TaxTMI 
TaxTMI 
Purchase by a person resident outside India of equity/preference/convertible preference shares and convertible debentures issued by an Indian company - SCHEDULE I
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....ctivity/sector mentioned in Annex A to this schedule, may issue ^60[shares or convertible debentures or warrants] to a person resident outside India, subject to the limits prescribed in Annex B to this schedule, in accordance with the Entry Routes specified therein and the provisions of Foreign Direct Investment Policy, as notified by the Ministry of Commerce & industry, Government of India, from time to time. ^68[Provided that a. In the sectors/activities mentioned in the Annex B to the Schedule, foreign investment upto the limit indicated against each sector/activity is allowed subject to the conditions of the extant policy on specified sectors and applicable laws/regulations; security and other conditionalities. In sectors/activities not listed therein, foreign investment is permitted upto 100% on the automatic route, subject to applicable laws/regulations; security and other conditionalities. b. Wherever there is a requirement of minimum capitalization it shall include share premium received along with the face value of the share, only when it is received by the company upon issue of the shares to the non-resident investor. Amount paid by the transferee dur....
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....ny which proposes to embark on expansion programme to undertake activities or manufacture items included in Annex B to this Schedule may issue ^61A[shares or convertible debentures or warrants] out of fresh capital proposed to be issued by it for the purpose of financing expansion programme, up to the extent indicated in Annex B, subject to compliance with the provisions of this paragraph.] (old 2)^16[***] ^30[(2) A company which is an Micro and Small Enterprise (MSE) (earlier Small Scale Industrial Unit) including an Export Oriented Unit or a Unit in a Free Trade Zone or in an Export Processing Zone or in a Software Technology Part or in an Electronic Hardware Technology Park, and which is not engaged in any activity/sector mentioned in Annex A to this schedule may issue ^62[shares or convertible debentures or warrants ] to a person resident outside India referred to in paragraph 1, subject to the limits prescribed in Annex B to this schedule, in accordance with the Entry Routes specified therein and the provision of Foreign Direct Investment Policy, as notified by the Ministry of Commerce & Industry, Government of India, from time to time.] ^31[(3) Any Indust....
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....ny rules/ regulations framed or directions issued thereunder, provided that: i. The equity shares shall be issued in accordance with the extant FDI guidelines on sectoral caps, pricing guidelines etc. as amended by Reserve Bank of India, from time to time; ii. The issue of equity shares under this provision shall be subject to tax laws as applicable to the funds payable and the conversion to equity should be net of applicable taxes.] Provided, that the foreign equity in the company after the conversion of Royalty/Lumpsum fee/ECB into equity is within the sectoral cap notified, if any.] ^71[(v) by way of swap of shares, provided the company in which the investment is made is engaged in an automatic route sector, subject to the condition that irrespective of the amount, valuation of the shares involved in the swap arrangement will have to be made by a Merchant Banker registered with SEBI or an Investment Banker outside India registered with the appropriate regulatory authority in the home country. Note: A company engaged in a sector where foreign investment requires Government approval may issue shares to a non-resident through swap of sha....
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....(a) is engaged or proposes to engage, in any activity specified in Annex A to this Schedule ;or (b) proposes to issue shares to a person resident outside India beyond sectoral limits or the activity of the Indian company falls under the FIPB route, as stipulated in Annex B to this Schedule ; or (c) ^72[***] (d) proposes to issue shares to a person resident outside India against import of capital goods/machinery/equipment (^34['excluding second-hand machinery]) subject to compliance with the conditions specified by the Government of India and the Reserve Bank from time to time; or (e) proposes to issue shares to a person resident outside India against preoperative/pre-incorporation expenses (including payments of rent etc.), subject to compliance with the conditions specified by the Government of India and the Reserve Bank from time to time.]] ^66[Para 4 4A and 4B deleted] ^26[5. Issue price Price of shares issued to persons resident outside India under this Schedule, shall not be less than- (a) the price worked out in accordance with the SEBI guidelines, as applicable, where the shares of the company is l....
