"We'll sort FC-TRS later": why FEMA's 60-day rule has no grace period

When an NRI sells shares to an Indian cousin, or an Indian promoter buys out a Singaporean co-founder's stake, the paperwork question that usually comes last is: "What about FC-TRS?" The answer that often follows — "we'll sort it once the deal closes" — is a costly misunderstanding. FEMA's reporting clock starts when money moves or instruments change hands, whichever happens first, not when the parties get around to filing.

Legal basis: Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (NDI Rules), Rules 9(6) and 21 — read with Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 (FEMA 395/2019-RB), Regulation 4(3) and Regulation 5, as amended up to FEMA 395(4)/2026-RB dated 13 June 2026; RBI Master Direction – Reporting under FEMA, 1999; FEMA 1999 sections 13 and 15; Foreign Exchange (Compounding Proceedings) Rules, 2024 (G.S.R. 566(E), 12 September 2024) and RBI A.P. (DIR Series) Circular No. 17/2024-25 dated 1 October 2024.

What is FC-TRS and which transactions need it?

FC-TRS (Foreign Currency–Transfer of Shares) reports the transfer of equity instruments of an Indian company where one side is a person resident outside India. It is filed with the Authorised Dealer Category-I bank (AD bank) on RBI's FIRMS portal.

"Equity instruments" under Rule 2(k) of the NDI Rules means equity shares, convertible debentures, preference shares and share warrants issued by an Indian company.

Transactions that require FC-TRS (FEMA 395, Regulation 4(3)):

• Transfer between a non-resident holding on a repatriable basis and a person resident in India
• Transfer between a non-resident holding on a repatriable basis and a non-resident holding on a non-repatriable basis
• Transfer on a recognised stock exchange by a person resident outside India
• Each tranche of payment in a deferred-consideration transfer under Rule 9(6) of the NDI Rules

Who files: the resident transferor or transferee, or the non-resident holding on a non-repatriable basis, as the case may be. For a stock-exchange sale, the non-resident who sells reports it. For deferred tranches, the resident transferor or transferee reports (Regulation 4(3)(a)–(c)).

Transactions that do NOT require FC-TRS:

• Transfers entirely between two residents (FEMA reporting does not arise)
• Sale between a non-resident holding on a non-repatriable basis and a person resident in India — Regulation 4(3) says this "is not required to be reported in Form FC-TRS"

This exemption trips up advisors: a repatriable NRI selling to a resident needs FC-TRS; a non-repatriable NRI selling to a resident does not.

The 60-day clock: exactly when it starts

Regulation 4(3) of FEMA 395: FC-TRS "shall be filed within sixty days of transfer of equity instruments or receipt / remittance of funds whichever is earlier."

That "whichever is earlier" is the trap. Illustration: a UK-based NRI agrees to sell shares on 1 November 2026, the Indian buyer remits payment on 5 November 2026, and the transfer is executed on 20 November 2026. The 60-day clock started on 5 November, when funds moved, not 20 November. The filing deadline is 4 January 2027, not 19 January 2027.

Deferred consideration: Rule 9(6) of the NDI Rules allows up to 25% of the total consideration in a resident/non-resident transfer to be paid on a deferred basis, or kept in escrow, within 18 months from the date of the transfer agreement (or indemnified by the seller for up to 18 months from payment of full consideration). Each deferred tranche must be reported in FC-TRS on receipt (Regulation 4(3)(c)). Three tranches means three filings.

The AD bank: FC-TRS goes to your AD bank, not directly to RBI. Under the Master Direction on reporting, the date of reporting to the AD bank is treated as the date of reporting to RBI, provided the documentation is complete in all respects. An incomplete form keeps the delay running until it is received complete. File early enough to answer bank queries inside the 60 days.

Pricing guidelines: floor, ceiling, and who certifies

Rule 21 of the NDI Rules sets the price direction by who is buying.

The stated guiding principle (Rule 21, Explanation): the non-resident is not guaranteed an assured exit price and exits at the price prevailing at the time of exit.

Unlisted company: fair value is the valuation "as per any internationally accepted pricing methodology for valuation on an arm's length basis" duly certified by:

• a Chartered Accountant,


• a SEBI-registered Merchant Banker, or


• a practising Cost Accountant.

Listed company: the benchmark is the price worked out under the relevant SEBI guidelines, or the price at which a preferential allotment can be made under SEBI guidelines, as applicable (Rule 21).

Filing on FIRMS

The filing is made on RBI's FIRMS portal (firms.rbi.org.in) and is processed through the AD bank. Keep ready the transfer agreement or gift deed, the valuation certificate (for unlisted companies), and the remittance details. Where the bank receiving the remittance differs from the bank handling the transfer, the KYC report from the remittance-receiving bank must be submitted with the FC-TRS (Master Direction – Reporting under FEMA).

Mode of payment: for Schedule I (FDI) transfers, consideration is paid by inward remittance through banking channels or out of "any repatriable foreign currency or Rupee account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016" (FEMA 395, Regulation 3.1(I)(A), as modified by FEMA 395(3)/2025-RB dated 15 January 2025). Sale proceeds (net of taxes) may be remitted abroad or credited to such an account.

