Gift refers to the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person to another.
It is very common for people to receive gifts from friends and relatives.However, one needs to be mindful of regulations governing gifts. Some of these are entailed below.
1. Gift of shares/securities:
- 1.1. By NRs/NRIs/PIOs in favor of resident Indians
- A person resident outside India can freely transfer equity shares/CCPS/CCDs by way of a gift to a person resident in India as under:
- Any person resident outside India, (not an NRI or an erstwhile OCB), may gift their shares/fully and mAndatorily convertible debentures to any person resident outside India.
- NRIs may gift, their shares/convertible debentures to another NRI only, provided that the latter has obtained prior permission of the Central Government to acquire the shares if he has previous ventures or tie-ups in India through investments in shares or debentures, a technical collaboration or a trademark agreement or investment in the same or allied field in which the Indian company whose shares are being transferred is engaged.
- Any person resident outside India may transfer share/fully and mandatorily convertible debentures to a person resident in India by way of gift.
- 1.2 By resident Indians in favor of NRs/NRIs/PIOs
A person resident in India who proposes to transfer security by way of gift to a person resident outside India [other than erstwhile OCBs] shall apply to the Central Office of the Foreign Exchange Department, RBI, furnishing the following information:
- Name and address of the transferor and the proposed transferee
- Relationship between the transferor and the proposed transferee
- Reasons for making the gift
- In the case of government-dated securities, treasury bills and bonds, a certificate issued by a chartered accountant on the market value of such securities
- In case of units of domestic mutual funds and units of money market mutual funds, a certificate from the issuer on the net asset value of such security
- In the case of shares/fully and mandatorily convertible debentures, a certificate from a chartered accountant on the value of such securities according to the guidelines issued by the SEBI or the discounted cash flow (DCF) method with regard to listed companies and unlisted companies, respectively
- certificate from the Indian company concerned certifying that the proposed transfer of shares/ convertible debentures, by way of gift, from resident to the non-resident, shall not breach the applicable sectoral cap/FDI limit in the company and that the proposed number of shares/ convertible debentures to be held by the non-resident transferee shall not exceed 5% of the paid-up capital of the company.
The transfer of security by way of gift may be permitted by the RBI, provided that:
- The donee is eligible to hold such security in accordance with the FEMA regulations made there under.
- The gift does not exceed 5% of the paid-up capital of the Indian company/ each series of debentures/ each mutual fund scheme.
- The applicable sectoral cap/FDI limit in the Indian company is not breached.
- The donor and the donee are relatives as defined in Section 6 of the Companies Act, 1956.
- The value of security to be transferred by the donor, together with any security transferred to any person residing outside India as gift in the calendar year, does not exceed the rupee equivalent of US$ 25,000.
- Such other conditions as considered necessary in public interest by the RBI.
2. Gift of immovable property
- 2.1. An NRI or PIO may acquire residential or commercial property by way of gift from a person resident in India or an NRI or a PIO except agricultural land/plantation property/farmhouse. NRs are not permitted to acquire immovable property by way of gift from a person resident in India.
- 2.2. An NRI can transfer agricultural land/farm house/plantation property in India as a gift to a person resident in India who is a citizen of India or to another NRI or PIO.
- 2.3. A PIO can transfer any immovable property other than agricultural land, plantation property or a farmhouse in India as a gift to a person resident in India or an NRI or a PIO.