I have certain shares and securities in India. I am not only a non-resident but also a citizen of a foreign country. I wish to make gift of some of these shares to my close relatives in India. I also want to sell some shares under a private arrangement and not through the stock market. Do I need to take permission of any authority before making the gift or sale?

P. Krishna, Abu Dhabi

The Reserve Bank of India has granted general permission to a person resident outside India to transfer any security to a person resident in India by way of gift. Therefore, no permission is necessary. General permission is also available for transfer of shares and convertible debentures by way of sale under a private arrangement by a person resident outside India to a person resident in India.

However, this would be possible where the transfer of shares is in conformity with SEBI regulations. Further, the pricing should comply with relevant SEBI rules and a certificate of a chartered accountant has to be obtained to this effect. In case the SEBI regulations and pricing guidelines are not met, prior approval of the Reserve Bank of India is necessary.

It is important to point out that if the shares and securities are sold through a stock market and such securities have been held for atleast one year, the capital gains would be exempt from tax. However, in the case of private sale of shares, the capital gains tax would be at the rate of ten percent, provided you do not claim the benefit of exchange loss under the second proviso to section 48 of the Income-tax Act. If you claim the benefit of this proviso, the long-term capital gains would be taxed at the rate of twenty percent.

The writer is a practising lawyer, specialising in tax and exchange management laws of India