A Comprehensive Guide to Filing Form FC-TRS: Navigating Foreign Currency Transfers in India

In today’s global business landscape, cross-border investments and transactions have become commonplace. For companies and individuals engaged in the transfer of equity shares, compulsorily convertible preference shares (CCPS), or convertible debentures between residents and non-residents in India, complying with regulatory requirements is essential. One such compliance obligation is the filing of Form FC-TRS under the Foreign Exchange Management Act (FEMA). This guide aims to simplify the FC-TRS filing process and highlight key considerations for a seamless experience.

Understanding the Basics:

Form FC-TRS is a mandatory form used to report the transfer of capital instruments such as equity shares, CCPS, or convertible debentures of an Indian company between a resident and a non-resident (or vice versa). Such transactions must be executed through an Authorized Dealer (AD) Category-I bank and reported via the RBI’s FIRMS (Foreign Investment Reporting and Management System) portal. This requirement ensures transparency and regulatory compliance in foreign exchange transactions involving Indian entities.

Key Considerations Before Filing

Before initiating the filing of Form FC-TRS, it is essential to evaluate a few key regulatory aspects. First, ensure that the foreign investment adheres to the Foreign Direct Investment (FDI) policy, including sector-specific conditions, sectoral caps, and the applicable entry route whether automatic or approval-based. The transaction must also comply with the pricing guidelines prescribed under FEMA. These guidelines vary depending on whether the Indian company is listed or unlisted and are designed to ensure fair valuation. Another crucial consideration is the timeline: the form must be filed within 60 days from the date of the actual transfer of capital instruments or the receipt/remittance of consideration, whichever occurs earlier. Missing this deadline may lead to penalties or additional compliance requirements.

 

Who Should File Form FC-TRS?

Form FC-TRS is typically filed by the resident party involved in the transfer—either the transferor or transferee, depending on the direction of the transaction. In cases where the capital instruments are held on a non-repatriable basis, the responsibility may lie with the non-resident investor. Additionally, if shares are acquired through a stock exchange under the FDI scheme, the non-resident is required to file the form through an AD Category-I bank.

The Filing Process

• Registration and Login

To initiate the filing process, both the entity and the user must register on the FIRMS Portal as an "Entity User" and "Business User" respectively. Once registered, log in and navigate to the Single Master Form workspace. Select "FC-TRS" as the return type to begin the submission.

• Filling in Investment Details

Some fields in the form, such as CIN, Company Name, and PAN, will be auto-populated. You will need to manually input details such as the FDI entry route, sectoral cap, and statutory ceiling applicable to the Indian investee company.

• Providing Transfer Details

The next section involves entering detailed information about the nature of the transaction. This includes the method of transfer (e.g., sale, gift), any change in shareholding pattern, the type of transfer, and the identity of the transferor and transferee (including donor/donee, if applicable).

• Entering Particulars of Transfer

This part requires details of the capital instruments being transferred. You will need to provide:

• Type and number of instruments

• Conversion ratio (if applicable)

• Face value and transfer price per instrument

• Total consideration amount

• Fair value as per the valuation report

• Number of shares on a fully diluted basis post-conversion

• Entering Remittance Details

In cases where the transfer involves consideration (i.e., it is not a gift), the filer is required to provide complete remittance details in the form. This includes specifying the mode of payment used for the transaction and furnishing the name and details of the Authorized Dealer (AD) Category-I Bank that facilitated the remittance. Additionally, the amount received or remitted in Indian Rupees (INR) must be clearly stated. If the consideration is paid in multiple installments, a tranche-wise breakdown should also be included to reflect each payment accurately. Providing these details ensures that the transaction is traceable, transparent, and aligned with FEMA compliance norms.

• Confirming Pricing Guidelines

The transfer price must adhere to RBI pricing guidelines. For listed companies, SEBI regulations apply. For unlisted companies, the pricing must follow internationally accepted valuation norms certified by a chartered accountant, SEBI-registered merchant banker, or cost accountant.

• Verifying Shareholding Pattern

The form auto-populates the pre-transaction shareholding pattern and calculates the post-transaction pattern based on the input. Carefully review and verify this data to ensure its accuracy before submission.

• Attaching Required Documents

Depending on the nature of the transaction (gift or sale), the following documents may be required:

• Consent letters from the transferor and transferee

• Board resolution approving the transfer

• Valuation report

• Declarations and undertakings from the parties

• Executed agreements or deed of transfer

Make sure all documents are signed, stamped, and scanned in the prescribed format.

Conclusion:

Filing Form FC-TRS is a critical part of complying with FEMA regulations for foreign investment in India. While the process may appear complex, careful planning and accurate documentation can ensure a smooth and timely submission. Given the frequent updates in regulatory norms, especially by the Reserve Bank of India, it's essential to stay informed. For businesses seeking end-to-end assistance, partnering with professionals can help avoid costly delays or penalties.

At Prolead Financial Solutions, we specialize in assisting companies with RBI and FEMA compliances, including FC-TRS filings. Reach out to our expert team for a hassle-free and compliant filing experience.