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CA Intermediate · Corporate and Other Laws · The Foreign Exchange Management Act, 1999

Arjun, a resident Indian, holds foreign currency received as a gift from a relative abroad during a visit. In the context of FEMA, which is the correct general position on a resident holding foreign exchange?

A resident may hold foreign exchange only to the extent FEMA and its rules and regulations allow. Foreign currency received as a gift or inheritance can be held within the conditions and limits RBI prescribes. It is neither completely prohibited nor unconditionally permitted.

  1. AA resident can never hold any foreign currency
  2. BA resident may hold foreign exchange or foreign security only as permitted by FEMA, including as prescribed by RBI, for example received as a gift or inheritance within specified limitsCorrect
  3. CA resident may hold unlimited foreign exchange without any condition
  4. DOnly authorised dealers may hold foreign currency

Explanation

FEMA allows a resident to hold, own or possess foreign exchange, security or immovable property abroad where permitted by the Act, rules or regulations, including foreign exchange acquired as gifts or inheritance within prescribed conditions. Absolute bans or unconditional freedom are both incorrect.

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