Gifts to NRIs may come under automatic route, but with caps

NEW DELHI: The government is vetting a proposal to liberalise the norms on transfer of gifts from resident Indians to non-resident Indians by seeking to put such investment proposals on the automatic route subject to the sectoral caps.
The existing rules provide for gifts by local citizens to NRIs or Persons of Indian Origin who are close relatives upto a monetary ceiling of Rs 10 lakh. However, being secondary market transactions, such proposals have to be approved by the Foreign Investment Promotion Board (FIPB). The government is now looking at a proposal to allow these transactions without having to go through the FIPB route as long as they fall within the FDI caps.
“We need to have an administrative delegation of powers for gifting shares to NRIs abroad, instead of coming to the FIPB,� a senior finance ministry official said. The delegation of powers could be to the RBI.
The government in consultation with the RBI is also looking at raising the existing limit of Rs 10 lakh given the comfort provided by the foreign exchange reserves which have topped the $87bn mark. The liberalisation on this front could mainly in respect of shares or securities of companies which are not listed or information technology
start-ups by further enhancing the monetary limit for gifting shares to relatives abroad.
But in the next round of liberalisation, a cap may well be imposed on the percentage of the equity capital of a company which can be transferred as gifts instead of a monetary ceiling, according to officials. Otherwise, this route could well be misused, they reckon. A fuller opening up of the gift route would be in the last stage of capital account convertibility.