When the Company paying dividend is not a FERA Company ( a company in which non-resident interest does not exceed 40% on the last day of the accounting year for which the dividend is payable), authorized dealers may allow, without prior approval of Reserve Bank, remittances of dividends on equity shares to non-resident shareholders. Non-resident shareholders could be individuals, firms, companies or other organizations. In the case of two categories of shareholders, different procedures are laid down:

(1) Cases where shares do not exceed Rs. 500,000/- in total face value or 25% of the total issued equity capital of the Company.

(2) Cases where the shares exceed Rs. 500,000/- in face value or 25% of the total issued equity capital of the company.

Cases where the shares held by each non-resident shareholder on which dividend is payable do not exceed Rs. 500,000/- in face value or 25% of the total issued equity capital of the Company, remittances of dividends will be allowed after the authorized dealer satisfies himself about the following points:

(a) Shares have been issued in India.

(b) The non-resident shareholder is the bona fide owner of the shares.

(c) If the non-resident shareholder is an individual, he is permanently resident outside India. If it is a firm, company or other organization, it is incorporated / registered outside India.

(d) Reserve Bank’s permission has been obtained for any one of the following four purposes, and there is no specific prohibition against remittance of dividends on the shares. The four purposes for which permission should have been obtained, are:

 (i) Permission by the non-resident holder of shares to continue to hold the shares u/s. 29(4)(a) of FERA, 1973. This will apply only if shares are held prior to 1st January 1974.

(ii) Permission has been granted to the non-resident holder of shares to purchase shares u/s. 29(1)(b) of FERA, 1973. This will apply in cases where shares were purchased after 31st December 1973.

(iii) Permission has been obtained by the non-resident holder of the shares or by the transferee to transfer shares in favor of non-resident shareholder u/s. 19(5) of FERA, 1973.

(iv) Permission has been obtained by the Indian Company in which the shares are held to issue or transfer them to non-resident holder u/s. 19(1) of FERA, 1973.

If Indian taxes are outstanding in respect of dividends, such dividends should not be remitted. The rationale is that where permission to purchase / hold shares in a FERA Company has been obtained, and there is no prohibition on remittances of dividends, there is no need to go into all the time-consuming procedures for obtaining further permission.

In cases where shares exceed Rs. 500,000 in face value 25% of the total issued equity capital of the Company, application for remittance of dividends should generally be made by the Company concerned. Application may also be made by the non-resident shareholders or their bankers in India in rare cases. Application by the Company should be made in Form RCD-2 giving relevant particulars of non-resident share holding, amount of dividend to be remitted to each shareholder etc. as a statement in Form RCD-3. Application by the letter giving full details of the proposed remittance together with particulars / documents listed below:

(1) Certified True Copy of the Company’s audited Balance Sheet and P & L Account of each period to which the dividend relates.

(2) Certified Statement of the Company under the signature of an authorized official showing the number of shares held by the non-resident shareholder, rate of dividend declared, year / period to which it relates, gross dividend, tax deducted at source and net dividend.

(3) Nationality and country of permanent residence where the shareholder is an individual, and place of incorporation where the shareholder is a body corporate.

(4) Number and date of Reserve Bank approval / license obtained by the non-resident shareholder, u/s.29(1)(b) / 29(4)(a) of FERA, 1973 for purchasing / holding the shares.

(5) Confirmation from the non-resident shareholder that he has at no time given any undertaking to the Reserve Bank or Government of India not to seek repatriation outside, of dividend accruing on the shares in question, nor has his legal executor, legal heir or assigns any investment, had given such undertaking.

Remittances of interim dividends
An application by a letter enclosing only Form RCD-3 is to be made for permission to remit interim dividend by companies in India, where the application is made by a non-resident shareholder, or his banker in India, particulars / documents listed in the above paragraph should be given.

Remittance of dividends on preference shares
Remittance of dividends on preference shares may be allowed by authorized dealers irrespective of the value of the holdings, subject to satisfying the requirements mentioned in para above. However, in the case of FERA Companies, the applications for remittances should be individually referred to the Reserve Bank.

Dividends not eligible for remittances abroad
Dividends not eligible for remittances abroad may be created to the ordinary non-resident rupee account of the shareholder, irrespective of whether the company paying dividend is a FERA company or not.

Dividends of FERA Companies

Remittances of dividends to non-resident shareholders in FERA Companies require prior approval of the Reserve Bank.

Refund of Income-tax to the non-resident firms or Companies

Remittance of refund of income-tax to foreign companies abroad require prior approval of the Reserve Bank. An application should be made on Form A2 together with the following documents / details:-

(1) Original assessment order together with the certified copy and copy of the Income-tax Return for the corresponding assessment year.

(2) Certificate from the authorized dealer to the effect that refund order has been encashed through them and proceeds are held by them pending approval of Reserve Bank for remittance.

(3) Details of the source of funds from which tax was originally paid. If it was paid out of remittances from abroad, the drawee bank’s certificate for the inward remittance should be produced. If tax was paid by deduction at source from dividend, interest on loans / royalty or other income which has already been remitted to the foreign firm / company, details of the income on which tax was paid should be given as listed below:-

(a) Nature of income whether interest / dividend / royalty etc., amount/s of income and assessment year in which it accrued.

(b) Name and address of the Indian Company from which income was derived.

(c) The year / period to which the income related.

(d) Number and date of the Reserve Bank’s approval for the remittance.

Remittance of Income-tax refund to individuals

Authorized dealers may remit without prior approval of Reserve Bank, amounts not exceeding Rs 2,500/- representing refund of income-tax. Unclaimed installment of Government of India annuity deposit certificates could also be similarly remitted.

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