Introduction to FC-TRS

If you are dealing with foreign investors in an Indian company, you cannot escape one form: FC‑TRS. This form quietly decides whether your cross‑border share transfer is FEMA‑compliant or a future headache.

In simple terms, FC‑TRS comes into play whenever shares or other capital instruments of an Indian company move between a resident and a non‑resident. Getting it right means smooth banking, clean due‑diligence, and no last‑minute panic during funding rounds or exits.

What is FC-TRS under FEMA?

FC‑TRS full form: Foreign Currency Transfer of Shares.

Under FEMA (Foreign Exchange Management Act, 1999), FC‑TRS is the prescribed reporting form for transfer of shares or other eligible capital instruments of an Indian company between a resident and a non‑resident. It is not about fresh issue of shares; it is specifically about transfer of existing securities.

The Reserve Bank of India (RBI) uses this reporting to track:

• Who is buying or selling shares
• At what price and valuation
• Whether sectoral caps, entry routes and pricing guidelines are followed

The legal framework mainly flows from the FEMA (Non‑Debt Instruments) Rules, RBI Master Directions on reporting, and various circulars that together define when, how and by whom FC‑TRS must be filed.

When is FC-TRS Filing Required?

FC‑TRS filing is required when:

• There is a transfer of shares or other capital instruments of an Indian company
• At least one party is a non‑resident (NRI, foreign company, foreign individual, foreign fund, etc.)

Typical scenarios:

• Resident sells shares to a non‑resident (for example, founder selling secondary shares to a foreign VC).
• Non‑resident sells shares to a resident (for example, NRI exiting by selling shares back to promoters).
• Certain non‑resident to non‑resident transfers where repatriable/non‑repatriable status or type of holding changes, depending on rules and AD bank interpretation.

If both buyer and seller are residents, FC‑TRS is not relevant because FEMA foreign investment reporting is not triggered.

Transactions Where FC-TRS is NOT Applicable

Broadly, FC‑TRS is not applicable to:

• Pure resident‑to‑resident transfers
• Transactions where FEMA reporting is not attracted at all

However, there are grey areas where people often assume FC‑TRS is not needed but the bank or consultant may advise otherwise:

• Gifts: Many cases of gifting shares between resident and non‑resident are still reported through FC‑TRS, but with a different document set and justification.
• Transmission / inheritance: When shares pass due to death of a shareholder, this is usually treated differently from a commercial sale. Still, banks often ask for documents and may or may not insist on FC‑TRS based on facts.
• ESOP related transfers: Primary issue on ESOP exercise to a non‑resident may be reported through FC‑GPR, but secondary transfers under ESOP liquidity events can trigger FC‑TRS.

Because of these nuances, it is always wise to confirm applicability with your Authorized Dealer (AD) bank or FEMA consultant before concluding that FC‑TRS is “not required”.

FC-TRS vs FC-GPR

People frequently confuse FC‑TRS with FC‑GPR, but the distinction is actually simple.

Aspect	FC-GPR	FC-TRS
Full form	Foreign Currency – Gross Provisional Return	Foreign Currency – Transfer of Shares
Covers	Issue of fresh shares/capital instruments to a non‑resident	Transfer of existing shares/capital instruments between resident and non‑resident (or vice versa)
Who usually files	Indian company issuing the shares	Resident buyer/seller (or specified non‑resident holder in certain cases)
Trigger event	Allotment of shares to non‑resident	Execution of transfer / receipt of consideration
Typical timeline	Within 30 days of allotment	Within 60 days of transfer or consideration, whichever is earlier

In one line: Issue = FC‑GPR; Transfer = FC‑TRS.

Who is Responsible for Filing FC-TRS?

Responsibility is a common confusion, especially in startup and NRI circles. Under FEMA reporting norms, the onus usually lies on the resident party involved in the transaction – either the resident buyer or the resident seller, depending on the direction of transfer.

In practice:

• The Indian company often coordinates filing through its compliance or finance team.
• A company secretary, FEMA consultant or CA prepares the form and documents.
• The filing is routed through the company’s or investor’s AD Category‑I bank.

Even though foreign investors sometimes assume “the company will handle it,” non‑compliance can affect both parties, so clarity on responsibility at the term‑sheet or SHA stage is a good idea.

Time Limit for FC-TRS Filing

The standard time limit is:

• FC‑TRS must be filed within 60 days from the date of transfer of capital instruments or date of receipt/remittance of funds, whichever is earlier.

Missing this 60‑day window does not automatically kill the transaction, but it does move you into the zone of Late Submission Fee (LSF) and, in extreme cases, compounding. Banks may also hesitate to process future FDI‑related transactions until past reporting is regularised.

