Under the Foreign Exchange Management Act (FEMA) in India, any transfer of securities between residents and non-residents, or vice versa, is subject to reporting requirements. These reporting obligations are in place to monitor and regulate foreign investments, ensure compliance with FEMA regulations, and maintain transparency in cross-border securities transactions.

Reporting of Transfer of Securities from Resident to Non-Resident (Outward Remittance)

When a resident in India transfers securities to a non-resident, they are required to report such transactions to the authorized dealer (usually a bank authorized by the RBI to deal in foreign exchange) within a specified timeframe. The reporting is typically done through the submission of the appropriate form, such as the LRS (Liberalized Remittance Scheme) form, to the authorized dealer.

The key details that need to be reported for the outward remittance of securities include:

• Type of Securities: Specify the type of securities being transferred, such as equity shares, debentures, bonds, or other financial instruments.

• Name and Details of the Non-Resident Recipient: Provide the name, address, and other relevant details of the non-resident recipient.

• Purpose of Transfer: Indicate the purpose of the transfer, such as investment, gifting, inheritance, or any other permissible reason.

• Value and Quantity of Securities: Mention the value and quantity of securities being transferred in the designated currency.
  
  

Reporting of Transfer of Securities from Non-Resident to Resident (Inward Remittance)

When a non-resident transfers securities to a resident in India, the resident recipient is also required to report the transaction to the authorized dealer within the prescribed timeline. Similar to outward remittances, the reporting is usually done through the relevant form.

The details to be reported for the inward remittance of securities include:

• Type of Securities: Specify the type of securities being received.

• Name and Details of the Non-Resident Transferor: Provide the name, address, and other relevant details of the non-resident transferor.

• Purpose of Transfer: Indicate the purpose of the transfer, such as investment, gifting, or any other permissible reason.

• Value and Quantity of Securities: Mention the value and quantity of securities being received in the designated currency.
  
  

Compliance and Penalties

Both residents and non-residents involved in securities transfers must ensure compliance with the reporting requirements stipulated under FEMA. Failure to report or provide inaccurate information may lead to penalties, fines, or other regulatory actions.

Reporting of transfer of securities from residents to non-residents and vice versa is a vital aspect of FEMA’s regulatory framework. These reporting requirements help maintain transparency, monitor foreign investments, and ensure adherence to FEMA regulations. It is crucial for all parties involved in such transactions to fulfill their reporting obligations accurately and within the specified timelines to avoid potential penalties and to contribute to a well-regulated and compliant financial system in India.