Can a resident Indian transfer shares to NRI as a Gift?

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Yes, a resident Indian can transfer shares to NRI by way of a gift only post obtaining prior approval from RBI.

A resident Indian need to submit the below documents to RBI while applying for approval to transfer the shares as a gift to NRI:

Name and address of self and the NRI.
Declare the relationship between self and NRI.
Purpose of the gift.
Certificate from a Chartered Accountant for valuation of shares to be gifted.
Certificate from the company declaring that the proposed transfer to NRI neither breaches the applicable sectoral cap/ FDI limit in the company nor does it exceed 5 percent of the paid-up capital of the company.
Undertaking that the value of shares to be transferred or already transferred (if any) in the past does not exceed the rupee equivalent of USD 50,000 during a financial year.

From the taxability perspective, an NRI gets a tax exemption (irrespective of the value) when the gift is received from a relative (as defined in Section 6 of the Companies Act) or for marriage. Otherwise, an NRI is liable to pay tax when the value of shares exceeds Rs.50,000.

Topic: NRI Taxation in India (Stocks, Mutual Funds and Derivatives) Article

2 Comments

2. Raj sholankly

| Link|June 12, 2022 7:54:18 PMReply

When Resident becomes NRI and informs bank, then his regular demat account is converted into NRO demat account. Is RBI supposed to be informed about value of his holdings or whether it is more than 5% paid up capital of the companies whose shares he is now holding under NRI status? My follow up question is can shares be gifted without any RBI limits from one NRO demat account to a relative’s NRO demat account (both parties are NRIs)?

2.1. subodh desai

| Link|October 12, 2022 4:06:01 PM

I AM ALSO WAITING FOR THE REPLY.

1. Ravi

| Link|November 20, 2021 11:53:41 AMReply

great article
More Information about gift tax India
NRI Gift Rules
Immovable property can be gifted to an NRI provided the remittance of sales proceeds does not exceed USD 1,000,000 per year.
NRIs can get gifts from relatives in the form of shares and securities provided the gifts do not exceed 5% of the paid-up capital of the company; the sectoral cap is not breached and the NRI is eligible to hold the securities.
A gift received from a specified trust, specified fund, or as a scholarship from educational institutions is not taxable.
If the gifts are an immovable property outside of India, it is exempt from tax.
The value of the gifts cannot be considered as a deduction while calculating income tax.
Income received from a gift in India is taxable in India whether the receiver and giver are Resident Indians or NRIs.
When you receive gifts, make sure the necessary documentation is in place.
Cash gifts that exceed Rs. 2,00,000 can be subject to penalty. Ensure that you get the relevant gift through cheques or bank account transfers.
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