Form FC-TRS: reporting share transfers between residents and non-residents

When is FC-TRS needed?

FC-TRS applies when shares, CCPS, CCDs or warrants of an Indian company move from a resident to a non-resident or the other way round, by sale or gift where permitted. Typical cases include a foreign investor buying shares from Indian founders, a foreign parent buying out an Indian partner, or an Indian buyer acquiring a foreign investor's stake. Transfers between two non-residents generally do not need FC-TRS, though other reporting can apply in specific cases.

Who files and pricing rules

The onus of reporting is on the resident party, whether transferor or transferee. The company whose shares are transferred is not the primary filer, although it must record the transfer in its register only after compliance.

Pricing guidelines apply. When a non-resident buys from a resident, the price should not be less than fair value. When a resident buys from a non-resident, the price should not exceed fair value. Fair value is computed by a chartered accountant or SEBI-registered merchant banker using an internationally accepted pricing method for unlisted companies.

Transfers on a stock exchange and other special cases

Where a non-resident buys or sells listed shares on a recognised stock exchange through a registered broker under the FDI route, the reporting responsibility and documents differ, and the broker and custodian play a role. Transfers involving NRIs on a non-repatriation basis are treated like domestic investment and may not need FC-TRS. Because these special cases have their own conditions, confirm the reporting route with the AD bank before closing a transaction.

Documents needed

Where up to 25% of the consideration is deferred, held in escrow or subject to indemnity, the FEMA rules allow this within 18 months of the transfer agreement. Such arrangements should be disclosed in the form.

• Share purchase or transfer agreement
• FIRC or proof of outward remittance
• KYC of the non-resident party from the AD bank
• Valuation certificate
• Consent letter or declaration of both parties
• Shareholding pattern before and after the transfer

Late filing and the LSF

Late reporting can be regularised by paying a Late Submission Fee (LSF) under RBI's A.P. (DIR Series) Circular No. 16 of 30 September 2022. For transaction (flow) returns the LSF is ₹7,500 plus 0.025% of the amount involved multiplied by the years of delay, capped at the amount involved. The LSF route is available only up to three years from the due date; beyond that the matter goes to compounding. FC-TRS is a flow return, so the amount-based component applies. The stamp duty on share transfers and the company's own records are separate obligations and must also be complete.

Common mistakes

Common errors include filing by the wrong party, missing the 60-day window because the clock starts on receipt of funds, valuations dated well before the transfer, mismatched names between the agreement and bank records, and sectoral cap breaches after the transfer. Gifts of shares by residents to non-residents may need prior RBI approval above certain limits, so check before executing. After FC-TRS is acknowledged, the company can register the transfer and update its register of members and the depository records.

Step by step

1. 1Agree price and terms

   Obtain a valuation and sign the share purchase agreement.

2. 2Complete payment

   Remit or receive funds through banking channels.

3. 3Collect documents

   Obtain FIRC, KYC, valuation report and declarations.

4. 4File FC-TRS on FIRMS

   The resident party files the Single Master Form within 60 days.

5. 5AD bank approval

   Respond to queries and download the acknowledgement.

6. 6Register transfer

   The company records the transfer after acknowledgement.