Step-by-Step FC-TRS Filing Process

All FC‑TRS filings are now done online through the RBI FIRMS portal under the Single Master Form (SMF) framework. Here is a simplified process:

1. Register as Business User (BU)
   • The company (or entity) creates a Business User login on the FIRMS portal.
   • Basic company details, CIN, PAN, AD bank and an authority letter are shared.
2. Login and choose the form
   • Login → Single Master Form → “Form FC‑TRS”.
   • Click on “Add New Return”.
3. Fill common investment details
   • Company name, CIN, PAN, sector, entry route (automatic/government), percentage of foreign shareholding, etc.
4. Fill transaction-specific details
   • Particulars of transfer: type of instrument, number of shares, face value, premium, total consideration.
   • Details of transferor and transferee: residency status, category, country, etc.
   • Remittance details: date, amount, currency, bank, mode.
5. Upload supporting documents
   • Share purchase/transfer agreement or gift deed.
   • Valuation certificate.
   • FIRC/Outward remittance certificate, KYC.
   • Board resolutions and shareholding pattern where required.
6. Submit to AD bank
   • Once filed, the form goes to the mapped AD bank for verification.
   • The bank can either approve, ask for clarification, or mark it back for resubmission.

Once the AD bank is satisfied, the return is treated as filed and accepted.

Documents Required for FC-TRS Filing

The exact checklist can vary by transaction type, but most cases need:

• Share Purchase Agreement / Transfer Deed / Gift Deed
• Valuation report from a Chartered Accountant or SEBI‑registered Merchant Banker
• FIRC or outward remittance certificate and bank advice
• KYC of the non‑resident investor (from their overseas or Indian AD bank)
• PAN and basic KYC of both parties
• Board resolution of the Indian company (where applicable)
• Shareholding pattern before and after the transaction

Keeping soft copies in a neatly named folder saves a lot of time when your AD bank raises queries.

Valuation & Pricing Guidelines under FEMA

FEMA does not allow you to pick any random price for a resident–non‑resident share transfer. There are pricing guidelines to prevent under‑invoicing and over‑invoicing of capital instruments.

Broadly:

• For unlisted shares, fair valuation is typically based on internationally accepted methods (DCF, comparable multiples, etc.) and certified by a CA or Merchant Banker.
• For listed shares, pricing often references SEBI guidelines and stock exchange prices.
• In many cases:
  • When a non‑resident buys from a resident → minimum price thresholds apply.
  • When a resident buys from a non‑resident → maximum price caps apply.

If your valuation report is weak, very old, or inconsistent with the deal structure, expect queries from the AD bank.

Common Errors in FC-TRS Filing

Some of the most frequent mistakes seen in real‑life cases and forum discussions:

• Using an outdated or non‑compliant valuation report.
• Missing the 60‑day deadline, then discovering LSF much later during a due‑diligence.
• Mismatch between amount in FC‑TRS, bank documents, FIRC and share purchase agreement.
• Wrong residency status/category selection for the investor in the form.
• Uploading incomplete documents or illegible scans.

All of these lead to extra back‑and‑forth with the AD bank, and sometimes cause deal‑closure delays.

Penalty for Late or Non-Filing of FC-TRS

If FC‑TRS is not filed on time, you typically face:

• Late Submission Fee (LSF): A monetary fee calculated based on the amount and period of delay.
• Compounding proceedings: In more serious or prolonged cases, a compounding application under FEMA may be required to regularise the default.
• Practical impact: Banks may refuse to process future foreign investment transactions until older non‑compliance is resolved. Investors’ lawyers may also flag it as a due‑diligence issue in funding or M&A deals.

Therefore, it is far cheaper to file correctly and on time than to clean it up later.

Practical Tips for Smooth FC-TRS Compliance

• Plan at term‑sheet stage: Clarify who will file FC‑TRS, which AD bank will handle it, and who will arrange valuation.
• Don’t wait till the last week: Start documentation as soon as remittance or transfer is done.
• Keep one source of truth: Make sure number of shares, price per share and total consideration match across agreement, valuation, FC‑TRS form and bank documents.
• Work with experienced partners: An AD bank branch and FEMA consultant who regularly handle FIRMS filings can save weeks of avoidable delay.

Specialised FEMA consultants in India (for example, firms branded as “FEMA Expert”) often handle end‑to‑end FEMA and RBI work from valuing the shares to drafting documents and liaising with AD banks and some of them report serving more than 3,600 clients across legal and FEMA services. For busy founders and NRIs, using such a specialist can turn a stressful compliance task into a simple checklist.

Conclusion

FC‑TRS may look like “just a form,” but for any company involving foreign investors, it is a core part of FEMA compliance. Knowing when it applies, who must file, the 60‑day rule, and the basic online process through the FIRMS portal can save you from penalties, AD bank issues and deal‑closure delays.

If your transaction structure is even slightly unusual gift, ESOP, inheritance, multiple legs of transfer, or historic delays looping in a FEMA consultant early is usually the smartest move. Timely, accurate FC‑TRS filing keeps your cap table clean, your investors comfortable, and your next funding or exit round much smoother.