Gift of Shares of Indian Companies by Resident to person resident outside India-Only with the RBI Prior Approval

Gift of Shares of Indian Companies by Resident to person resident outside India-Only with the RBI Prior Approval

 – Transfer of any capital instrument, by way of gift by a person resident in India to a person resident outside India will require RBI approval. While forwarding applications to Reserve Bank for approval for transfer of capital instruments by way of gift, the documents mentioned in Annex 3 should be enclosed.

Reserve Bank considers the factors while processing such applications:

Conditions for approval of gift are given in regulation 10A(a) of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 .

Gift should be to close relatives and should not exceed 5% of paid up capital of company. Value of security should not exceed US $ 50,000. It should be within sectoral cap/FDI limits.

 Application should be made to RBI giving details as specified in Regulation 10(a)(iii) of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations – Part I Section I para 8.B of RBI Master Circular No. 15/2013-14 dated 1-7-2013 [earlier Master Circular No. 15/2012-13 dated 2-7-2012] – Para 3.4.5.1(ii) of Consolidated FDI Policy Circular No. 1 of 2014 dated 17-4-2014 issued by DIPP of MC&I.

[The limit of USD 25,000 has been increased to USD 50,000 vide RBI circular No. 14 dated 15-9-2011].​

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Annex-4

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PART I,

Section I, para 8

(b) II (iii)]

Documents to be submitted by a person resident in India for transfer of shares to a person resident outside India by way of gift

i. Name and address of the transferor (donor) and the transferee (donee).

ii.Relationship between the transferor and the transferee.

iii.Reasons for making the gift.

iv. In case of Government dated securities and treasury bills and bonds, a certificate issued by a Chartered Accountant on the market value of such security.

v. In case of units of domestic mutual funds and units of  Money Market Mutual  Funds, a certificate from the issuer on the Net Asset Value of such security.

vi. In case of shares and convertible debentures, a certificate from a Chartered Accountant on the value of such securities according to the guidelines issued by Securities & Exchange Board of India or fair value worked out as per any internationally accepted pricing methodology for valuation of shares for listed companies and unlisted companies, respectively.

vii. Certificate from the concerned Indian company certifying that the proposed transfer of shares/ convertible debentures by way of gift from resident to the non-resident shall not breach the applicable sectoral cap/ FDI limit in the company and that the proposed number of shares/convertible debentures to be held by the non-resident transferee shall not exceed 5 per cent of the

paid up capital of the company.

viii. An undertaking from the resident transferor that the value of security to be transferred together with any security already transferred by the transferor, as gift, to any person residing outside India does not exceed the rupee equivalent of USD 50,000 during a financial year