Relaxation on shares transfer by NRIs - SEBI Circular

As per the extant regulations, in case of any transfer of shares by the Non-Resident India, the PAN of the transferor and the transferee is required.

Feb 21, 2019 06:02 IST India Infoline News Service

Like in the case of Resident Indians, the NRIs are also permitted to execute transfer of shares via their demat accounts. Such transfer of shares from the demat account can either be for a consideration or without consideration. However, as per the extant regulations, in case of any transfer of shares by the Non-Resident India, the PAN of the transferor and the transferee is required. This was becoming challenging since many Non Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Indian Citizens (OICs) did not have an Indian PAN card as they were not required to file returns in India. It is in this light that the recent SEBI circular (SEBI/HO/MIRSD/DOS3/CIR/P/2019/30) dated February 11, 2019 assumes special significance. But before we get into the significance of this circular, let us first understand how the various permutations apply in case of transfer of shares by NRIs.
 
Transfer of shares by NRIs – Extant provisions
 
Currently, NRIs are permitted to transfer shares either to resident Indians or to non-resident Indians subject to fulfilment of certain rules and regulations. Here are the highlights:
  1. Transfer of shares from NRIs to NRIs is accorded General Permission by the Reserve Bank of India (RBI). However, such transfer of shares can only be by way of sale of shares for a market-driven consideration.
  2. Transfer of shares by NRIs to resident Indians for consideration requires the prior approval of the RBI and such consideration must be based on verifiable and acceptable market value only.
  3. Transfer of shares by NRIs to resident Indians is also permitted as a Gift (without consideration). This transfer by way of Gift has a General Permission accorded by the Reserve Bank of India without any prior approval.
  4. Transfer of shares by an NRI to a resident Indian in a private limited company will require the prior permission of the RBI.
  5. In case of NRI to NRI transfer, under the RBI General Permission, the transfer is only allowed for shares transferred by an NRI to another NRI or PIO. This does not cover transfer of shares to Overseas Corporate Bodies (OCBs).
  6. NRIs are required to furnish of their PAN card for any such transfer of shares in a limited company.
 
SEBI circular pertaining to furnishing of PAN by NRIs for share transfer
The SEBI circular dated Feb 11th pertains to the last point of submission of PAN details along with the transfer. Many NRIs, OICs, PIOs and even foreign nationals who intend to transfer shares of public limited companies listed in India do not have an Indian PAN card. This was becoming a roadblock. To overcome this problem, SEBI circular stipulates that the requirement of PAN furnishing by the transferor will be done away with.

However, the relaxation on submission of PAN for transfer of shares by NRIs, OICs, PIOs and foreign nationals will only be available subject to the following conditions.
  • The relaxation on submission of PAN shall only be available for transfers that have been executed after January 01, 2016. Any pending disputes in this regard, will automatically stand resolved.
  • This PAN relaxation will only be available for non-commercial transactions i.e. by way of gift to a resident Indian. Any sale made by an NRI to a resident Indian for consideration will require the PAN to be submitted.
 
The PAN relaxation will only be permitted in case of gifts given to immediate relatives and supported by an appropriate trust deed. The definition of “Immediate Relatives” will be the same as defined in the SEBI SAST Regulations 2011.

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