Last updated: 3 August 2026
On 15 May 2026, the Reserve Bank of India’s Foreign Exchange Department in Chennai passed a compounding order against India Cements Limited for one thing: it filed Form FC-TRS late. The compounding amount was Rs 18,250, small for a company that size, but the order is a public record and it names the company. For a startup, the same lapse rarely costs so little. When a foreign investor sells its stake to a resident buyer, or a resident founder sells shares to an overseas fund, the reporting clock starts on the day the shares move, and it runs for exactly 60 days. Miss it, and the Late Submission Fee formula begins compounding on the full value of the deal.
Deadline: File Form FC-TRS within 60 days of the transfer of shares between a resident and a non-resident, or of receipt of consideration, whichever is earlier.
Who must comply: The resident party to the transfer (buyer or seller), for every FDI-route secondary transfer, gift, or exit.
Penalty: Late Submission Fee of Rs 7,500 + 0.025% x amount x years of delay, capped at 100% of the transaction value. Beyond three years, Section 13 of FEMA allows a penalty of up to three times the sum involved.
Key action: Get the valuation certificate and the FIRMS entity master ready before you sign the share transfer, not after.
Time to act: The 60 days run from the transfer date. A signed SH-4 with no FC-TRS is already a live contravention.
The problem: the form that only surfaces during due diligence
Form FC-TRS reports a change of ownership in an Indian company’s shares when one side of the deal is resident in India and the other side is not. It sits under the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, and it is filed on the RBI’s FIRMS portal through the Single Master Form. FC-GPR handles the primary issue of shares to a foreign investor. FC-TRS handles the secondary movement afterwards, and that is exactly why founders forget it.
A primary raise gets attention. Lawyers paper it, the board approves it, and someone files FC-GPR because the money will not clear the escrow otherwise. A secondary transfer feels different. An angel wants an early exit. A founder sells a small block to a new fund. An employee who moved abroad exercises ESOPs and later sells. Two people sign a share transfer deed, money changes hands, the cap table gets updated, and no one thinks about the Reserve Bank. The FC-TRS obligation is invisible until the next diligence round, when the acquirer’s counsel asks for proof of reporting and finds nothing.
By then the delay is not 60 days. It is often two or three years, spanning several transfers, and each one carries its own Late Submission Fee. The India Cements order shows the RBI does act on FC-TRS delays on its own record. For an unlisted company mid-raise, the cost is rarely the fee alone. It is the deal timeline that slips while the company scrambles to regularise years of unreported transfers before the term sheet expires.
Diagram 1: the FC-TRS clock and what happens after it runs out
Share transfer executed
or consideration received, whichever is earlier
File FC-TRS on FIRMS
valuation + KYC + declaration
Contravention begins
LSF now applies
LSF window closes
Section 13 penalty + compounding
The Late Submission Fee route stays open for three years from the original due date. Past that, regularisation moves to compounding under Section 15 of FEMA, with penalty exposure under Section 13.
What FC-TRS actually covers, and what it does not
FC-TRS is required whenever capital instruments of an Indian company move between a resident and a non-resident under the foreign direct investment route. The common triggers are a sale of shares from a resident to a non-resident, a sale from a non-resident back to a resident, and a transfer by way of gift across residency lines. Capital instruments here means equity shares, compulsorily convertible preference shares, compulsorily convertible debentures, and share warrants. The residency of the parties, not their nationality, decides whether the form applies.
Some transfers sit outside FC-TRS. A fresh allotment of shares to a foreign investor is reported through FC-GPR, not FC-TRS. A transfer between two residents needs no FIRMS reporting at all. A transfer between two non-residents is generally outside the reporting net, unless it involves a company in a sector with conditions or caps. Transfers executed on a recognised stock exchange follow the market’s own reporting and settlement, so an unlisted startup will almost never fall in that carve-out. When in doubt, the safe assumption for a funded private company is that any share movement touching a foreign shareholder needs FC-TRS.
The responsibility to file rests with the resident party. If a resident founder sells to an offshore fund, the founder files. If a non-resident investor exits to a resident buyer, the resident buyer files. The onus does not shift to the foreign party, and it does not sit with the company by default, although in practice the company’s secretarial team usually drives the filing because it holds the FIRMS entity master and the cap table.
