Rule 9 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 9 of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 governs the transfer of equity instruments of an Indian company, or units, where a person resident outside India is on either side of the deal. Sub-rules (1), (2) and (3) cover three transfers: between two non-residents, from a non-resident to a resident, and from a resident to a non-resident. Sub-rules (4) to (8), on gifts, deferred payment, escrow, guarantees and pledges, are explained separately.
This article is based on the Rules as notified on 17 October 2019 (S.O. 3732(E)) as amended by the notifications named in this article; the latest amendment consulted is S.O. 4870(E) dated 2 September 2026. Amendments made after that date should be checked in the Gazette. There is no official consolidated text; each sub-rule was read from the 2019 notification with the amendments applied. For the reporting that follows a transfer, see our FC-TRS reporting service page.
A person resident outside India who holds equity instruments or units in accordance with the Rules, or a person resident in India, may transfer them as rule 9 provides. Sub-rule (1): a non-resident who is not an individual or an erstwhile overseas corporate body may transfer by sale or gift to any non-resident, with prior Government approval wherever Government approval is applicable. Sub-rule (2): a non-resident may sell or gift to a resident, or sell on a recognised stock exchange in the manner SEBI specifies, subject to pricing guidelines, documentation and reporting. Sub-rule (3): a resident may sell to a non-resident subject to entry routes, caps, pricing and reporting.
The opening words of rule 9
Rule 9 is headed "Transfer of equity instruments of an Indian company by or to a person resident outside India". It begins: a person resident outside India holding equity instruments of an Indian company or units in accordance with the Rules, or a person resident in India, may transfer such equity instruments or units so held by him in compliance with the conditions, if any, specified in the Schedules of the Rules and subject to the terms and conditions prescribed in the sub-rules. The opening words are as notified.
Rule 9(1): non-resident to non-resident
Sub-rule (1) says a person resident outside India, "not being an individual or an erstwhile overseas corporate body", may transfer by way of sale or gift the equity instruments of an Indian company or units held by him to any person resident outside India. As notified, the words read "not being a non-resident Indian or an overseas citizen of India or an erstwhile overseas corporate body". S.O. 3030(E), the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2026 (12 June 2026) substituted "an individual" for "a non-resident Indian or an overseas citizen of India". Individuals resident outside India, including NRIs and OCIs, are now dealt with in the wider Chapter V; see our article on rules 12 and 13.
The Explanation to sub-rule (1), as notified, says the sub-rule also includes transfer of equity instruments of an Indian company pursuant to liquidation, merger, de-merger and amalgamation of entities or companies incorporated or registered outside India.
There are two provisos:
- Item (i), substituted by S.O. 3492(E), the Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2024 (16 August 2024): prior Government approval shall be obtained for transfer in all cases wherever Government approval is applicable. As notified, the item required prior government approval for any transfer "in case the company is engaged in a sector which requires government approval". The 2024 wording is wider: it applies wherever Government approval is applicable, which includes the land-border rule in rule 6.
- Item (ii), as notified: where the equity instruments are held by the non-resident on a non-repatriable basis, a transfer by sale to a transferee who intends to hold on a repatriable basis shall comply with entry routes, sectoral caps or investment limits specified in the Rules and attendant conditions, pricing guidelines, documentation and reporting requirements for such transfers as the Reserve Bank may specify from time to time.
Rule 9(2): non-resident to resident, or sale on a stock exchange
Sub-rule (2) allows a person resident outside India holding equity instruments or units in accordance with the Rules to transfer them to a person resident in India by way of sale or gift, or to sell them on a recognised stock exchange in India in the manner specified by the Securities and Exchange Board of India. It has a proviso in two items:
- (i) a transfer by sale must comply with pricing guidelines, documentation and reporting requirements for such transfers specified by the Reserve Bank "in consultation with the Central Government from time to time".
- (ii) where the equity instruments are held on a non-repatriable basis, the conditions at item (i) do not apply.
None of the nineteen amending notifications changes sub-rule (2); the words "in consultation with the Central Government" in item (i) are printed in the Rules as they stand today. The Reserve Bank's Master Direction - Foreign Investment in India, updated up to June 15, 2026, restates the sub-rule in paragraph 7.6 without those words. The reader should confirm against the official text.