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....ard remittance through normal banking channels or by credit to his NRE / FCNR (B) account, as the case may be; Provided further that the Reserve Bank, may on application made to it and for sufficient reasons permit an Indian company to refund the amount of consideration received towards issue of security, if such amount of consideration is outstanding beyond a period of 180 days from the date of receipt. Explanation: In case of partly paid equity shares, the period of 180 days shall be reckoned from the date of receipt of each call payment.] ^39[9. Reporting of issuance of shares of Indian company.-(1) An Indian company issuing ^53[shares or convertible debentures or warrants] in accordance with these Regulations shall submit through AD bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the Registered office of the company operates, (A)not later than 30 days from the date of receipt of the amount of consideration received by Indian company for issue of ^54[shares or convertible debentures or warrants], ^55[report in Advance Reporting Form as specified by Reserve Bank from time to time] along with a copy/ies of Foreign Inward Remittance Ce....
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....e India or vice versa, the transferor/transferee, resident in India, shall submit to the AD bank ^44[a report in the form FC-TRS, as specified by the Reserve Bank from time to time.], within 60 days from the date of receipt or payment of the amount of consideration. The onus of submission of the form FC-TRS within the specified time shall be on the transferor/transferee, resident in India. (ii) ^45[***] (iii) The IBD/FED/nodal branch of the AD bank shall submit a consolidated monthly statement in respect of all such transactions reported by its branches, to the Reserve Bank in the form and manner stipulated by Reserve Bank, Foreign Exchange Department, Central Office, from time to time. (iv) The sale consideration in respect of ^64[shares or convertible debentures or warrants ] remitted into India through normal banking channels, shall be subjected to a KYC check by the remittance receiving AD bank at the time of receipt of funds, in case, the remittance receiving AD bank is different from the AD bank handling the transfer transaction, the KYC check shall be carried out by the remittance receiving bank and the KYC report shall be submitted by the customer....
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....-2008, before it was read as, "2. If the person purchasing the shares under this Scheme proposes to be collaborator or proposes to acquire the entire share holding of a new Indian company, he should obtain a prior permission of Central Government if he has a previous venture or tie-up in India through investment in shares or debentures or a technical collaboration or a trade mark agreement or investment by whatever name called in the same field or allied field in which the Indian company issuing the shares is engaged." 14 Inserted vide Notification No. 179/2008 dated 22-08-2008 w.e.f. 12-01-2005 15. Substituted vide Notification No. 179/2008 dated 22-08-2008 w.e.f. 10-02-2006, before it was read as, "(1) An Indian company which is not engaged in any activity, or in manufacturing of item included in Annexure 'A' to this Schedule, may issue shares or convertible debentures to a person resident outside India, referred to in paragraph 1 upto the extent specified in Annexure B, subject to compliance with the provisions of the Industrial Policy and Procedures as notified by Secretariat for Industrial Assistance (SIA) in the Ministry of Commerce and I....
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....dia and the terms and conditions of such an approval are complied with." 18. Substituted vide Notification No. 179/2008 dated 22-08-2008, before it was read as, "form specified in Annexure C" 19. Substituted vide Notification No. 179/2008 dated 22-08-2008, before it was read as, "form specified in Annexure D" 20. Substituted vide Notification No. 179/2008 dated 22-08-2008, before it was inserted vide Notification No. 041/2001 dated 2/3/2001 as, "(4B) i) An Indian company may sponsor an issue of ADRs/GDRs with an overseas depository against shares held by its shareholders at a price to be determined by the Lead Manager. ii) The proceeds of the issue shall be repatriated to India within a period of one month. iii) The sponsoring company shall comply with the provisions of the Scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued thereunder by the Central Government from time to time; iv) the sponsoring company shall furnish full details of such issue in a form specified in Annexure C to the Foreign Investment Division, ....
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....er this Schedule, shall not be less than a) the price worked out in accordance with the SEBI guidelines ^2[as applicable], where the issuing company is listed on any recognised stock exchange in India, and b) fair valuation of shares done by a chartered accountant as per the guidelines issued by the erstwhile Controller of Capital Issues, in all other cases." 27. Omitted vide Notification No. FEMA 229/2012-RB, Dated 23-04-2012, before it was read as, "(2) If the person purchasing the shares under this Scheme proposes to be a collaborator or proposes acquire the entire shareholding of a new Indian company, he should obtain prior permission of Central Government if he has, as on January 12, 2005, an existing joint venture or technology transfer/trademark agreement in the same field as that of such Indian company. Provided that no prior permission of Central Government shall be required for investments to be made by Venture Capital Funds registered with. SEBI; investment by multinational., financial institutions; or where in the existing joint-venture investment by either of the parties is less than 3% or where the existing joint Venture/ coll....
