Home » FEMA » FOREIGN INVESTMENTS IN INDIA – TRANSFER OF SECURITY BY WAY OF GIFT – LIBERALISATION

FOREIGN INVESTMENTS IN INDIA – TRANSFER OF SECURITY BY WAY OF GIFT – LIBERALISATION

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 Krushi Barfiwala

The transfer of any security from a person resident in India to a person resident outside India by way of gift are governed by Regulation 10 (A)(a) of the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 (“Regulations”). The Regulations specify that for such gift, an application has to be made to the Reserve Bank of India (“RBI”).  The Committee to Review the Facilities for Individuals under the Foreign Exchange Management Act, 1999 in its Report has suggested that general permission may be made available to individual residents in India to gift shares / securities /convertible debentures, etc. to their NRI/PIO close relatives (relative as defined in Section 6 of the Companies Act, 1956) subject to certain conditions.

Keeping in mind the above, the RBI vide RBI/2011-12/175 A.P. (DIR Series) Circular No. 14 (“Circular”) dated 15 September 2011 has liberalised and laid down the provisions with respect to Transfer of Security by Way of Gift to a person resident outside India. The Circular provides that  a person resident in India who proposes to transfer, by way of gift, to a person resident outside India any security including shares/convertible debentures is required to obtain prior approval of the Reserve Bank.

Further, it is to be noted the RBI has also doubled the value of the security to be transferred together with any security transferred, by way of gift to any person residing outside India from USD 25,000 to USD 50, 000 per financial year.

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