equal value are.

Section 37A has safeguards. The Authorised Officer must record reasons in writing. There is a minimum value threshold. The order goes to a Competent Authority, who confirms or sets it aside after hearing both sides. The aggrieved person can appeal to the Appellate Tribunal. If the person discloses the asset and brings it back into India, the seizure can be set aside.

Section 13(1A) to (1D) adds the penalty side: penalty up to three times the sum involved, confiscation of equivalent value in India, and possible prosecution with imprisonment up to five years and fine.

Key rules to remember

Section 4 prohibition: Resident in India: no acquiring, holding, owning, possessing or transferring foreign exchange, foreign security or immovable property outside India, save as the Act provides; The default rule. Learn the five verbs and the three asset types.
Section 6(4) exception: Allowed if acquired or held while resident outside India, or inherited from a person resident outside India; Both limbs matter: own prior holding, or inheritance from a non-resident.
Section 37A(1) seizure: Authorised Officer + reason to believe + reasons recorded in writing → seizes value equivalent situated within India; No seizure if aggregate value of the foreign assets is less than the prescribed value.
Section 37A(2) placing before Competent Authority: Order + relevant material placed before Competent Authority within 30 days of seizure; Competent Authority is an officer not below the rank of Joint Secretary to the Government of India.
Section 37A(3) disposal: Competent Authority disposes within 180 days of seizure: confirms or sets aside, after hearing Enforcement Directorate and aggrieved person; Court stay period is excluded, and at least 30 more days are given after the stay is vacated.
Section 37A(4) duration and disclosure: Confirmed seizure continues till adjudication ends; Adjudicating Authority then gives directions. Disclosure and bringing back into India can lead to seizure being set aside; The proviso applies at any stage of proceedings under the Act.
Section 37A(5) and (6): Appeal against Competent Authority order to Appellate Tribunal; section 15 does not apply; Section 15 is the provision for compounding of contraventions. Section 37A(6) excludes it, so a seizure under section 37A cannot be compounded. The appeal against a Competent Authority order lies directly to the Appellate Tribunal under section 37A(5).
Section 13(1A), (1C): Penalty up to 3 × sum involved + confiscation of equivalent value in India; imprisonment up to 5 years and fine; Applies where aggregate value exceeds the threshold prescribed under the proviso to section 37A(1).

How to solve Holding of Foreign Exchange and Assets Outside India questions

For any question on foreign assets held abroad, follow the provision, facts, conclusion pattern.

1Identify the person: is he resident in India? Section 4 binds only residents in India.
2Identify the asset: foreign exchange, foreign security or immovable property outside India.
3Check the exceptions: was it acquired or held while resident outside India, or inherited from a non-resident (section 6(4)), or otherwise permitted under the Act?
4If no exception applies, state the contravention of section 4.
5Apply section 37A: reason to believe, reasons in writing, value above the prescribed threshold, seizure of equivalent value in India.
6Trace the procedure: placing before the Competent Authority within 30 days, disposal within 180 days, appeal to the Appellate Tribunal.
7Add the consequences under section 13(1A) to (1D) and the effect of disclosure and bringing the asset back.
8Write a clear conclusion tied to the facts.

Quickest way: Four-question check for foreign assets

When to use it: Use when time is short and the question gives a short fact pattern about a resident holding assets abroad.

Resident in India? If no, section 4 does not apply.
Any section 6(4) exception? If yes, no contravention.
If contravention: seizure of equivalent value in India under section 37A, with the 30-day and 180-day limits.
Close with remedies: appeal to the Appellate Tribunal, or disclosure and bringing the asset back.

Common mistakes in Holding of Foreign Exchange and Assets Outside India

Saying section 37A allows seizure of the foreign asset itself.
Students read it as a normal seizure power.
Fix: Write that it allows seizure of the value equivalent situated within India.
Mixing up the 30-day and 180-day periods.
Both periods run from the date of seizure and appear close together.
Fix: 30 days: the Authorised Officer places the order before the Competent Authority. 180 days: the Competent Authority decides.
Forgetting the minimum value threshold.
It sits in the proviso and is easy to skip.
Fix: State that no seizure can be made if the aggregate value is less than the prescribed value.
Saying appeals under section 37A go to the Special Director (Appeals).
Students apply the general appeal route.
Fix: Section 37A(5) gives an appeal to the Appellate Tribunal, and section 37A(6) excludes section 15.
Applying section 4 to a person resident outside India or ignoring section 6(4).
Students memorise the prohibition without the exceptions.
Fix: Always check residence first, then the exception for assets acquired while non-resident or inherited from a non-resident.
Treating Competent Authority as the Adjudicating Authority.
Both deal with the same matter.
Fix: The Competent Authority confirms or sets aside the seizure. The Adjudicating Authority decides the contravention and gives directions on the seizure after confirmation.

