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

Kapoor, a resident individual, holds foreign exchange of USD 8,000 acquired while he was a non-resident in the past and now resident in India. Under FEMA, 1999, a person resident in India may hold, own, transfer or invest in foreign currency, foreign security or immovable property situated outside India in certain cases. Which of the following is the correct statement of the position?

A resident Indian may hold foreign currency, securities or immovable property outside India if these were acquired or owned while he was resident outside India, or were inherited from a person resident outside India. Kapoor's earlier-acquired USD holding is therefore permitted under FEMA.

  1. AA resident may hold foreign currency or property abroad only if acquired after becoming resident with RBI approval
  2. BA resident may hold foreign currency, security or immovable property outside India if it was acquired, held or owned when he was a non-resident, or inherited from a person resident outside IndiaCorrect
  3. CA resident can never hold any foreign security or property outside India
  4. DA resident may hold such assets only for up to 90 days

Explanation

FEMA allows a resident to hold, own, transfer or invest in foreign currency, security or immovable property outside India if it was acquired, held or owned when he was resident outside India, or inherited from a person resident outside India. Hence Kapoor's holding of foreign currency acquired earlier as a non-resident is permitted. The total prohibition is wrong, and there is no 90-day limit in the Act.

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