Transfer of shares by NRI to Resident Indian

Transfer of shares by NRI to Resident Indian

What are the applicable law for the transfer of Shares of Indian Company from Non-Resident Indian to Resident Indian under Income Tax act 1961, Companies Act 2013 & Foreign Exchange Management Act?

Can shares be transferred in cash if the value is only Rs. 90,000 /- or It shall be mandatory to be credited in NRE Account ?

There is no capital gain on sale of shares.

Thanks

Asked 5 years ago in Income Tax

- In the hands of transferor, capital gain is taxable in India. As you have said there is no capital gain then no tax. Transferor should file the ITR as NRI and show the relevant transaction under proper schedules. The amount of transaction should be credited in the NRO account as the transaction takes place in India.

- In the hands of transferee, it is to be reported in the ITR if taxable income exceeds Rs.50 lacs.

- In case of company, name of transferee will be recorded on the register of members and updated list of shareholders will be reported to the ROC.

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Valuation of shares will be required.

Transfer of shares must be reported in Form FC-TRS to RBI through an AD bank within 60 days of receipt.

Consent letters, Share Transfer agreement will be required.

The copies of RBI approvals evidencing the transfer of shares.

Under Companies Act

Execution of securities transfer form (“STF”) i.e. SH-4 will need to be executed by transferor and transferee and submitted to company within two months of its execution.

2. Stamp duty @ 0.25% on the value of the shares (i.e. consideration or the fair value, whichever is higher) will need to be paid in Indian rupees.

3. The transferee / his agent must submit to the company a certificate in the Form FC-TRS endorsed by the AD bank that the payment has been made by the transferee.

4. On receipt of the said certificate, the company may record the transfer in its books.

Share cannot be transferred in cash. It should be credited to NRE Account.

Ruchi Goel Anchal

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As per income tax act, the shares must be transferred at fair value determined under rule 11UA.

As per companies act, share transfer agreement has to be executed and form has to be filed with MCA.

Further, for FEMA purposes, form FC-TRS shall have to be filed with RBI.

The buyer shall also have to deduct applicable TDS and then remit the consideration. It is advisable to carry out such transaction through banking channels only.

We may assist you with all above compliance.