20 August 2013
My client is having a statue of non resident wish to transfer their shareholding in Indian private company to another NRI. 1. whether the transaction comes under automatic route..?? 2. whether there is any restriction on fixing transfer price of shares..?? 3. Whether the payment/receipt on account of this transaction can be done abroad..?? any intimation to be given to RBI..??? 4. What will be the tax applicable...??
20 August 2013
Dear Sanil RBI has now simplified financial transactions between non-resident & NRI by granting general permissions for transfer of shares, by way of sale/gift. However in your query you used word Non Resident at one place and Non Resident Indians (NRIs) at other place so for better clarity I try to explain different situation and compliance according to RBI/FEMA. NR to NR (Sale / Gift): A person resident outside India (other than NRI and OCB) may transfer by way of sale or gift, shares to any person resident outside India (including NRIs but excluding OCBs). NR to NRI / Gift): A person resident outside India may transfer by way of sale or gift, shares to NRI. NRI to NRI (Sale / Gift): NRIs may transfer by way of sale or gift the shares or convertible debentures held by them to another NRI. NRI to NR (Sale / Gift): Transfer of shares from NRI to NR requires the prior approval of the Reserve Bank of India. On analysis of above Para it’s clear that RBI prior approval is required for transfer of shares between NRI to NR. Apart from this other share transfer between two non-residents is permissible under automatic route. 2. Pricing: RBI/FEMA does not prescriber pricing guidelines for transfer of shares from non-resident to another non-resident however transfer price should not be lower than the fair valuation done by SEBI registered Cat-1 merchant banker or a chartered accountants as per DCF method. 3. Payment: Transfer of shares are liable to pay Capital Gains Tax on their investments which depends on the tenure of their stocks
in case of further clarification please feel free to contact
CAclubindia
