Rules explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rules 4 to 7 of the Foreign Privileged Persons Rules, 1957 say what happens when goods or vehicles that came in without payment of duty are later sold or passed on. They require prior concurrence, set a three-year period, give specific routes for motor vehicles, allow a vehicle to be retained after retirement and provide for recovery of duty.
This article reads the Rules as amended up to the CBIC text updated 6 August 2014 (reflecting Notification No. 56/2014-Cus. (N.T.) and earlier amending notifications of 1985, 1999, 2001 and 2002 shown in the text). Later notifications should be checked, as no official consolidated text exists beyond the CBIC text.
A privileged person cannot sell goods that came in without payment of duty within three years of import without the prior concurrence of the Board. Motor vehicles have their own routes in rule 4A: sale to another privileged person, re-export, sale to a non-privileged person after three years on payment of duty, or disposal if accidented. If goods go to a non-privileged person, duty is recovered (rule 5). Rule 4B lets a retiring person retain a vehicle used in India for three years or more.
Rule 4: permission to sell or dispose of goods
Rule 4(1). No privileged person shall, without the prior concurrence of the Central Board of Excise and Customs, sell or otherwise dispose of, to any privileged or non-privileged person, goods on which exemption was given at import or clearance from bond, within three years from the date of import.
Rule 4(1A). If the privileged person relinquishes his post or is transferred out of India within the three years, he shall, with the Board's prior concurrence, sell or dispose of the goods before the expiry of three months from the date of relinquishment or departure, or within a longer period the Board may allow.
Rule 4(1B). Sub-rule (1A) does not affect his right to take the goods with him.
Rule 4(2). The application for concurrence is made by the privileged person in the form in Appendix V to the Board through the Protocol Division, Ministry of External Affairs.
Rule 4(3) and (4). A copy of the Board's communication goes to the Commissioner nearest the privileged person's headquarters and to the officers who received the rule 3 certificate copies. Rule 4 does not apply to a motor vehicle; rule 4A governs those. The clearance formalities are in our article on rules 1 to 3.
If you need help working out which route applies to a sale, our legal consultation team can help look at the facts.
Rule 4A: motor vehicles
4A(1). No privileged person may sell or dispose of a vehicle on which exemption was given except as sub-rule (2) allows.
4A(2). A privileged person may:
- (a) sell or dispose of the vehicle to another privileged person, with the permission of the Board through the Ministry of External Affairs;
- (b) re-export it, with the permission of the Ministry of External Affairs;
- (c) sell or dispose of it to a non-privileged person, with the Board's permission through the Ministry of External Affairs, on payment of appropriate customs duty, on expiry of three years from the date of import. Proviso: a privileged person on transfer out of India may sell, before the three years end, a vehicle imported within one year of his posting in India to a non-privileged person;
- (d) sell or dispose of an accidented or totally damaged vehicle to the insurance company with the Board's permission. Proviso: if the insurer declines, the vehicle may, with the Board's permission, be sold to the Metal Scrap Trading Corporation or another suitable disposal agency for scrapping.
Applications under clauses (a), (c) and (d) go to the Ministry of External Affairs in its prescribed form (4A(3)), and it remits them to the Board.
4A(4). A special purpose vehicle such as a communication vehicle or armoured vehicle may only be sold to another privileged person, re-exported, or surrendered to the nearest Custom House for scrapping or authorising an Indian agency to scrap it. Scrap proceeds, if any, are reimbursed to the privileged person after deducting the duty leviable.
Rule 4B: retaining a vehicle after retirement
- 4B(1). A privileged person who, on retiring or relinquishing his post, decides to stay in India and keep the vehicle for his bona fide use may be allowed by the Board, on application, to retain it without payment of customs duty, on condition that the vehicle has been used in India for three years or more on the date he ceases to be a privileged person or relinquishes his post (the "relevant date").
- 4B(2). If it has not been used for three years or more on the relevant date, or if he later sells or disposes of it, customs duty becomes payable.