Tax on the transfer

FC-TRS is FEMA reporting, not income tax. The same transaction has separate income-tax consequences — capital gains for the seller, and tax deduction by a resident buyer paying a non-resident — which must be worked out under the Income-tax Act applicable to the year of transfer. Plan both together: the valuation, the tax deduction and the FC-TRS filing feed into each other.

If you miss the 60 days: LSF or compounding

Missing the 60-day window is a reporting delay under FEMA 395. Two routes exist.

Late Submission Fee (LSF): Regulation 5 of FEMA 395 makes the person responsible for the report liable to an LSF for delays. The Master Direction states that LSF applies to transactions on or after 7 November 2017 and is "an option for regularising reporting delays without undergoing the compounding procedure." The matrix:

The percentage doubles every twelve months of delay; the minimum LSF is ₹100; part-years are counted proportionately by month. LSF covers reporting delays only — late or non-transfer of instruments and other contraventions are dealt with under sections 13 and 15 of FEMA.

Compounding: Instead of LSF, or for contraventions LSF does not cover, the person may apply to RBI for compounding under section 15 of FEMA and the Foreign Exchange (Compounding Proceedings) Rules, 2024.

• Statutory penalty (FEMA s.13(1)): up to three times the sum involved where quantifiable, or up to ₹2 lakh where not quantifiable; for a continuing contravention, a further penalty up to ₹5,000 for every day after the first day.
• Application fee: ₹10,000 plus GST (Compounding Rules 2024, rule 4(4); RBI Circular 17/2024-25, para 3.2).
• Reporting contraventions under FEMA 395: RBI's guidance matrix applies a fixed ₹10,000 plus a variable amount by size (e.g. ₹1,000 per year below ₹10 lakh; ₹2,500 per year from ₹10 lakh to below ₹40 lakh) (Circular 17/2024-25, para 5.4).
• Payment: within 15 days of the compounding order; if not paid, the contravener is deemed never to have applied (Rules 10 and 11).
• Not compoundable by RBI: among others, cases where the amount is not quantifiable, where an adjudication penalty order has already been passed, or where the Directorate of Enforcement views the case as a serious contravention suspected of money laundering or terror financing (Rule 9; Circular para 4.4).

Illustrations (hypothetical)

A — NRI sells shares to an Indian buyer:
A UK-resident NRI holding shares of an unlisted Bengaluru company on a repatriable basis sells 10,000 equity shares to a resident for ₹50 lakh. The buyer remits payment on 15 October 2026.

• FC-TRS deadline: 14 December 2026 (60 days from 15 October)
• Pricing: price must not exceed fair value (ceiling; NR is the seller)
• Valuation: certified by a CA, SEBI-registered Merchant Banker or practising Cost Accountant
• Filing: the resident buyer bears the FC-TRS obligation

B — Indian buyer acquires from a Singapore company:
A resident director buys shares of an Indian company from a Singapore company for ₹1 crore, paid on 1 October 2026; shares are transferred on 10 October 2026.

• Trigger date: 1 October 2026 (funds moved first)
• FC-TRS deadline: 30 November 2026
• Pricing: price must not exceed fair value (ceiling; NR is selling to a resident)

FAQ

Q: Does FC-TRS apply when a non-resident sells shares through a stock exchange?
Yes. Regulation 4(3)(b) requires a transfer on a recognised stock exchange by a person resident outside India to be reported in FC-TRS by that person.

Q: The NRI transferred shares as a gift, with no payment — is FC-TRS still required?
Where the transfer is between a non-resident holding on a repatriable basis and a resident, yes: Regulation 4(3)(a) covers transfers, not only sales. With no funds moving, the 60 days run from the transfer.

Q: Our AD bank is slow with a submission we made on day 45 — are we late?
The Master Direction treats the date of reporting to the AD bank as the date of reporting to RBI, provided the form and documents are complete in all respects. Keep proof of the submission date.

Q: We are two years late. Can we still use LSF?
LSF is available for transactions on or after 7 November 2017, and the fee percentage doubles every twelve months of delay. Compounding remains the alternative route.

Sources

• FEMA 395/2019-RB (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, amended up to 13 June 2026 — Regulations 3.1, 4(3), 5 — https://rbi.org.in/Scripts/NotificationUser.aspx?Id=11723
• Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 — Rules 2(k), 9(6), 21 — https://rbi.org.in/Scripts/NotificationUser.aspx?Id=11753
• RBI Master Direction – Reporting under Foreign Exchange Management Act, 1999 — FC-TRS and Late Submission Fee
• Foreign Exchange Management Act, 1999 — sections 13 and 15
• Foreign Exchange (Compounding Proceedings) Rules, 2024 — G.S.R. 566(E), 12 September 2024; RBI A.P. (DIR Series) Circular No. 17/2024-25, 1 October 2024

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For questions on FC-TRS, valuation or compounding for your share transfer, contact Harun Raaj & Associates at harunraaj.com/contact.

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