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

Rohan, a person resident in India, buys a flat in Dubai using funds he holds abroad, without any permission available under the Act or its rules. Under the general prohibition in Section 4 of FEMA, 1999, what is the position of this acquisition?

The acquisition is prohibited unless an exception exists under the Act. Section 4 bars a person resident in India from acquiring, holding, owning, possessing or transferring foreign exchange, foreign security or immovable property outside India, save as otherwise provided.

  1. AIt is prohibited unless otherwise provided in the Act, because a resident cannot acquire or hold immovable property outside IndiaCorrect
  2. BIt is always allowed because the property is outside India
  3. CIt is allowed if Rohan informs the Registrar of Companies
  4. DIt is prohibited only if the flat is sold later

Explanation

Section 4 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 immovable property situated outside India. Without an exception, Rohan's acquisition falls under the prohibition. The claim that it is only barred on later sale is wrong because acquisition and holding are both covered.

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