All About FC-TRS form of RBI for Transfer of Shares between Resident & Non Resident

In today’s globalised world, many businesses operate beyond the borders of their home country. When companies venture abroad, they need to adhere to the financial regulations of the host country to ensure a transparent and fair market. Foreign investment, particularly in India, is a key driver of economic growth and thus, is governed by several rules and procedures. In India, the Reserve Bank of India (RBI) acts as the custodian of such procedures.

Whether you are setting up a foreign company in India or a resident seeking to transfer shares to a non-resident, understanding the complex regulatory environment, including various forms and certifications, is essential for a smooth business operation.

Background on FC-TRS form

The Form FC-TRS (Foreign Currency Transfer of Shares) is one such critical document regulated by the RBI. It handles the transfer of shares between residents and non-residents in India. Introduced as part of an effort to streamline and improve the ease of doing business in India, the Form FC-TRS is now filed on FIRMS (Foreign Investment Reporting and Management System), an online application introduced by RBI in 2018.

The platform provides a single window for reporting for nine types of foreign investments, including Form FC-TRS. The application’s forms are submitted in a single format known as SMF (Single Master Form). For comprehensive regulations related to foreign company setup in India, FIRMS provide the necessary templates and guidelines.

The FC-TRS form signifies the transfer of shares from a resident in India to a non-resident or vice versa. It becomes crucial when there is considerable foreign direct investment (FDI) involved in the business. Accurate reporting via FC-TRS form helps in adherence to RBI’s regulatory framework for International taxation, ensuring efficient fund transfer between the entities and the overall harmony of the investment atmosphere in India.

When to use FC-TRS form

The FC-TRS form is filed in specific scenarios involving the transfer of shares between residents and non-residents in India. It is crucial to understand when this form needs to be filed to ensure compliance with RBI regulations.

The FC-TRS form must be filed within 60 days of the date of remittance or the date of transfer, whichever is earlier. This means that if there is a transfer of shares between a resident and a non-resident in an Indian company, the FC-TRS form must be submitted within this timeframe.

The form is required when there is a transfer of shares in both directions, i.e., from a resident in India to a non-resident or from a non-resident to a resident. The purpose is to keep track of foreign investment transactions, maintain transparency in share ownership, and comply with the regulatory framework set by the RBI.

It’s important to note that the FC-TRS form applies to transfers involving substantial amounts of foreign direct investment (FDI). This ensures that the RBI can effectively monitor and regulate cross-border financial activities related to share transfers.

By filing the FC-TRS form promptly, businesses and individuals can maintain compliance with RBI regulations and contribute to the smooth functioning of foreign investment transactions in India.

Requirements and Procedure of Filing FC-TRS

To ensure a successful filing of the FC-TRS form, certain documents and information need to be prepared in advance. Here are the requirements and steps involved in the filing process:

1. Buyers and Sellers Consent: The consent of both the buyer and the seller involved in the share transfer must be obtained. This ensures that the parties involved are in agreement with the transfer and have provided their consent willingly.
2. Valuation Report: A valuation report that accurately values the shares being transferred needs to be prepared. This report determines the fair market value of the shares and assists in the calculation of any applicable taxes or fees.
3. Shareholder Agreement: If there is a shareholder agreement in place between the parties involved, a certified true copy of the agreement needs to be attached to the FC-TRS form. This agreement outlines the rights and obligations of the shareholders involved in the transfer.
4. Board Resolution: A certified true copy of the board resolution approving the share transfer must be attached to the form. This resolution indicates that the transfer has been officially approved by the company’s board of directors.
5. FCGPR Approvals: Copies of the Foreign Collaboration General Permission Route (FCGPR) approvals obtained for all the shares being transferred should be included. The FCGPR approval is necessary when there is foreign investment involved in the transfer of shares.
6. 15CA and CB: Copies of Form 15CA and Form 15CB must be attached. These forms are used for electronic submission of remittance-related information and are required for certain types of transactions involving non-residents.
7. FIRC and KYC: The Foreign Inward Remittance Certificate (FIRC) and Know Your Customer (KYC) documents need to be submitted. The FIRC serves as proof of remittance, while the KYC documents verify the identity and address details of the parties involved in the transfer.
8. Declaration by Non-Resident Transferor/Transferee: A declaration form, duly filled and signed by the non-resident transferor or transferee, stating their non-residency status must be provided. This ensures that the transfer complies with the relevant regulations governing resident and non-resident transactions.

