What changed
Earlier, the value of securities that could be transferred by way of gift to a non-resident was limited to USD 25,000 per calendar year. This limit has now been raised to USD 50,000 per financial year. All other conditions under FEMA Regulation 10A(a) remain unchanged. Note: Prior RBI approval is still required for all gift transfers of securities.
What it means for you
Banks should note that prior RBI approval is still mandatory for any gift transfer of securities to a person resident outside India. The circular only enhances the value limit up to which such gifts can be made, from USD 25,000 per calendar year to USD 50,000 per financial year. This does not eliminate the need for prior approval.
What you must do
- Update internal FEMA compliance checklists to reflect the new USD 50,000 per financial year limit for gift transfers of securities to NRIs/PIOs, but ensure staff understand that prior RBI approval is still required for all such gifts.
- Inform customers that prior RBI approval is mandatory for all gift transfers of securities, and the enhanced limit applies to the value of securities that can be transferred together with any other gifts in the financial year.
- Ensure all gift transfers are supported by a declaration of relationship and compliance with other unchanged conditions under Regulation 10A(a).
- Train staff handling forex remittances on the revised limit and documentation requirements, emphasizing that prior approval is still needed.
Who it affects
Authorised Dealer (AD) banks handling outward remittances or securities transfers, Resident individuals gifting shares/convertible debentures to NRI/PIO close relatives, NRI/PIO recipients of such gifts
Does this circular remove the need for RBI approval for all gift transfers of securities?
No. Prior RBI approval is still required for any gift transfer of securities to a person resident outside India. The circular only enhances the value limit up to which such gifts can be made, from USD 25,000 per calendar year to USD 50,000 per financial year.
Who qualifies as a 'close relative' for this purpose?
The circular refers to the definition of 'relative' under Section 6 of the Companies Act, 1956. AD banks should verify the relationship as per that definition before processing the gift transfer.
What happens if the gift value exceeds USD 50,000 in a financial year?
The circular does not specify that gifts exceeding USD 50,000 require a separate application; it states that prior approval is required for all gifts. The limit is the maximum value of securities that can be transferred together with any other gifts in the financial year.