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....t was read as, "Notwithstanding anything contained in clause (3) an Export Oriented Unit or a Unit in Free Trade Zone or in Export Processing Zone or in a Software Technology Park or in an Electronic Hardware Technology Park may issue shares or convertible debentures to a person resident outside India referred to in paragraph 1 in excess of 24 per cent provided it complies with the ceilings specified in Annexure B." 32. Substituted vide Notification No. FEMA 244/2012-RB, dated 22-10-2012, before it was read as, "A person resident outside India referred to in clauses (i) and (ii) of sub-regulation (1) of Regulation 5, may purchase shares or convertible debentures issued by an Indian company up to the extent and subject to the terms and conditions set out in this Schedule." 33. Substituted vide Notification No. FEMA.266/2013-RB dated 05-03-2013, before it was read as, "a report in form FC-GPR" 34. Substituted vide Notification No. FEMA. 242/2012-RB dated 19-10-2012 w.e.f. 10-04-2012, before it was read as, 'including second-hand machinery' 35. Inserted vide Notification No. FEMA. 242/2012-RB dated 19-10-20....
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....erted portion in Form ECB -2. ^25[C) the amount of consideration received by Indian company as advance against equity shall be reported to the Regional Office of the Reserve Bank under whose jurisdiction the Registered Office of the Company operates in the form specified in 'Annex C "within 30 days of receipt thereof.]" 40. Inserted vide Notification No. FEMA. 242/2012-RB dated 19-10-2012 w.e.f. 15-03-2011. 41. Inserted vide Notification No. FEMA. 242/2012-RB dated 19-10-2012 w.e.f. 22-04-2009. 42. Renumbered as "11", vide Notification No. FEMA. 242/2012-RB dated 19-10-2012 before it was read as "10" 43. Substituted vide Notification No. FEMA. 242/2012-RB dated 19-10-2012, before it was read as, "a report in form FC-GPR" 44. Substituted vide Notification No. FEMA.266/2013-RB Dated March 05, 2013, before it was read as, "a report in the form FC-TRS specified in Annex F to this Schedule". 45. Deleted vide Notification No. FEMA.266/2013-RB Dated March 05, 2013, before it was read as, "(ii) Reserve Bank may, by notification, modify from time to time the Form FC-TRS specified in Annex F to this Schedule. 46. Substituted vide Noti....
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....agement (Deposit) Regulations, 2000. ] ^9[Explanation: Conversion of Rayalty/Lumpsum fee due for payment or conversion of ECB, as given elsewhere in this Schedule, ^37[import payables of capital goods by units in Special Economic Zones] shall be treated as consideration for issue of shares within the meaning of this paragraph.] ^12[Provided that if the shares or convertible debentures are not issued within 180 days from the date of receipt of the inward remittance or date of ^38[debit to NRE/FCNR(B)/Escrow account], the amount of consideration so received shall be refunded to the person concerned by outward remittance through normal banking channels or by credit to his NRE/FCNR(B) account, as the case may be:] ^12[Provided further that the Reserve Bank may, on an application made to it and for sufficient reasons permit an Indian company to refund the amount of consideration received towards issue of security, if such amount is outstanding beyond a period of 180 days from the date of receipt.]" 53. Substituted vide Notification No. FEMA. 308/2014-RB, dated June 30, 2014, before it was read as, "shares or co....
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....try of Finance, Government of India to issue such ADRs and/or GDRs or is eligible to issue ADRs/ GDRs in terms of the relevant scheme in force or notification issued by the Ministry of Finance, and b) is not otherwise ineligible to issue shares to persons resident outside India in terms of these Regulations, and c) the ADRs/GDRs are issued in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Central Government thereunder from time to time. 2. The Indian company issuing shares under sub-paragraph (1), shall furnish to the Reserve Bank, full details of such issue in ^18[Form DR], within 30 days from the date of closing of the issue. 3. The Indian company issuing shares against ADRs/GDRs shall furnish a quarterly return in the ^19[Form DR-Quarterly] to Reserve Bank within fifteen days of the close of the calendar quarter. &n....