FEMA Section 6(4): Clarification on Holding Foreign Assets
Current · Source: Reserve Bank of India · RBI/2013-14/440 · issued 09 Jan 2014 · ~2 min read
Quick answerRBI clarifies that returning residents can freely use eligible foreign assets (accounts, income, inheritance) for payments or fresh investments abroad without RBI approval, provided funds come solely from those assets and FEMA rules are followed.
The rule, in the simplest words
If you moved back to India after living abroad, you can keep using your foreign bank accounts, foreign income, or foreign gifts you got while you were living outside India.
You can also use any foreign money you inherited from someone who lived outside India.
You can spend or invest this foreign money freely without asking RBI (India's central bank) for permission, as long as the money comes only from those allowed sources and you follow all FEMA (foreign exchange) rules.
How it plays out — a real example
A forex & trade-finance officer in Mumbai helps a returning resident customer, Priya, who wants to use the money from her old US bank account (opened when she worked in New York) to buy shares in a US company. The officer checks that the funds come only from that account and not from any new Indian income, then processes the investment without needing RBI approval, making Priya happy and the process smooth.
What changed
RBI issued a clarification on Section 6(4) of FEMA, 1999, addressing representations about the scope of transactions covered. It explicitly lists eligible assets: foreign currency accounts opened while non-resident, income from overseas employment/business/investments/gifts/inheritance during non-residency, and foreign exchange inherited from a non-resident. The circular confirms that returning residents can freely utilize these assets for payments or new investments abroad without RBI approval, as long as the funds are exclusively from eligible assets and FEMA provisions are not contravened.
What it means for you
For banks, this clarification reduces ambiguity in handling returning resident customers' foreign assets. It simplifies compliance by clearly defining eligible assets and permitting free utilization without prior RBI nod, streamlining remittance and investment processes. Lenders must ensure transactions are funded solely from eligible assets and verify no FEMA violations occur.
What you must do
Update internal FEMA compliance manuals to reflect the clarified scope of Section 6(4) eligible assets.
Train staff to verify that funds for payments or fresh investments abroad are sourced exclusively from eligible assets as defined.
Advise returning resident customers on their rights to freely use eligible foreign assets without RBI approval.
Ensure transaction monitoring systems flag any use of ineligible funds for such purposes.
Can a returning resident use income earned abroad after returning to India for fresh investments without RBI approval?
No, only income earned while resident outside India, or from eligible assets held abroad, qualifies. Post-return income is not covered under Section 6(4) and requires RBI approval for overseas investments.
Does this circular allow repatriation of sale proceeds from eligible foreign assets to India?
Yes, the circular permits free utilization of sale proceeds of eligible assets, which includes repatriation to India, as long as the funds are from eligible assets and FEMA rules are followed.
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/440
A.P. (DIR Series) Circular No. 90
January 9, 2014
To,
All Category- I Authorised Dealer Banks and Authorised Banks
Madam / Sir,
Provisions under section 6 (4) of Foreign Exchange Management Act, 1999 - Clarifications
Attention of Authorized Dealers is invited to Section 6 (4) of FEMA, 1999 in terms of which a person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India.
2. We have been receiving representations with regards to nature of transactions covered under Section 6(4) of FEMA, 1999. In this regard it is clarified that Section 6(4) of FEMA, 1999 covers the following transactions:
Foreign currency accounts opened and maintained by such a person when he was resident outside India;
Income earned through employment or business or vocation outside India taken up or commenced while such person was resident outside India, or from investments made while such person was resident outside India, or from gift or inheritance received while such a person was resident outside India;
Foreign exchange including any income arising therefrom, and conversion or replacement or accrual to the same, held outside India by a person resident in India acquired by way of inheritance from a person resident outside India.
A person resident in India may freely utilise all their eligible assets abroad as well as income on such assets or sale proceeds thereof received after their return to India for making any payments or to make any fresh investments abroad without approval of Reserve Bank, provided the cost of such investments and/ or any subsequent payments received therefor are met exclusively out of funds forming part of eligible assets held by them and the transaction is not in contravention to extant FEMA provisions.
3. Authorised Dealer Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
4. The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the FEMA, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
Yours faithfully,
(Rudra Narayan Kar)
Chief General Manager-in- Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/440 · issued 09 Jan 2014. The plain-English explanation above is BankPulse’s own independent summary.
Ensure transaction monitoring systems flag any use of ineligible funds for such purposes.
📜 Compliance
Update internal FEMA compliance manuals to reflect the clarified scope of Section 6(4) eligible assets.
Train staff to verify that funds for payments or fresh investments abroad are sourced exclusively from eligible assets as defined.
Advise returning resident customers on their rights to freely use eligible foreign assets without RBI approval.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (Category-I Authorised Dealer Banks, Returning resident individuals holding foreign assets, Compliance officers handling FEMA transactions), your first concrete step on “FEMA Section 6(4): Clarification on Holding Foreign Assets” is: “Update internal FEMA compliance manuals to reflect the clarified scope of Section 6(4) eligible assets.” (RBI issued this 09 Jan 2014).
Action required: Update internal FEMA compliance manuals to reflect the clarified scope of Section 6(4) eligible assets.
Action required: Train staff to verify that funds for payments or fresh investments abroad are sourced exclusively from eligible assets as defined.
Action required: Advise returning resident customers on their rights to freely use eligible foreign assets without RBI approval.
Action required: Ensure transaction monitoring systems flag any use of ineligible funds for such purposes.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8685&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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