Once all the required documents are gathered, the FC-TRS form can be filed. The process involves the following steps:

1. Login into the FIRMS portal: Access the FIRMS portal using the provided Entity User and Business User ID credentials.
2. Select the Return Type: Within the FIRMS portal, navigate to the “File Return” tab and select “Single Master Form.” Choose “Form FC-TRS” from the drop-down menu for the Return Type and click on “Add New Return.”
3. Enter Details: Fill in the details related to FDI-Entry Route and Applicable Sectoral Cap under the relevant tabs.
4. Enter Common Details: Provide information such as the nature of the transfer (gift or sale), details of the transferor and transferee, and the date of the transfer.
5. Enter Particulars of Transfer: Fill in the details of the capital instruments, including the type of instrument, number of instruments, conversion ratio, face value, and transfer price per instrument.
6. Enter Remittance Details: Enter the mode of payment, name of the Authorized Dealer (AD) bank along with the IFSC code, the amount received, and the date of receiving the amount.
7. Verify Shareholding Pattern: Ensure that all the pre-filled details in the Shareholding Pattern tab are accurate.
8. Save and Submit: Once all the required information is entered, click on “Save and Submit” at the top right corner of the form.

By carefully following these steps and providing the necessary documents, the FC-TRS form can be submitted successfully for processing by the RBI. It is advisable to double-check all the information before submitting the form to avoid any discrepancies or delays in the approval process.

Post-submission Process

After submitting the FC-TRS form through the FIRMS portal, there are a few steps involved in the post-submission process. Here is an overview of what to expect:

1. Form Auto Acknowledgement: Once the form is submitted, an email will be received from autoreply-firms@rbi.org.in, confirming the auto-acknowledgement of the FC-TRS form. This email serves as proof that the form has been successfully filed.
2. Approval or Rejection: About 3-4 days after the form is submitted, the approval or rejection of the filed FC-TRS form will be communicated through the same email ID. It is advisable to regularly check the email for updates on the status of the filed form.
3. Rejection Remarks: In case the FC-TRS form is rejected, the email notification will include specific remarks detailing the reasons for rejection. It is important to carefully review these remarks and address any issues mentioned before resubmitting the form.
4. Re-submission Process: If the FC-TRS form is rejected, it is necessary to follow the mentioned process again and make sure to rectify any errors or omissions based on the remarks received. Resubmitting the form with the necessary corrective actions will increase the chances of approval.

It is important to note that timely filing of the FC-TRS form is essential to avoid any delays or penalties. Failure to submit the form within the stipulated timeframe may result in non-compliance and potential penalties. Therefore, it is recommended to monitor the progress of the form submission and take prompt action as required.

By following these steps and closely monitoring the communication from the RBI regarding the approval or rejection of the FC-TRS form, individuals and businesses can ensure a smooth post-submission process.

Penalties for Late Filing

Timely submission of the FC-TRS form is crucial to avoid penalties for late filing. In the event that the form is filed after the prescribed deadline, a Late Submission Fee (LSF) may be applicable. The calculation of the LSF is based on the following formula:

Late Submission Fee = 7500 + (0.025% x A x n)

Where:

• A represents the amount involved in the delayed reporting
• n represents the number of years of delay in submission, rounded up to the nearest month and expressed up to 2 decimal points

For each instance of late filing, the Late Submission Fee is calculated based on the above formula. It is important to note that the Late Submission Fee must be deposited to the RBI by way of a demand draft.

