Section 6 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 6 governs capital account transactions: investments, borrowings, lending and similar transactions that alter assets or liabilities across the border. Since 15 October 2019 (as the footnotes in the copy consulted show), the section splits the power in two: the Reserve Bank handles transactions in debt instruments, and the Central Government handles the rest. This article covers sub-sections (1), (2), (2A) and (7). Sub-sections (4) to (6) have their own article, and sub-section (3) is omitted.
Subject to sub-section (2), any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction. For debt instruments, the Reserve Bank, in consultation with the Central Government, specifies permissible classes, limits and conditions. For transactions not involving debt instruments, the Central Government, in consultation with the Reserve Bank, prescribes them. The Act prints no class, limit or condition.
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. The changes to section 6 described below come from footnotes citing Act 20 of 2015, s. 139, with effect from 15-10-2019. For structuring an inbound or outbound investment, our FDI reporting (FC-GPR) team can help with the practical side.
What a capital account transaction is
Section 2(e) defines it as a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India. Our article on capital account and current account transactions explains the definition. Section 2(e) still says it includes transactions referred to in sub-section (3) of section 6, and sub-section (3) is shown as omitted; the reference is flagged here as printed.
Sub-section (1): the general permission
Section 6(1): "Subject to the provisions of sub-section (2), any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction." The structure mirrors section 5, but here the permission is made expressly subject to sub-section (2), which lets the permitted classes, limits and conditions be fixed. For the current account counterpart, see our article on section 5.
Sub-section (2): debt instruments, specified by the Reserve Bank
The Reserve Bank may, in consultation with the Central Government, specify:
- (a) any class or classes of capital account transactions, involving debt instruments, which are permissible (clause substituted by Act 20 of 2015, s. 139, w.e.f. 15-10-2019);
- (b) the limit up to which foreign exchange shall be admissible for such transactions; and
- (c) any conditions which may be placed on such transactions (clause inserted by the same section, w.e.f. 15-10-2019).
The proviso to sub-section (2) (substituted by the same section, w.e.f. 15-10-2019) says that the Reserve Bank or the Central Government shall not impose any restrictions on the drawal of foreign exchange for payment due on account of amortisation of loans or for depreciation of direct investments in the ordinary course of business. This is the one protection the Act itself writes into the section. Note that it speaks of drawal of foreign exchange for these two kinds of payment and applies to both authorities.
Where the Reserve Bank's power sits
The Reserve Bank's regulation-making power for debt instruments is in section 47(2)(a): regulations may provide for the permissible classes of capital account transactions involving debt instruments determined under sub-section (7) of section 6, the limits of admissibility of foreign exchange for them, and the prohibition, restriction or regulation of such transactions under section 6. The Foreign Exchange Management (Debt Instruments) Regulations, 2019, as amended from time to time, are the regulations made for this purpose (they name section 6(2)(a) and section 47 as their source). This article does not describe their contents.
Sub-section (2A): non-debt instruments, prescribed by the Central Government
Sub-section (2A), inserted by Act 20 of 2015, s. 139 (w.e.f. 15-10-2019), says the Central Government may, in consultation with the Reserve Bank, prescribe:
- (a) any class or classes of capital account transactions, not involving debt instruments, which are permissible;
- (b) the limit up to which foreign exchange shall be admissible for such transactions; and
- (c) any conditions which may be placed on such transactions.
The hooks in section 46(2) are clause (ab) (the permissible classes of capital account transactions in accordance with sub-section (2A) of section 6, the limits of admissibility of foreign exchange, and the prohibition, restriction or regulation of such transactions) and clause (aa) (the instruments determined to be debt instruments under sub-section (7)). Both clauses were inserted by Act 20 of 2015, s. 143 (w.e.f. 15-10-2019).
| Debt instruments | Not involving debt instruments | |
|---|---|---|
| Sub-section | 6(2) | 6(2A) |
| Who acts | Reserve Bank, in consultation with the Central Government | Central Government, in consultation with the Reserve Bank |
| Verb used | "specify" (regulations, section 2(zd)) | "prescribe" (rules, section 2(x)) |
| Matters covered | Permissible classes, limits, conditions | Permissible classes, limits, conditions |
| Hook | Section 47(2)(a) | Section 46(2)(ab) |
Both sub-sections list classes, limits and conditions, and the proviso to sub-section (2) applies to the Reserve Bank and the Central Government alike.
Sub-section (3): omitted
Sub-section (3) is shown by a line of asterisks. Its footnote says it was omitted by Act 20 of 2015, s. 139, w.e.f. 15-10-2019. This article does not describe what it used to contain.
Sub-section (7): what is a debt instrument
Sub-section (7), inserted by the same section, w.e.f. 15-10-2019, says that for the purposes of section 6 "debt instruments" shall mean such instruments as may be determined by the Central Government in consultation with the Reserve Bank. The Act does not list them. Section 46(2)(aa) is the rule-making hook, so the instruments that count as debt instruments are determined by the Central Government and the line between the Reserve Bank's and the Central Government's jurisdiction depends on that determination.
Example. A resident company, Harbor Foods Private Limited, wants to raise a loan from an overseas lender and also to issue shares to an overseas investor. Whether each transaction is one "involving debt instruments" (and so within the Reserve Bank's regulations) or "not involving debt instruments" (and so within the Central Government's rules) depends on which instruments the Central Government has determined to be debt instruments. The Act answers only the question of who decides, not what is permitted.
Section 47(3): saving of earlier regulations
Section 47(3), inserted by Act 20 of 2015, s. 144 (w.e.f. 15-10-2019), says all regulations made by the Reserve Bank before the date on which the provisions of the section are notified on capital account transactions, the regulation-making power in respect of which now vests with the Central Government, shall continue to be valid until amended or rescinded by the Central Government. Drafting point: the copy prints "notified under section 6 and section 47 of this Act", as printed. Our article on section 47 deals with the section as a whole.
Reading section 6 with sections 3 and 4
Section 3 opens with "save as otherwise provided in this Act, rules or regulations made thereunder"; section 6 and the instruments made under it are among the exceptions. For the practical side, see our guide on capital account transactions under FEMA.
Need help with a cross-border investment or loan?
Whether a transaction is on the debt or non-debt side decides which instrument you must read, and a mistake can leave you outside the permitted classes. Our FDI reporting (FC-GPR) team can help you classify the transaction, identify the governing rules or regulations, and plan the reporting.
Key takeaways
- Section 6(1) permits any person to sell or draw foreign exchange to or from an authorised person for a capital account transaction, subject to sub-section (2).
- For debt instruments, the Reserve Bank specifies classes, limits and conditions in consultation with the Central Government (section 6(2); hook section 47(2)(a)).
- For non-debt instruments, the Central Government prescribes them in consultation with the Reserve Bank (section 6(2A); hook section 46(2)(ab)).
- "Debt instruments" are those determined by the Central Government in consultation with the Reserve Bank (section 6(7); hook section 46(2)(aa)).
- Neither authority may restrict drawal of foreign exchange for amortisation of loans or depreciation of direct investments in the ordinary course of business (proviso to section 6(2)).
- The split took effect from 15-10-2019 per the footnotes; section 6(3) is omitted; earlier Reserve Bank regulations continue until amended or rescinded by the Central Government (section 47(3)).
Read next
- Section 46: power of the Central Government to make rules
- Section 47 and 48: Reserve Bank regulations and laying before Parliament
- Section 6(4) to (6): assets acquired before change of residence, and branch or office in India
- ECB: External Commercial Borrowings Under FEMA
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.