Detailed Guide on Filing of Form FC-TRS in India

Many businesses operate beyond the borders of their home country. When companies venture abroad, they need to adhere to the financial regulations of the host country to ensure a transparent and fair market. Foreign investment, particularly in India, is a key driver of economic growth and thus, is governed by several rules and procedures. In India, the Reserve Bank of India (RBI) acts as the custodian of such procedures.

Whether you are setting up a foreign company in India or a resident seeking to transfer shares to a non-resident, understanding the complex regulatory environment, including various forms and certifications, is essential for a smooth business operation.

Background on FC-TRS form

The Form FC-TRS (Foreign Currency Transfer of Shares) is one such critical document regulated by the RBI. It handles the transfer of shares between residents and non-residents in India. Introduced as part of an effort to streamline and improve the ease of doing business in India, the Form FC-TRS is now filed on FIRMS (Foreign Investment Reporting and Management System), an online application introduced by RBI in 2018.

The platform provides a single window for reporting for nine types of foreign investments, including Form FC-TRS. The application’s forms are submitted in a single format known as SMF (Single Master Form). For comprehensive regulations related to foreign company setup in India, FIRMS provide the necessary templates and guidelines.

The FC-TRS form signifies the transfer of shares from a resident in India to a non-resident or vice versa. It becomes crucial when there is considerable foreign direct investment (FDI) involved in the business. Accurate reporting via FC-TRS form helps in adherence to RBI’s regulatory framework for International taxation, ensuring efficient fund transfer between the entities and the overall harmony of the investment atmosphere in India.

Who is responsible for filing the Form-FC-TRS?

The onus of filing the Form FC-TRS is on the Indian resident whether transferor or transferee. However, In the case where the Non-Resident investor, acquires shares on the stock exchanges, the responsibility of filing the form FC-TRS is on Investee Company.

When to use FC-TRS form

The FC-TRS form is filed in specific scenarios involving the transfer of shares between residents and non-residents in India. It is crucial to understand when this form needs to be filed to ensure compliance with RBI regulations.

The FC-TRS form must be filed within 60 days of the date of remittance or the date of transfer, whichever is earlier. This means that if there is a transfer of shares between a resident and a non-resident in an Indian company, the FC-TRS form must be submitted within this timeframe.

The form is required when there is a transfer of shares in both directions, i.e., from a resident in India to a non-resident or from a non-resident to a resident. The purpose is to keep track of foreign investment transactions, maintain transparency in share ownership, and comply with the regulatory framework set by the RBI.

It’s important to note that the FC-TRS form applies to transfers involving substantial amounts of foreign direct investment (FDI). This ensures that the RBI can effectively monitor and regulate cross-border financial activities related to share transfers.

By filing the FC-TRS form promptly, businesses and individuals can maintain compliance with RBI regulations and contribute to the smooth functioning of foreign investment transactions in India.

Documents required for FC-TRS filing

Consent Letter through the seller and buyer or their duly appointed agent and in the latter case the Power of Attorney Document.
Disclosure of the shareholding pattern of the investee corporation after the acquisition of shares by an individual resident outside India.
A Certificate from a Chartered accountant representing the fair value of shares.
Broker’s note, relating to a sale, which has been made on the Stock Exchange.
Buyer’s declaration that he is entitled under FDI policy and the existing sectoral limits as well as Pricing Guidelines which needs to be complied with.

Additional information’s required for filing FC-TRS

Name of the company including email id and telephone number, activity code and NIC code number.
Disclosure of whether FDI is allowed under Automatic route and details of the sectoral cap under FDI policy.
Nature of transaction whether transfer from resident to non-resident or vice-versa.
Details of the buyer along with with with the address and also the nature of investing Entity. In the case of company-date and place of Incorporation.
Details of the seller along with with with with the address and also the nature of disinvesting Entity. In the case of company-date and place of Incorporation.
Disclosure of earlier Reserve Bank of India/FIPB approval.
Details of the transactions regarding shares/convertible debentures to be transferred.
Disclosure of foreign investments in the company.
Disclosure of where the shares of the entity are listed on the stock exchange i.e. name of the stock exchange along with the price quoted on the stock exchange.

