Sale and Transfer of Shares/Bonds/Debentures
I. Sale/Transfer of Shares/Bonds/Debentures by NRIs to Residents
In order to facilitate quick transfer of shares/bonds/debentures held by NRIs to residents, Reserve Bank has granted general exemptions for sale/transfer of shares/bonds/debentures through stock exchanges in India subject to fulfillment of certain conditions.
Applications for sale/transfer of shares/bonds/debentures held by NRIs/OCBs by private arrangement i.e. other than through stock exchange should be made to Reserve Bank in TS 1 either by the transferor or the transferee, attaching therewith the letter of consent of the other party irrespective of whether the shares/bonds/debentures are listed on a stock exchange or not. While conveying its approval, Reserve Bank will stipulate the conditions subject to which the sale/transfer should be effected. In case of sale/transfer of shares/bonds/debentures acquired on repatriation basis, repatriation of such proceeds of bulk holding (i.e. shares/bonds/debentures exceeding Rupee one lakh in face value or 5% of the company’s paidnup capital whichever is lower) will be permittted only on production of a certificate from a Chartered Accountant or the concerned company’s secretary stating that shares with necessary transfer form duly signed have been received/lodged with the company for registration in favour of the transferee.
II. Sale/Transfer of Shares/Bonds/ Debentures of Indian companies through a Stock Exchange acquired without repatriation benefit.
Reserve Bank has exempted the transfer of shares, bonds or debentures of Indian companies made by NRIs through stock exchange in India in case where (a) such transfers are made in favour of an Indian citizen or person of Indian origin resident in India or in favour of a company or other body corporate incorporated in India and (b) sale proceeds of shares are credited to the NRO account of the transferor with no right of repatriation outside India. In such cases, authorised dealers may credit the sale proceeds to the seller’s NRO account after verifying the contract notes issued by recognised stock exchange brokers through whom the sale was effected. This exemption is available in respect of shares, bonds, or debentures acquired by NRIs under the Portfolio Investment Scheme as well as under any Direct Investment Scheme.
(ii) For sale/transfer of shares, bonds or debentures by OCBs acquired on non-repatriation basis through a stock exchange in India, a consolidated application giving full particulars may be submitted to the concerned office of Reserve Bank. Permission will be granted by Reserve Bank for a specific period subject to renewal.
III. Sale/Transfer of shares/Bonds/ Debentures of Indian companies through a Stock Exchange acquired without repatriation benefits under the Portfolio Investment Scheme.
Reserve Bank exempted transfer of shares, bonds, or debentures of Indian companies registered in India previously acquired by NRIs/OCBs with repatriation benefits under the Portfolio Investment Scheme to person residents in India or persons of Indian origin resident in India or in favour of companies or bodies corporate, incorporated under any lay in force in India on the following conditions:
(a)The transferor had purchased such shares, bonds or debentures from the stock market through a member of a recognised stock exchange in India and delivery of shares, bonds, or debentures so purchased has been taken by him or on his behalf by the concerned authorised dealers or its nominee.
(b) The shares, bonds or debentures are sold in the stock market through member of a recognised stock exchange in India and sale transaction is effected at the ruling market price as determined on the floor of the stock exchange by normal bid and offer method and through the same designated branch of the authorised dealer through which the shares, bonds or debentures were earlier purchased.
(c) The sale proceeds are paid to the said designated branch.
Consequently, it is not necessary for NRIs/OCBs to obtain Reserve Banks’ permission for sale of shares/bonds/debentures effected in the above manner. As regards the repatriation of sale proceeds received by the designated branches, Reserve Bank, will while granting approval for purchase of shares/bonds/debentures, also grant approval for repatriation of the sale proceeds if and when the shares/bonds/debentures are sold in the above manner. The actual repatriation of the same proceeds or credit thereof to the NRE/FCNR account of the beneficiary will be subject to payment of Indian taxes.
IV. Sale/transfer of shares/bonds/debentures acquired by NRIs/OCBs with repatriation benefit under the Direct Investment Scheme
Sale/transfer of shares/bonds/debentures acquired by NRIs/OCBs with repatriation benefit under the Direct Investment Scheme and sold through the Stock Exchange in India will require permission of Reserve Bank. Applications for necessary permission should be made by NRIs/OCBs to the Central Office of Reserve Bank in Form TS 4 through the designated bank branch of an authorised dealer.
In such cases, permission for sale/transfer of shares/bonds/debentures acquired with the right of repatriation will be granted by Reserve Bank to the branch designated by the seller to the authorised dealer, as the case may be, who may sell the holdings at the ruling market price, through a stock exchange at any time within the validity of the permission. While granting permission for sale/transfer, Reserve Bank will also authorise the designated branch/authorised dealer to credit the sale proceeds to the NRE or FCNR account of the seller or to remit them abroad subject to payment of taxes on capital gain if any. Where the amount of capital gains taxed is not immediately determinable, the designated branch/authorised dealer may allow repatriation of sale proceeds or credit thereof to he sellers NRS/FCNR account to the extent of the original cost of investment immediately on realisation of the sale proceeds. The excess amount, if any representing capital gain should be kept by the designated branch/authorised dealer in a separate NRO account of the seller or in a suspense account. The designated branch/authorised dealer may allow withdrawal of this amount for credit to the NRE/FCNR account of the seller or remit it abroad, on production of necessary tax clearance certificate.
V. Transfer of Rupee Securities by Non-residents as Gift
Reserve Bank has also exempted transfer, by way of gift, of any share, bond or debentures of company registered in India made by a non-resident Indian or person of Indian origin to a citizen of India or a person of Indian origin resident in India provided:
(a) such shares, bond or debenture was held by the transferor with the permission of the Reserve Bank, and
(b) such transfer is between relatives as defined in Section 6 of the Companies Act, 1956
Consequently, it is not necessary for NRIs to obtain Reserve Banks’ permission for transfer of shares/bonds/debentures effected in the above manner
VI. Transfer of Rupee Securities to Non-residents as Gifts
Transfer of rupees shares/securities by residents to non-residents by way of gift requires prior approval of Reserve Bank. Applications for such transfers should be made to the concerned office of Reserve Bank and should, inter alia, containing the following information:
(a) Name, address and permanent place of residence of both the transferor and the transferee.
(b) Relationship between the transfer or and the transferee.
Reason for making the gift
VII. Sale/Transfer of Government Securities/Units
NRIs/OCBs may freely sell/transfer Government securities through a Stock Exchange in India, provided the sale/transfer of such securities is arranged through an authorised dealer. Similarly NRIs/OCBs holding units of UTI may freely tender them for repurchase by the Trust.