General Exemption for Sale/Transfer of Shares/Bonds/Debentures
of Indian Companies through a Stock Exchange acquired without repatriation benefit
10C.26 (i) Reserve Bank by its Notification No. FERA.149/93-RB dated
26th April 1993 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.
General Exemption for Sale/Transfer of Shares/Bonds/Debentures
of Indian Companies through a Stock Exchange acquired with repatriation benefits
under the Portfolio Investment Scheme
10C.27 (i) Reserve Bank
by its Notification No.FERA.150/93-RB dated 26th April 1993 has 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 persons resident in India or persons of Indian origin resident in India
or in favour of companies or bodies corporate, incorporated under any law 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 dealer or its
nominee.
(b) The shares, bonds or debentures are sold in the stock market
through a member of a recognised stock exchange in India and the 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;
and
(c) The sale proceeds are paid to the said designated
branch. Consequently, it is not necessary for NRIs/OCBs to obtain Reserve Bank's
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 shares/bonds/debentures
are sold in the above manner. The actual repatriation of the sale proceeds or
credit thereof to the NRE/FCNR account of the beneficiary will be subject to payment
of Indian taxes.
(ii) Sale/transfer of shares/bonds/debentures acquired
by NRIs/OCBs with repatriation benefits 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 bank branch designated by the seller or
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 gains, if any. Where the amount of capital gains tax is not
immediately determinable, the designated branch/authorised dealer may allow repatriation
of sale proceeds or credit thereof to the seller's NRE/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.
NOTE: Under
Section204 of the Income-tax Act 1961, authorised dealers are required to deduct
income-tax at a flat rate of 20% of the long-term capital gains accruing to NRIs
on the transfer of specified assets which include shares/bonds/debentures of Indian
companies, Government securities and any other notified assets. The amount of
capital gains is to be arrived at on the basis of a formula laid down by Government.
The tax deducted at source is required to be paid into Government treasury or
the office of Reserve Bank, State Bank or any other nationalised bank authorised
for the purpose, within one week from the date of deduction of tax. NRIs have,
however, been given the option to pay tax at the above flat rate or pay it on
the total income for the assessment year, in which case the remaining amount of
sale proceeds withheld by authorised dealers may be credited to NRE/FCNR account
of the seller or remitted to him abroad only after production of the necessary
tax clearance certificate.
(iii) A quarterly statement of sales
/ transfers of shares / bonds / debentures acquired by NRIs/OCBs under the Direct
Investment Scheme and sold through stock exchange by authorised dealers vide sub-paragraph
(ii) above should be submitted by the concerned authorised dealer to the Central
Office of Reserve Bank in form DSP within 15 days from the close of each calendar
quarter. General Exemption for Transfer
of Rupee Securities by Non-residents as Gift 10C.28
By its Notification No. FERA.151/93-RB dated 26th April 1993, Reserve Bank has
also exempted transfer, by way of gift, of any share, bond or debenture of a 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 share, 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. |