Section 4 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.
Section 4 is a single sentence, but it is one of the most important in the Act for individuals and companies who hold anything abroad. It says that, save as otherwise provided in the Act, a person resident in India shall not acquire, hold, own, possess or transfer any foreign exchange, foreign security or immovable property situated outside India. The exceptions are found elsewhere in the Act, mainly in sections 6 and 9.
Section 4 bars a person resident in India from acquiring, holding, owning, possessing or transferring foreign exchange, foreign security or immovable property situated outside India, save as otherwise provided in the Act. The main carve-outs are in section 6(4) (assets acquired while resident outside India or inherited from such a person) and section 9 (listed exemptions up to limits the Reserve Bank specifies). A breach can have consequences under section 13 and, in some cases, section 37A.
About this article
This article is based on the consolidated text of the Act consulted (amendments shown up to Act 50 of 2019). Later amendments should be checked. Section 4 carries no amending footnote in the copy consulted. For a business with overseas investments, our ODI reporting team can map your holdings to the exceptions that apply.
The sentence, word by word
Section 4 reads: "Save as otherwise provided in this 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."
| Element | What it means |
|---|---|
| "Save as otherwise provided in this Act" | The prohibition gives way to any provision of the Act that allows the holding; it does not mention rules, regulations or Reserve Bank permission in this sentence |
| "no person resident in India" | A person resident in India under section 2(v), including an Indian company and an overseas branch owned or controlled by a resident |
| "acquire, hold, own, possess or transfer" | Five verbs, covering the whole life of an asset from acquiring it to passing it on |
| "foreign exchange, foreign security or any immovable property situated outside India" | Three categories of asset; the first two are defined in section 2, and the third is tied to the location of the property |
Who is caught
The restriction is on a person resident in India. Our article on residence under section 2(v) explains how a person is classified, including the point that an Indian-incorporated company is a person resident in India. A person resident outside India is not caught by section 4, but the person's assets in India are dealt with elsewhere in the Act, in particular in section 6(5).
What is caught
"Foreign exchange" and "foreign security" are defined in section 2(n) and 2(o). Immovable property situated outside India is not defined in the Act's section 2, so the ordinary meaning applies and the test is where the property is situated. The five verbs matter because they close gaps: it is not enough to say that the person did not buy the asset; a person who merely possesses or holds it is also within the sentence.
Example. Vivek, a resident in India, buys shares in an overseas company denominated in a foreign currency and holds them in his own name. Those shares are a foreign security. Unless an exception in the Act applies, section 4 prohibits him from acquiring and holding them. Whether an exception does apply depends on sections 6 and 9 and on the instruments made under them, which this article does not set out.
The exceptions: "save as otherwise provided in this Act"
The opening words refer to the Act, not to rules. Two sections deal with section 4 directly.
Section 6(4): assets from the period of non-residence
Section 6(4) says that a person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if the currency, security or property was acquired, held or owned by the person when he was resident outside India, or inherited from a person who was resident outside India. Our article on section 6(4) to (6) covers it in detail. The core idea is that a person who returns to India does not have to dispose of assets acquired during the years of non-residence.
Section 9: listed exemptions
Section 9 says that sections 4 and 8 do not apply to certain cases. These include possession of foreign currency or foreign coins up to a limit the Reserve Bank may specify, a foreign currency account held or operated by a person or class of persons up to a limit the Reserve Bank may specify, foreign exchange acquired or received before the 8th day of July, 1947, and foreign exchange acquired from employment, business, trade, vocation, services, honorarium, gifts, inheritance or any other legitimate means up to a limit the Reserve Bank may specify. The Act does not print any of the limits; they are for the Reserve Bank to specify by regulation under section 47(2). Our article on section 9 explains each clause.
Section 4 and section 3(d)
Section 3(d) prohibits a financial transaction in India as consideration for, or in association with, the acquisition or creation or transfer of a right to acquire any asset outside India by any person. Section 4 deals with the holding itself; section 3(d) deals with the money side of acquiring it. They overlap and are read together. Our article on section 3 covers the clause.
Consequences of a contravention
Section 4 states the restriction; consequences sit in other sections. Section 13 provides for penalties for contravention generally, and our guide on contravention and penalties under section 13 covers sub-sections (1) and (2). Later articles in this series cover section 13(1A) to (1D), which relate to assets held outside India, and section 37A, which deals with seizure of equivalent assets in the case of a contravention of section 4. This article does not state penalty amounts or thresholds, because they are not part of section 4.
What the Act leaves to rules and regulations
Section 4 itself does not mention rules, forms or limits. Where the sections it points to leave a limit to the Reserve Bank or the Central Government, the limit is in a regulation under section 47 or a rule under section 46. For how overseas investment by Indian entities is regulated and reported in practice, see our guide on overseas direct investment under FEMA; the facts in that guide are not repeated here.
Need help with assets held abroad?
If you or your company hold foreign exchange, shares or property outside India and are not sure which exception covers them, our ODI reporting team can review the history of each asset and the residence status of the holder at the time it was acquired. Getting this right early is easier than correcting it after a notice.
Key takeaways
- Section 4 bars a person resident in India from acquiring, holding, owning, possessing or transferring foreign exchange, foreign security or immovable property outside India.
- The restriction is "save as otherwise provided in this Act"; the main exceptions are section 6(4) and section 9.
- Section 6(4) covers assets acquired while resident outside India and assets inherited from a person resident outside India.
- Section 9 exempts listed cases from sections 4 and 8, up to limits the Reserve Bank specifies.
- Consequences are in other sections, including section 13 and section 37A.
- Check the rules and regulations for any limits; the Act does not print them.
Read next
- Section 13(1A) to (1D): penalty, confiscation and prosecution for assets held outside India
- Section 37A: seizure of equivalent assets for foreign holdings
- Section 3: dealing in foreign exchange and payments to non-residents
- LRS: Liberalised Remittance Scheme complete guide
Disclaimer: Based on a consolidated text of the Foreign Exchange Management Act, 1999 showing amendments up to Act 50 of 2019, as consulted on 2 October 2026. Limits, forms, timelines and procedures are set by rules, regulations and Reserve Bank directions made under the Act; they change from time to time and are not covered here. Later amendments should be checked. This article is general information, not legal advice; check the official text before acting.