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CS Executive · Economic, Commercial and Intellectual Property Laws · Foreign Direct Investments - Regulations and Policy

Ravi Menon, a non-resident, inherited shares of an Indian company from his father, who was resident in India. Ravi is now resident outside India. Under section 6(5) of FEMA, what is his position regarding holding these shares, despite the entry conditions applicable to fresh FDI?

Ravi may hold, own, transfer or invest in the inherited shares. Section 6(5) of FEMA permits a non-resident to do so with Indian security that was held when he was resident in India or inherited from a person resident in India.

  1. AHe may hold, own, transfer or invest in them, since they were acquired or held when the owner was resident in India or inherited from a person resident in IndiaCorrect
  2. BHe must sell them immediately to an authorised person
  3. CHe can hold them only if the sectoral cap permits fresh investment
  4. DHe may hold but never transfer them

Explanation

Section 6(5) allows a person resident outside India to hold, own, transfer or invest in Indian currency, security or immovable property if it was acquired or held when he was resident in India or inherited from a person resident in India. Shares inherited from a resident father fall within this. The other options add conditions or restrictions not in the provision.

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