Reporting Share Sales Between Residents and Non-Residents on FC-TRS: Scope, Conditions and Delay Fee
This article explains when a sale of equity instruments between a resident and a non-resident must be reported on Form FC-TRS under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 and the FEMA (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, what must be verified before the filing, and what follows from delay.
There is no new notification behind this article; it reflects the framework in force. It matters because the filing is the last step of a transaction that must already satisfy eligibility, cap, approval, pricing and payment conditions. A failure on any of these creates a FEMA issue separate from the lateness of the report.
Which transfers are reportable
FC-TRS is an online reporting mechanism of the Reserve Bank of India, filed on the FIRMS portal through the Authorised Dealer Category-I bank.
- Resident to non-resident: governed by
Rule 9(3)of the NDI Rules, which sets the foreign investment conditions and pricing. FC-TRS is required. - Non-resident to resident: governed by
Rule 9(2), which deals with pricing, documentation and reporting. FC-TRS is required. - Transfer from a non-repatriable holding to a resident: as stated,
Regulation 4(3)(a)of the Mode of Payment and Reporting Regulations, 2019 means no FC-TRS reporting is required. - Non-resident to non-resident: the sectoral restrictions, approval requirements and other FEMA conditions in
Rule 9continue to apply, but no FC-TRS reporting is required.
Checks before filing
Buyer eligibility and limits
The buyer must be a person resident outside India who is eligible to acquire equity instruments under the NDI Rules and is not barred from the sector. Ownership and control restrictions must be satisfied, the ultimate beneficial owner identified, and nationality and beneficial ownership verified, with the rules on land-border countries considered.
On the investee side, the principal activity and sector determine whether foreign investment is permitted, and whether it is under the automatic or the Government route. The sectoral cap, any statutory limit, the aggregate foreign investment, the FPI limit and the NRI and OCI limits (where relevant) are tested on fully diluted share capital, before and after the transaction.