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Monday, 4 December 2017

Quick Insight to FCTRS Filing

Introduction
RBI had launched a module for reporting, under Foreign Direct Investment through eBiz portal of the Ministry of Commerce & Industry, Government of India. This has enabled the online filing of the following returns with the RBI:
Advance Remittance Form (ARF) which is used by the companies to report the FDI inflows to RBI;
FCGPR Form which a company submits to RBI for reporting the issue of eligible instruments to the overseas investor against the above mentioned FDI inflow; and
FCTRS Form which is submitted to RBI for transfer of securities between resident and person outside India.
The RBI, vide its circular no. 40/RBI, dated February 1, 2016, has issued the directions that from February 8, 2016 onwards, the physical filing of forms ARF, FCGPR and FCTRS will be discontinued and forms submitted in online mode, only through e-Biz portal, will be accepted.

FCTRS?
Foreign investors can invest in Indian companies by purchasing/acquiring existing shares from Indian shareholders or from other non-resident shareholders.
General permission has been granted to non-residents / NRIs for acquisition of shares by way of transfer in the following manner.
Transfer of shares by a Person resident outside India
Non-Resident to Non-Resident (Sale / Gift)
Note: Transfer of shares from or by erstwhile OCBs would require prior approval of the Reserve Bank of India.
NRI to NRI (Sale / Gift)
Non-Resident to Resident (Sale / Gift)
Note: Transfer of shares from a Non-Resident to Resident other than under SEBI regulations and where the FEMA pricing guidelines are not met would require the prior approval of the Reserve Bank of India.
Transfer of shares/convertible debentures from Resident to Person Resident outside India
Transfer of Shares by Resident which requires Government approval
Prior permission of the Reserve Bank in certain cases for acquisition / transfer of security
Escrow account for transfer of shares

Reporting of FDI for Transfer of shares route
1.    Form FCTRS shall be filed for transfer of capital instruments between:
person resident outside India holding capital instruments in an Indian company on a repatriable basis and person resident outside India holding capital instruments on a non-repatriable basis; and
person resident outside India holding capital instruments in an Indian company on a repatriable basis and a person resident in India,
2.    The onus of reporting shall be on the resident transferor/ transferee or the person resident outside India holding capital instruments on a non-repatriable basis, as the case may be.
Note: Transfer of capital instruments in accordance with these Regulations by way of sale between a person resident outside India holding capital instruments on a non-repatriable basis and person resident in India is not required to be reported in Form FC-TRS.
3.    Transfer of capital instruments on a recognised stock exchange by a person resident outside India shall be reported by such person in Form FC-TRS to the Authorised Dealer bank.
4.    Transfer of capital instruments prescribed in regulation 10(9) of FEMA 20(R), shall be reported in Form FC-TRS to the Authorised Dealer on receipt of every tranche of payment. The onus of reporting shall be on the resident transferor/ transferee. Transfer of ‘participating interest/ rights’ in oil fields shall be reported Form FC-TRS.
5.    The form FCTRS shall be filed with the Authorised Dealer bank within sixty days of transfer of capital instruments or receipt/ remittance of funds whichever is earlier.imageOfDesc
*In terms of Section 2 (ze) of Foreign Exchange Management Act, 1999 "Transfer" includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien.
The content of this article is intended to provide a general guide to the subject matter. Expert advice should be sought about your specific circumstances. For assistance in filing FCTRS and FCGPR Forms and related compliances contact us at +91 9900397777 drop a mail at info@preethamandco.com.

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