- 4B(3). If he proposes to sell or dispose of it, he must offer it to the State Trading Corporation, with the Board's permission.
- 4B(4). Rule 5 applies, with the necessary changes, to the duty payable.
Rule 5: recovery of duty
5(1). Where goods other than a motor vehicle are cleared without payment of duty and are sold or disposed of (other than by re-export) to a non-privileged person within three years of import, the customs duty is recovered from the privileged person by the Commissioner nearest his headquarters. The duty is assessed in consultation with that Commissioner.
5(1B). For a vehicle sold under rule 4A(2)(c), duty is paid to the Commissioner nearest the privileged person's headquarters in India. Except for an accidented or totally damaged vehicle, it is assessed on the depreciated value, with depreciation at the scales specified by the Board for second hand motor vehicles. The rate of duty and the exchange rate are those applicable on the date the Board approves the sale.
Provisos to 5(1B). The first proviso allows sale of vehicles after four years of import on a reciprocal basis for privileged persons of countries that allow a similar facility to Indian privileged persons posted there, on applications made to the Ministry of External Affairs before the applicants leave India. The further proviso (inserted in 2002) extends the same facility after four years to all privileged persons belonging to the United Nations or any other International Organisation, whether or not reciprocity exists. Rule 4A(2)(c) prints three years and these provisos print four years; read each as printed.
5(1C). For an accidented or totally damaged vehicle under rule 4A(2)(d), duty is calculated taking the sale price as the cum-duty price, at the rate applicable to such a vehicle had it not been accidented.
5(1D). If a vehicle is stolen, duty is calculated taking the amount of the insurance claim as the cum-duty price, at the applicable rate.
5(2) and (3). The privileged person must furnish the information and documents the recovering officer requires and produce the goods for inspection. On payment of the duty, the Commissioner informs the other authorities who received the certificate copies.
Rule 6: sale to another privileged person
Where goods cleared without payment of duty are sold to another privileged person within three years of import, the seller must obtain from the buyer an exemption certificate in duplicate (for a motor vehicle, also an undertaking in duplicate), forward copies as rule 3(3) requires, and both seller and buyer report to the Board. The rule applies each time the goods pass between privileged persons, but for goods other than motor vehicles it ceases to apply after three years from import.
Rule 7: powers of the Commissioner
The Principal Commissioner or Commissioner of Customs may adopt such procedure as he thinks necessary to give effect to the Rules.
Example. A first secretary, Ms. Varga, is posted to India and brings a car. She is transferred out after two years. As the car was imported within one year of her posting, the proviso to 4A(2)(c) lets her sell it to a non-privileged person before the three years end, with the Board's permission, paying duty on the depreciated value.
For the exemption power, see our article on section 25; for the recovery machinery used when duty is not paid, see rules 1 to 5 of the Attachment Rules.
Need help with a sale, retention or duty recovery?
The routes, permissions and valuation steps in these Rules are specific, and a sale without concurrence can lead to recovery of duty. Our legal consultation team can help you plan the application and check the duty computation. For the first stage, see rules 1 to 3.
Key takeaways
- Sale of exempted goods within three years of import needs the Board's prior concurrence, applied for through the Protocol Division.
- Motor vehicles may go to another privileged person, be re-exported, be sold to a non-privileged person on payment of duty after three years, or be disposed of if accidented.
- A retiring person may retain a vehicle without duty if it was used in India for three years or more.
- Duty on sale to a non-privileged person is recovered from the privileged person; vehicles are assessed on depreciated value.
Read next
- Rules 1–3 of the Foreign Privileged Persons Rules, 1957: clearance formalities
- Rules 1–5 of the Customs Attachment of Property Rules, 1995
- Section 25 of the Customs Act: power to grant exemption
Disclaimer: Based on the customs rules named above as published on the CBIC Tax Information Portal and, for sets amended since 2023, the amending notifications (read through a TaxClue consolidated reading text; no official consolidated text exists), as consulted on 3 October 2026. Later notifications, rates and the Customs Act, 1962 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.