Rule 9(3): resident to non-resident
Sub-rule (3) says a person resident in India holding equity instruments or units may transfer them to a person resident outside India by way of sale, subject to the entry routes, sectoral caps or investment limits, pricing guidelines and other attendant conditions as applicable for investment by a person resident outside India, and documentation and reporting requirements for such transfers as the Reserve Bank specifies, again "in consultation with the Central Government from time to time". This sub-rule is as notified and has no proviso. A transfer by gift from a resident is dealt with in sub-rule (4), explained in our article on gifts, optionality, deferred payment and escrow.
| Direction | Sub-rule | Mode | Main conditions |
|---|---|---|---|
| Non-resident (not an individual or erstwhile OCB) to non-resident | 9(1) | Sale or gift | Prior Government approval wherever applicable; non-repatriable to repatriable by sale needs routes, caps, pricing, reporting |
| Non-resident to resident | 9(2) | Sale or gift; sale on a recognised stock exchange | Pricing, documentation, reporting; not applicable to non-repatriable holdings |
| Resident to non-resident | 9(3) | Sale | Entry route, cap, pricing, documentation, reporting |
What the Master Direction adds
The Master Direction (paragraph 7) repeats these sub-rules and adds statements of its own. Among them: where a foreign portfolio investor's acquisition under its paragraph 6.2 breaches an aggregate or sectoral limit, the FPI must sell the excess within five trading days after settlement to an eligible resident, and the breach during that window is not reckoned as a contravention; and a transfer to an individual person resident outside India that moves ownership or control of a listed company to a land-border entity or citizen needs prior Government approval (paragraph 7.3.4). It also gives references to Reserve Bank circulars for reclassifying portfolio investment as FDI. These are the Master Direction's directions to banks; they are not printed in rule 9. Pricing is covered in our article on pricing of share transfers and swaps, and the reporting forms in our article on Form FC-TRS.
For the company-law side of a transfer, see section 56 of the Companies Act, 2013. Our older guides on transfer of shares from resident to non-resident and from non-resident to resident remain available.
A worked example
Nordvik Holdings, a company incorporated abroad, holds shares of Lakshya Components Private Limited on a repatriable basis and wishes to sell them to Pelican Capital, another company incorporated abroad. Under sub-rule (1), the transfer is permitted; if Lakshya's sector needs Government approval, prior approval comes first. If instead Nordvik sells the shares to a resident, Mr. Rao, sub-rule (2) applies and the sale must follow the Reserve Bank's pricing guidelines. If Mr. Rao later wants to sell to a different foreign investor, sub-rule (3) applies, with the entry route, cap and pricing of that investor.
Need help with a cross-border share transfer?
A transfer between a resident and a non-resident needs the right pricing, approval check and report in sequence. Our FC-TRS reporting team can manage the filing once the deal is struck.
Key takeaways
- Rule 9(1) to (3) covers non-resident to non-resident, non-resident to resident, and resident to non-resident transfers.
- Since 12 June 2026, sub-rule (1) excludes "an individual" (instead of an NRI or OCI) and an erstwhile overseas corporate body.
- Since 16 August 2024, prior Government approval is needed for transfer wherever Government approval is applicable.
- Sub-rules (2) and (3) still print "in consultation with the Central Government"; the Master Direction omits those words in its restatement.
- Pricing, documentation and reporting are as the Reserve Bank specifies.
Read next
- Rule 21(2)(b) and (c) of the FEM (Non-debt Instruments) Rules, 2019: pricing of share transfers and swaps
- Rule 9(4) to (7) of the FEM (Non-debt Instruments) Rules, 2019: gift, optionality, deferred payment and escrow
- Rules 12 and 13 of the FEM (Non-debt Instruments) Rules, 2019: investment by individuals resident outside India
- Regulation 4(3) of the Mode of Payment and Reporting Regulations: Form FC-TRS
Disclaimer: Based on the Gazette text of the instrument this article names, as notified and as amended by the notifications named in the article (for the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 the latest amendment consulted is S.O. 4870(E) dated 2 September 2026), as consulted on 2 October 2026. There is no official consolidated text; the provisions were read with each amendment applied. Sectoral caps, entry routes, conditions, forms and time limits change by notification, press note and circular; later changes should be checked on the Gazette, DPIIT and Reserve Bank sites. This article is general information, not legal advice; check the official text before acting.