Requirements and Procedure of Filing FC-TRS

Buyers and Sellers Consent: The consent of both the buyer and the seller involved in the share transfer must be obtained. This ensures that the parties involved are in agreement with the transfer and have provided their consent willingly.
Valuation Report: A valuation report that accurately values the shares being transferred needs to be prepared. This report determines the fair market value of the shares and assists in the calculation of any applicable taxes or fees.
Shareholder Agreement: If there is a shareholder agreement in place between the parties involved, a certified true copy of the agreement needs to be attached to the FC-TRS form. This agreement outlines the rights and obligations of the shareholders involved in the transfer.
Board Resolution: A certified true copy of the board resolution approving the share transfer must be attached to the form. This resolution indicates that the transfer has been officially approved by the company’s board of directors.
FCGPR Approvals: Copies of the Foreign Collaboration General Permission Route (FCGPR) approvals obtained for all the shares being transferred should be included. The FCGPR approval is necessary when there is foreign investment involved in the transfer of shares.
15CA and CB: Copies of Form 15CA and Form 15CB must be attached. These forms are used for electronic submission of remittance-related information and are required for certain types of transactions involving non-residents.
FIRC and KYC: The Foreign Inward Remittance Certificate (FIRC) and Know Your Customer (KYC) documents need to be submitted. The FIRC serves as proof of remittance, while the KYC documents verify the identity and address details of the parties involved in the transfer.
Declaration by Non-Resident Transferor/Transferee: A declaration form, duly filled and signed by the non-resident transferor or transferee, stating their non-residency status must be provided. This ensures that the transfer complies with the relevant regulations governing resident and non-resident transactions.

Once all the required documents are gathered, the FC-TRS form can be filed. The process involves the following steps:

Login into the FIRMS portal: Access the FIRMS portal using the provided Entity User and Business User ID credentials.
Select the Return Type: Within the FIRMS portal, navigate to the “File Return” tab and select “Single Master Form.” Choose “Form FC-TRS” from the drop-down menu for the Return Type and click on “Add New Return.”
Enter Details: Fill in the details related to FDI-Entry Route and Applicable Sectoral Cap under the relevant tabs.
Enter Common Details: Provide information such as the nature of the transfer (gift or sale), details of the transferor and transferee, and the date of the transfer.
Enter Particulars of Transfer: Fill in the details of the capital instruments, including the type of instrument, number of instruments, conversion ratio, face value, and transfer price per instrument.
Enter Remittance Details: Enter the mode of payment, name of the Authorized Dealer (AD) bank along with the IFSC code, the amount received, and the date of receiving the amount.
Verify Shareholding Pattern: Ensure that all the pre-filled details in the Shareholding Pattern tab are accurate.
Save and Submit: Once all the required information is entered, click on “Save and Submit” at the top right corner of the form.

Post-submission Process

Form Auto Acknowledgement: Once the form is submitted, an email will be received from [email protected], confirming the auto-acknowledgement of the FC-TRS form. This email serves as proof that the form has been successfully filed.
Approval or Rejection: About 3-4 days after the form is submitted, the approval or rejection of the filed FC-TRS form will be communicated through the same email ID. It is advisable to regularly check the email for updates on the status of the filed form.
Rejection Remarks: In case the FC-TRS form is rejected, the email notification will include specific remarks detailing the reasons for rejection. It is important to carefully review these remarks and address any issues mentioned before resubmitting the form.
Re-submission Process: If the FC-TRS form is rejected, it is necessary to follow the mentioned process again and make sure to rectify any errors or omissions based on the remarks received. Resubmitting the form with the necessary corrective actions will increase the chances of approval.

It is important to note that timely filing of the FC-TRS form is essential to avoid any delays or penalties. Failure to submit the form within the stipulated timeframe may result in non-compliance and potential penalties. Therefore, it is recommended to monitor the progress of the form submission and take prompt action as required.

Penalties for Late Filing

Timely submission of the FC-TRS form is crucial to avoid penalties for late filing. In the event that the form is filed after the prescribed deadline, a Late Submission Fee (LSF) may be applicable. The calculation of the LSF is based on the following formula:

Late Submission Fee = 7500 + (0.025% x A x n)

Where:

A represents the amount involved in the delayed reporting
n represents the number of years of delay in submission, rounded up to the nearest month and expressed up to 2 decimal points

For each instance of late filing, the Late Submission Fee is calculated based on the above formula. It is important to note that the Late Submission Fee must be deposited to the RBI by way of a demand draft.

The RBI has provided guidelines on the Late Submission Fee calculation in accordance with A.P. (DIR Series) Circular No. 16 dated September 30, 2022.

