For ease of doing business overseas, Government of India in consultation with Reserve Bank of India (RBI) recently revamped the existing framework for overseas direct investment marked by new set of rules, regulations, and directions. While a plethora of changes have been unfurled in relation to overseas investment , one such change is pertaining to gifting of foreign securities by non-residents to an Indian resident individual.
Schedule III of Foreign Exchange Management (Overseas Investment) Rules, 2022, (OI Rules) lays down modes of permissible acquisition of Foreign Securities by way of gift to a resident individual which are summarized in below chart:
RESIDENT INDIVIDUALS ARE NOT PERMITTED TO TRANSFER ANY OVERSEAS INVESTMENT BY WAY OF GIFT TO A PERSON RESIDENT OUTSIDE INDIA
Note: In case foreign securities are received as gift from a foreign citizen who is not a relative, Foreign Exchange Management (Overseas Investment) Rules, 2022, (OI Rules) directs a resident individual to acquire gift in accordance with the provisions of FCRA, 2010 and related Rules & Regulation. However, FCRA, 2010 is silent on such transaction. It also does not explicitly prohibit such transaction. Therefore, lack of any express language under the law may lead to diverse interpretations.
1 NRI does not satisfy the definition of “foreign source” as per sec 2 (j) of Foreign Contribution (Regulation) Act, 2010 (FCRA, 2010). NRI is a person who is a Citizen of India & is a Non Resident.
2 Relative – is defined as per sec 2(77) of Companies Act 2013 read with rule 4 of Companies Rules, 2014. It includes members of HUF, husband or wife, Father (Step-Father), Mother (Step-Mother), Son (Step- Son), Son’s Wife, Daughter, Daughter’s Husband, Brother (Step-Brother), Sister (Step-Sister).