The RBI has provided guidelines on the Late Submission Fee calculation in accordance with A.P. (DIR Series) Circular No. 16 dated September 30, 2022.

It is essential to submit the FC-TRS form within the specified time frame to avoid incurring any Late Submission Fee. By ensuring timely compliance with the submission requirements, individuals and businesses can avoid penalties and maintain a smooth regulatory process.

Steps for Filing Form FC-TRS

Filing the Form FC-TRS involves a step-by-step process. Here is a breakdown of the required steps to successfully submit the form:

Step 1: Login into the FIRMS portal

To begin the filing process, log in to the FIRMS portal using the provided Entity User and Business User ID credentials. These credentials will give you access to the necessary forms and functionalities.

Step 2: Select your Return Type

Once logged in, navigate to the “File Return” tab on the portal’s main dashboard. Click on “Single Master Form” and select “Form FC-TRS” from the drop-down menu in the “Return Type” section. To proceed, click on “Add New Return” located at the top right corner of the page.

Step 3: Enter the details of received FDI-Entry Route and Applicable Sectoral Cap

In this step, you will need to provide specific details related to the Foreign Direct Investment (FDI) entry route and the applicable sectoral cap. Ensure that all the information entered is accurate and aligns with the relevant regulations.

Step 4: Enter the common details

Under this tab, you will input the common details of the share transfer. Specify whether the transfer is by way of gift or sale. Include the details of the transferor and transferee, along with the date of transfer. Double-check the accuracy of the information before proceeding.

Step 5: Enter particulars of transfer

In this section, you will need to fill in the particulars of the share transfer. This includes details such as the type of capital instruments, the number of instruments, conversion ratio (if applicable), the number of equity shares on a fully diluted basis, face value, and transfer price per instrument.

Step 6: Enter remittance details

Under the “Remittance Details” tab, provide information about the mode of payment, the name of the Authorized Dealer (AD) bank along with the IFSC code, the amount received, and the date of receiving the amount. Accurate reporting of remittance details is crucial for compliance purposes.

Step 7: Verify Shareholding Pattern

Ensure that all the pre-filled details in the “Shareholding Pattern” tab are correct. This section should reflect the updated shareholding pattern after the transfer has taken place.

Step 8: Save and Submit

Once you have reviewed and verified all the information, click on “Save and Submit” at the top right corner of the form. This action will finalize the submission process for the FC-TRS form.

By following these step-by-step instructions and providing accurate and complete information, you can successfully file the Form FC-TRS through the FIRMS portal.

Conclusion

In conclusion, the Form FC-TRS plays a vital role in facilitating the transfer of shares between residents and non-residents in India. It is an essential document that helps maintain transparency and regulate foreign investment transactions.

By understanding the requirements and procedures involved in filing the FC-TRS form, individuals and businesses can ensure compliance with the Reserve Bank of India’s regulations. The introduction of the FIRMS portal has streamlined the filing process, making it more convenient and efficient.

Remember to gather all the necessary documents and information before submitting the FC-TRS form. Be diligent in following the step-by-step instructions within the FIRMS portal to ensure accurate and timely filing.

It is crucial to adhere to the prescribed timelines for filing the FC-TRS form to avoid any penalties or complications. Late submission fees may be applicable in case of delayed filing.

If you have any queries or encounter any difficulties during the filing process, it is recommended to seek professional assistance to ensure compliance and smooth execution of the share transfer.

Understanding the guidelines and regulations related to foreign investment transactions, including the FC-TRS form, is essential for businesses and individuals engaging in cross-border share transfers in India.

For more information on related topics such as setting up foreign companies in India, international taxation, or RBI services, you can refer to the links provided below:

• Foreign Company Setup in India
• International Taxation
• Complete Guide to Foreign Inward Remittance Certificate (FIRC)
• RBI Services

By staying informed and complying with the necessary regulations, you can navigate the process of share transfer between residents and non-residents smoothly and successfully.

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