Worked examples

Example 1

Rakesh, resident in India, holds a flat in Dubai bought out of income earned in India and not permitted under the Act. An Authorised Officer suspects this. Explain the action possible under FEMA.

Show the solution

Provision: section 4 bars a resident in India from acquiring, holding or owning immovable property outside India, save as the Act provides.
Facts: Rakesh is resident in India. The flat is immovable property outside India. It was not acquired while he was non-resident or inherited from a non-resident, so section 6(4) does not help.
Hence the holding is suspected to be in contravention of section 4.
Under section 37A(1), if the Authorised Officer has reason to believe this, he may, after recording reasons in writing, seize value equivalent situated in India. This is possible only if the aggregate value is not below the prescribed value.
The order and material must go to the Competent Authority within 30 days, and that authority must decide within 180 days after hearing Rakesh and the Enforcement Directorate.
Further, section 13(1A) allows a penalty up to three times the sum involved and confiscation of equivalent value in India.

Answer: Rakesh contravenes section 4. The Authorised Officer can seize Indian assets of equivalent value under section 37A, subject to the prescribed threshold, confirmation by the Competent Authority, and an appeal to the Appellate Tribunal.

Example 2

Meera, resident in India, inherited shares in a US company from her father who was resident outside India. Is she in breach of section 4? Would section 37A apply?

Show the solution

Provision: section 4 prohibits residents in India from holding foreign security, save as otherwise provided.
Exception: section 6(4) permits a resident in India to hold foreign security if inherited from a person who was resident outside India.
Facts: The shares are foreign security and were inherited from her father, who was resident outside India.
So the holding falls within section 6(4) and is not a contravention of section 4.
Section 37A applies only where assets are suspected to be held in contravention of section 4. No such contravention exists, so no seizure of equivalent value can be made.

Answer: Meera is not in breach of section 4 because of the section 6(4) exception. Section 37A does not apply.

Exam tips

Write section 4 and section 6(4) together. Examiners often test the rule with its exception.
Memorise the numbers: 30 days, 180 days, Joint Secretary, three times, five years. Use them in the answer.
Stress that seizure is of equivalent value within India. This is the core idea of section 37A.
In case-based questions, give the conclusion in one line after the analysis, and mention disclosure and bringing the asset back as a remedy.
Do not quote the threshold amount. The Act leaves it to be prescribed, so say prescribed value.

Practice questions from Law relating to Foreign Exchange Management

Holding of Foreign Exchange and Assets Outside India: frequently asked questions

What does FEMA section 4 say?

It says that, save as otherwise provided in the Act, no person resident in India shall acquire, hold, own, possess or transfer foreign exchange, foreign security or immovable property outside India. Section 6(4) gives an exception for assets acquired while non-resident or inherited from a non-resident.

What is the purpose of section 37A of FEMA?

It deals with assets held outside India in contravention of section 4. It lets an Authorised Officer seize the equivalent value of such assets within India. The seizure is then reviewed by a Competent Authority.

Who confirms a seizure under section 37A?

The Competent Authority, an officer not below the rank of Joint Secretary to the Government of India. The order must be placed before this authority within 30 days of seizure. It must decide within 180 days, after hearing both sides.

Can the seizure be reversed under section 37A?

Yes. The Competent Authority can set aside the order. Also, if the person discloses the asset and brings it back into India at any stage, the Competent Authority or Adjudicating Authority can pass an order including setting aside the seizure.

What penalty applies for undisclosed foreign assets above the threshold?

Section 13(1A) provides a penalty up to three times the sum involved and confiscation of equivalent value in India. Section 13(1C) adds imprisonment up to five years and fine. Courts take cognizance only on a written complaint by an officer not below Assistant Director.