The Complete Step-by-Step Guide to FC-TRS Filing Under FEMA

The Complete Step-by-Step Guide to FC-TRS Filing Under FEMA

By CS Jaivindra Singh | csjaivindrasingh.com

Foreign Direct Investment (FDI) in India comes with its fair share of regulatory compliances, and one of the most critical is reporting the transfer of shares. If an Indian resident is selling or gifting shares to a non-resident (or vice versa), the transaction must be reported to the Reserve Bank of India (RBI).

This reporting is done through Form FC-TRS (Foreign Currency-Transfer of Shares). Navigating the RBI’s FIRMS portal can seem daunting, but breaking it down step-by-step makes the process straightforward. Whether you are an investor, a startup founder, or a corporate professional, here is your complete guide to successfully filing an FC-TRS.

Step 1: Understand the Ground Rules

Before logging into any portal, you need to know the basics of the filing:

• The 60-Day Rule: The FC-TRS form must be filed within 60 days from the date of the transfer of capital instruments or the receipt/remittance of funds, whichever is earlier. Missing this deadline will result in Late Submission Fees (LSF).

• Who is Responsible? The onus to file falls on the resident entity (the Indian buyer or seller). If the transaction is between two non-residents on a recognized stock exchange, the Indian investee company must step in and file.

• The Platform: All filings are done online through the RBI’s Foreign Investment Reporting and Management System (FIRMS) portal under the Single Master Form (SMF) module.

Step 2: Complete the FIRMS Portal Registrations

If your company has never used the FIRMS portal before, you cannot jump straight to filing. There is a two-part registration process:

1. Entity User (EU) Registration: The Indian company must register in the RBI's Entity Master. You will need the company’s PAN, CIN, and an Authorization Letter on the company letterhead.

2. Business User (BU) Registration: The individual authorized to actually file the form must register as a Business User. During this step, you will select the specific Authorized Dealer (AD) Bank branch that handles the company's foreign remittances. The AD Bank usually approves this within 3 to 5 working days.

Step 3: Prepare Your Document Checklist

Do not start the online form until you have a complete documentation file. Gathering these beforehand saves time and prevents portal timeouts. You will need:

• Transaction Documents: The executed Share Purchase Agreement (SPA), Share Transfer Deed (Form SH-4), or Gift Deed.

• Consent Letters: Signed by both the buyer and the seller.

• Valuation Certificate: A certificate from a SEBI-registered Merchant Banker or a practicing Chartered Accountant determining the fair value of the shares (crucial for FEMA pricing guidelines).

• Remittance Proof: The Foreign Inward Remittance Certificate (FIRC) and the KYC report of the non-resident entity, both issued by the AD Bank.

• Declarations: Standard declarations from both parties confirming adherence to FDI sectoral limits and pricing guidelines.

• Corporate Authorizations: The Board Resolution from the investee company taking note of the share transfer.

Step 4: Execute the Online Filing (The SMF Module)

Once your Business User account is active and your documents are ready, it's time to file:

1. Log into the FIRMS portal and navigate to the Single Master Form (SMF).

2. Select Form FC-TRS from the return type drop-down and click "Add New Return."

3. Common Details: Enter the basic company parameters, entry route (Automatic or Government), and sectoral caps.

4. Particulars of Transfer: Carefully input the nature of the transfer, buyer/seller details, the exact number of shares, face value, transfer price, and the fair value as per your valuation certificate.

5. Remittance Details: Enter the AD Bank details, mode of payment, and exact amounts. (Note: This section is skipped if the transfer is by way of gift).

6. Shareholding Pattern: Update the pre- and post-transaction shareholding. Crucial check: Ensure the portal's auto-calculated post-transaction values perfectly match the company's updated cap table.

Step 5: Submit and Monitor for AD Bank Approval

After attaching all your compiled documents in PDF format, hit submit. The filing is then routed to your designated AD Bank.

The AD Bank has 5 working days to review the submission. They will do one of three things:

• Approve it: Your compliance is complete!

• Reject it: Usually due to a typo or missing document. You will need to correct the error and resubmit.

• Forward to RBI: If the transaction has complexities requiring regulatory clarification.

Final Thoughts

FEMA compliance is not an area where you want to cut corners. A meticulous approach to the FC-TRS filing ensures smooth cross-border transactions and keeps the company in the RBI's good graces.

Need professional assistance with your FEMA compliances, FC-TRS filings, or valuation certificates? Reach out to us at csjaivindrasingh.com to ensure your cross-border transactions are seamless and fully compliant.