Can you legally sell foreign currency notes and coins within India?
Selling foreign currency notes and coins within India depends on what category of item is being sold. Foreign coins held as numismatic collectibles — where the collector value substantially exceeds any monetary value — are treated as goods for domestic sale purposes, free of FEMA restriction. Current legal tender foreign notes are technically foreign exchange under FEMA, and resident-to-resident transfers of foreign exchange are subject to FEMA regulations. Demonetised and defunct foreign notes have no live monetary value and are treated as collectible goods — no FEMA restriction on domestic sale.
The FEMA framework for resident-to-resident transfers
FEMA Section 3 prohibits residents from dealing in foreign exchange except through an Authorised Dealer bank or as otherwise permitted. Section 3(b) specifically prohibits making or receiving payments in foreign exchange except as provided by the Act. A resident who sells a current legal tender US dollar note to another resident collector and receives Indian rupees in exchange is technically involved in a foreign exchange transaction — they are exchanging foreign currency for domestic currency in a private arrangement rather than through an Authorised Dealer.
In practice, the Indian numismatic collector community regularly buys and sells foreign currency notes domestically without routing transactions through AD banks, and this activity is not actively enforced against. The RBI's enforcement attention for FEMA violations is directed at significant financial flows, currency speculation, and hawala operations — not at collector-to-collector sales of foreign notes for their numismatic value.
The three-category analysis
Category 1 — Foreign coins with significant numismatic premium: A US Morgan silver dollar sold at ₹15,000 for its collector value, when its face value is USD 1 (approximately ₹84), is primarily a goods transaction — the monetary value of the coin as a medium of exchange is trivial compared to its collector value. Indian numismatic practice treats this as a sale of goods. GST at 5% applies under HSN 9705.
Category 2 — Current legal tender foreign notes: A current USD 100 note (worth ₹8,400 as money) sold to a collector for ₹9,000 (a modest numismatic premium). This is closer to a foreign exchange transaction — the monetary value dominates the collectible value. Technically, this should flow through an AD bank. Practically, informal domestic trading occurs. The legal position is a grey zone.
Category 3 — Demonetised or defunct foreign notes: A German Deutschmark note, demonetised when Germany adopted the Euro, sold to a collector for ₹500. This note has zero monetary value — no bank anywhere in the world will exchange it for local currency. It is a collectible object with historical interest. FEMA's concern is with the foreign exchange value — there is none here. This is a straightforward sale of goods. GST at 12% applies under HSN 4907.
GST on foreign currency note and coin sales
The GST treatment of foreign currency notes and coins sold domestically follows the same framework as Indian numismatic items: numismatic coins (HSN 9705) at 5%; numismatic banknotes (HSN 4907) at 12%. A foreign note or coin sold for its collector value is a numismatic item for GST purposes regardless of its country of origin. The national origin of the note or coin does not affect the applicable HSN code — the numismatic character does.
Domestic sale of foreign currency items — the three-category summary Foreign COINS with large numismatic premium (Morgan dollars, gold sovereigns, historical coins): treated as goods; FEMA technically applies but minimally enforced; GST 5% (HSN 9705) Current legal tender foreign NOTES at near face value: grey zone — technically FEMA applies (AD bank route appropriate for large transactions); GST 12% (HSN 4907) Demonetised or defunct foreign NOTES (no monetary value): treated as collectible goods; no practical FEMA restriction; GST 12% (HSN 4907) Practical rule: the higher the numismatic premium over monetary value, the more clearly it is a goods transaction rather than a foreign exchange transaction |
Laws & authorities referenced in this chapter
FEMA 1999 — §3 (prohibition on foreign exchange dealings except through AD bank or as permitted)
FEMA 1999 — §2(m) (foreign currency definition), §2(n) (foreign exchange definition)
CGST Act 2017 — HSN 9705 (numismatic coins, 5%), HSN 4907 (banknotes, 12%)
FEMA 1999 Schedule III — permitted transactions for residents
Foreign coins with numismatic premium: treated as goods; GST 5% (HSN 9705). Current legal tender foreign notes: FEMA grey zone — AD bank route technically appropriate for significant transactions. Demonetised/defunct foreign notes: treated as collectible goods; no FEMA restriction; GST 12% (HSN 4907). Practical position: domestic collector-to-collector sales of foreign numismatic items are not actively FEMA-enforced. The monetary vs collectible value ratio determines how closely FEMA scrutiny applies.
This is educational content, not legal advice. For a specific situation, please consult a qualified legal professional. Excerpted from Currency, Coins & The Law by Mayank Agarwal, Part 12: FEMA & International — Cross-Border Collecting — Currency, Antiquities & Foreign Exchange.