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The gift is nothing but a thing given willingly to someone without payment. Gift of shares to Non-Resident Indian (NRI) by Resident is regulated by the Foreign Exchange Management Act, 1999 under the transfer of securities.
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As per the FEMA regulation and FDI policy, the Non-resident are allowed to invest in India. Subject to the FDI sectoral Cap and non-resident investors can invest in Indian Companies by purchasing/acquiring existing shares from resident shareholders. Which can be in the form of the gift as well.
Under FEMA act, the gift is considered as one of the types of transfer of Security.
A person resident in India can transfer shares by way of sale or gift to a person resident outside India subject to the FDI guidelines issued in this regard.
A person resident in India, who intends to transfer any security, by way of gift to a person resident outside India, has to obtain prior approval from the Reserve Bank of India.
The following documents shall be enclosed while forwarding the application to the Reserve Bank of India for approval for the transfer of shares by way of gift:
The Reserve Bank of India shall consider the following factors while processing applications:
The Form FC-TRS should be submitted to the AD Category-I Bank, within 60 days from the date of transfer of shares by way of gift.
The onus of submission of the Form FC-TRS within the given timeframe would be on the transferor/transferee, resident in India.
The provisions of Companies Act 2013 and Income tax shall also comply in addition to above compliances.
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