Transfer of Shares from Non-Resident Indians to Resident Indians

Similar to the case of Resident Indians, Non-resident Indians are also allowed to carry out the transfer of shares through the medium of their Demat Account. The Transfer of shares can be for a consideration or without consideration depending on the preference if the transfer takes place through Demat Account.

Furthermore, as per the abiding regulations, in case of the transfer of shares by a Non-Resident Indian, the PAN for both the parties, the Transferor and the Transferee, is required. That turned out to be difficult since many Non-Resident Indians (NRIs), Persons of Indian Origin (POIs) and Overseas Indian Citizens (OICs) did not have a PAN Card in their possession as they were not required to file Income Tax Returns in India. That is why, in light of these struggles, the Securities and Exchange Board of India, issued a circular dated February 11, 2019, to help the case.

SEBI Circular set forth that the necessity of PAN furnishing by the Transferor is allowed to be done away with, to overcome the previously mentioned problem. However, the relaxation is provided to the NRIs, PIOs and Foreign Nationals, subjected to certain conditions only.

The Relaxation to be provided to the transferor only:

• In the case of Transfers that have been carried out after January 1^st 2016. However, this relaxation will be made available for non-commercial transactions only.
• In the case where an immediate relative is given a gift supported by an appropriate trust deed.

The provisions of Transfer of Shares by Non-Resident Indians (NRIs):

NRIs are enabled to make the Transfer of shares to resident Indians or Non-Resident Indians both, subject to the fulfilment of certain rules and regulations. Some of these are:-

1. The case of the Transfer of shares from NRIs to NRIs requires general permission from the Reserved Bank of India (RBI). However, transfer of such type is only allowed in the manner of sales of shares for market-driven consideration. Also, such a transfer does not include the transfer of shares from NRI to Overseas Corporate Bodies (OCBs).
2. The case where the transfer takes place between NRIs and Resident Indians, with consideration, then the process requires the approval of RBI in advance. Furthermore, it must be noted that consideration must be based on appropriate market value.
3. When the Transfer Takes place between NRIs and Resident Indians, but without Consideration i.e.; in the form of a Gift, then the General Permission of RBI is required without any approval in advance.
4. Advance Approval is needed when the transfer takes place between the NRI and a resident Indian in a private limited company.

In Case of a transfer of shares in a limited company, NRIs are required to mandatorily furnish of their PAN Card.