Facts:

• Mr. X is a resident Indian holding 1,000 equity shares in PIL, an Indian listed company.
• He wants to gift these shares to his son, an NRI residing in the USA.

What does the law say?

• Under FEMA (Non-debt Instruments) Rules, 2019 and the FDI Policy, a resident individual can gift equity shares to a person resident outside India only with prior approval from the Reserve Bank of India (RBI).
• Conditions to be fulfilled include:
  • The donee (NRI son) must be eligible to hold such shares under FEMA.
  • The gift must not exceed 5% of the paid-up capital of the company cumulatively from the donor to the donee.
  • The sectoral caps of the Indian company must not be breached.
  • The donor and donee must be relatives as defined under the Companies Act, 2013.
  • The total value of securities gifted in a financial year should not exceed USD 50,000 (in rupee equivalent).

Conclusion:

• Mr. X can gift the shares to his NRI son only after obtaining prior RBI approval.
• All the above conditions must be strictly complied with.
• Without RBI approval, such a transfer by way of gift to an NRI is not permitted under FEMA.

If you want, I can help draft the RBI application or provide further compliance details.