Share transfer rule relaxed

Foreign investors can sell shares to another of their kind with government's permission

Foreign investors will no longer have to seek the government’s permission to sell shares to another of their kind in sectors where foreign direct investment (FDI) is allowed under the automatic route.

Approval will be required for stake sale from one non-resident to another in sectors under the government approval route.

"Initially, it was a grey area, but (by inserting this paragraph in the new circular), the government has clarified its position on the matter," said Krishan Malhotra, head of tax at corporate law firm Shardul Amarchand & Mangaldas.

The circular also said companies won’t need fresh prior approval of the government to bring additional foreign investment into the same entity within an approved foreign equity percentage or into a wholly-owned subsidiary.

Foreign investment is permitted either through automatic or government approval routes.

FDI grew about 40 per cent to Rs 1.76 lakh crore in 2014-15 against Rs 1.26 lakh crore the previous year, Finance Minister Arun Jaitley had said earlier.