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 and Direct Investment Scheme

(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 Banks 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) Reserve Bank by its Notification No.F.E.R.A.150/93-RB dated 26th April 1993 read with Notification No.F.E.R.A.198/99-RB dated 30th March 1999 has exempted sale/transfer of shares, bonds or debentures of Indian companies registered in India previously purchased/acquired by NRIs/PIOs/OCBs with repatriation benefits under the Direct 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/acquired such shares/bonds/debentures in accordance with the terms and conditions of the permission granted under clause (d) of sub-section (1) of Section 19 of the Foreign Exchange Regulation Act, 1973.

and

(b) The shares/bonds/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.

Authorised dealers may in such cases allow the remittance of net sale proceeds of such shares/bonds/debentures sold by NRIs/PIOs/OCBs on stock exchange subject to the following conditions:-

a) The shares are sold on stock exchange and brokers contract note showing the sale price is produced.

b) A documentary evidence is produced to show that the original investment was permitted on repatriation basis specifically by Reserve Bank or was covered under the general permission granted by Reserve Bank and was made out of funds remitted from abroad in foreign exchange or out of funds held in NRE/FCNR account of the non-resident investor.

c) A no objection certificate from Income Tax authorities or undertaking/certificate regarding payment of income-tax (cf. paragraph 3B.10 of ECM) is produced.

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 sellers 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 the provisions of the Income-tax Act 1961, authorised dealers are required to deduct income-tax at the rate as applicable form time to time 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.

(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.