In India, the transfer of shares to a non-resident is subject to regulatory controls, particularly under the Foreign Exchange Management Act (FEMA) and the Reserve Bank of India (RBI) guidelines. Specifically, if a resident Indian wishes to gift shares to a non-resident, certain conditions and limits apply as per FEMA and the RBI’s guidelines.
Key Aspects of Gifting Shares to Non-Residents:
Example:
Suppose an Indian resident wants to gift 3% of their shares in a listed company to a non-resident. Before proceeding, the donor must seek approval from the RBI for the gift, and the value of the shares should not exceed USD 50,000 in any given year. The transaction must also respect the 5% limit on the total capital that can be held by non-residents in the company.
Conclusion:
In summary, gifting shares to a non-resident is allowed under FEMA, but it requires prior approval from the RBI. The gift can only be for up to 5% of the total capital of the company, and the value of the shares cannot exceed USD 50,000 in a given financial year. The gifting process must comply with all regulatory provisions, including any sectoral caps on foreign ownership.