It is essential to submit the FC-TRS form within the specified time frame to avoid incurring any Late Submission Fee. By ensuring timely compliance with the submission requirements, individuals and businesses can avoid penalties and maintain a smooth regulatory process.

Procedure of filing Form FC-TRS with RBI

Step 1- Registration for the User:

The individual reporting for the transaction in Single Master Form at FIRMS. An individual could use his login details for only the entity that had authorized the individual to report the transactions. In case the individual wants to act as a Business User for another entity, then the person should register himself separately. For registering as a business user one must go to the FIRMS website at https://firms.rbi.org.in

On the website the person is required to open the Registration or for New Business User.
Then the business user must fill up the details in the form namely
Name/User name (which must be unique)/E-mail address/Phone no./Address
IFSC Code of the Bank branch towards whom the reporting shall be made.
Also authority letter as an attachment
Company CIN/LLPIN
PAN Number
Entity name
When the filling of the details is completed the Business User is required to submit the form.
When the Business User submits the registration form, the same shall be required to be verified through the AD Bank Branch concerned. The approval or rejection of the same shall be communicated by means of email notification towards the Business User.

Step 2: Logging in to FIRMS:

In case one wants to log in to FIRMS, the person must to the website https://firms.rbi.org.in
By using the User Name and default password provided through an email, the Business User shall be able to set a new password.
Logging in towards FIRMS would lead the Business User to his/her workstation.

Step 3: Logging in to SMF and reach out to the workstation:

When the submission process is completed for the form of registration of new business user, you shall be able to login to the FIRMS, and now you could log in into Single Master Form and reach your workspace.
One must click on the left navigation button and you shall be able to view many options and from that select Single Master Form.

Step 4: Select the Return type- Form FC-TRS:

On single Master Form, one must click on the menu “Return Type” where you shall be able to view different kinds of forms Select “Form FC-TRS” and then click on the Add new return. The user would be taken towards form FC-TRS. Where some details shall be pre-filled like CIN, Company name, Pan Number, etc. and whereas some details like entry route as well as applicable sectoral cap/statutory ceiling would require to be filled.

Step 5: Common Investment Details:

Then the applicant is required to file the common investment details. These particulars are common towards all the returns that could be reported in SMF in FC-TRS form. The applicant should fill up the common investment details in the form.

Step 6: Common Details:

Some common details are required to be filled in the following tab of Form FC-TRS, after filling in the details of common investment is done. Details like way of transfer, any change in the shareholding pattern, transfer is made from and towards whom, nature of transfer, date of transfer, type of transfer, as well as at last the details of the buyer or seller for sale or donor and donee details in case of gift.

Step 7: Particulars of Transfer:

The details of transfer like the type of capital instruments, number of instruments, conversion ratio, number of equity shares on a fully diluted basis, face value of equivalent shares, transfer rate per instrument, the total sum of consideration and the fair value of the instruments at the time of transfer(relating to gift this would be kept blank)

Step 8: Remittance details: (it is not applicable to transfer of gift):

Then the person must fill in the Form FC-TRS which includes Remittance Details like Mode of payment, Name of AD bank, Address of the AD bank, Amount remitted or received in rupees, Whether and Tranche number, Whether the remitter is different from a foreign investor

Step 9: Share Holding Pattern:

Value of equity shares (on a fully diluted basis) apart from the Foreign Portfolio Investment and indirect foreign investment or Value of Capital contribution or profit shares, Foreign Portfolio Investment, and Indirect foreign investment- Value of equity shares (on a fully diluted basis)

The Pre transaction values are auto-populated from the Entity Master
Post-transaction values are auto-calculated depending on the details given in the form.
The Business user must make certain that the details are properly filled in the form so that the shareholding pattern which is auto- calculated is correct.

Step 10: Submitting the Form:

After successfully filling in all details, the person must click on the Save and Submit for submitting the form. The non-resident transferor or transferee would have to attach a declaration together with the form FC-TRS in a prescribed format.

FAQs

What is Form FC-TRS?

Form FC-TRS (Foreign Currency-Transfer of Shares) is a document required by the Reserve Bank of India (RBI) for reporting the transfer of shares or convertible debentures of an Indian company from a resident to a non-resident, or vice versa.

Who is required to file Form FC-TRS?

Form FC-TRS must be filed by the Indian company whose shares or convertible debentures are being transferred. The form is typically filed by the company secretary or any other authorized person.

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