Pricing: the second trap hiding inside the transfer
Reporting on time is only half the compliance. The price has to respect the FEMA pricing guidelines, which are anchored to the fair value of the shares worked out under an internationally accepted methodology and certified by a chartered accountant, a merchant banker, or a registered valuer. The direction of the deal decides which way the fair value acts as a floor or a ceiling.
A transfer priced on the wrong side of fair value is a separate contravention from a late filing, and the two often travel together. A founder who sells to a fund below fair value has both mispriced the deal and, if the FC-TRS is late, delayed the report of it. Getting the valuation certificate under Rule 21 of the Non-Debt Instrument Rules done before signing removes the first risk and gives the FC-TRS filing the document it needs.
The Late Submission Fee: how the number is built
When FC-TRS is filed after 60 days, the RBI system computes a Late Submission Fee rather than launching straight into penalty proceedings, provided the delay is within three years. The formula is fixed and mechanical. The fee equals Rs 7,500 as a flat administrative component, plus 0.025% of the amount involved multiplied by the number of years of delay. The years of delay are rounded up to the nearest month and carried to two decimal places. The whole fee is capped at 100% of the amount involved.
Two timing rules matter after the fee is computed. The LSF option is only available up to three years from the original due date of the filing. And once the RBI system issues an LSF advice, it has to be paid within 30 days, otherwise the advice becomes void and the delay reverts to being an open contravention. A company that lets an LSF advice lapse loses the cheapest exit it will get.
Diagram 2: FC-GPR, FC-TRS, and which one your transaction is
Founders confuse the two because a single financing event can produce both. A round where new money comes in and an early investor partly cashes out needs an FC-GPR for the primary allotment and an FC-TRS for the secondary sale. Filing one and forgetting the other is one of the most common gaps a diligence team surfaces. Our guide comparing FC-GPR and FC-TRS side by side maps out which form each leg of a mixed deal needs.
What you must do now: filing FC-TRS without a rejection
The FIRMS portal is unforgiving about documentation. Most FC-TRS rejections come from a missing valuation certificate, a mismatch between the transfer date and the consideration date, or an entity master that was never set up. Work through the sequence below before the 60-day window closes.
- Confirm the transaction needs FC-TRS. Check that one party is resident and the other is non-resident, and that the instrument is an equity share, CCPS, CCD, or warrant. A transfer between two residents or a fresh allotment does not use this form.
- Fix the reporting date. The 60 days run from the date of transfer or the date consideration is received, whichever is earlier. Diarise the earlier of the two the moment the deal is signed.
- Get the valuation certificate. Obtain a fair value certificate under the Rule 21 pricing guidelines from a chartered accountant, merchant banker, or registered valuer, and check the price sits on the correct side of fair value for the direction of the transfer. See our note on the FEMA valuation certificate under Rule 21.
- Register the entity master. If the company has never filed on FIRMS, register the Entity Master first. FC-TRS cannot be filed until the entity exists on the portal, and this step alone can eat several working days.
- Collect the KYC and consent documents. The AD Bank needs the non-resident’s KYC through their banker, the executed share transfer deed, the pricing certificate, the board or shareholder approvals, and a declaration that the transaction complies with FEMA.
- File in the SMF and route through the AD Bank. Submit FC-TRS in the Single Master Form. The Authorised Dealer Bank reviews and forwards it to the RBI. Build in time for the bank’s queries, which are routine.
- If you are already late, compute the LSF and pay within 30 days of the advice. File anyway, let the system generate the Late Submission Fee, and clear it inside the 30-day window so the advice does not lapse.
- If the delay is beyond three years, prepare for compounding. The LSF route is closed. Apply for compounding under Section 15 of FEMA rather than waiting for the RBI to open proceedings under Section 13.
Diagram 3: the numbers that make founders act
The deeper implication: FC-TRS is now a diligence gate, not a formality
According to CS Sapna Malpani, the pattern she sees across Bangalore startups is not wilful non-compliance but a reporting gap that widens quietly between funding rounds. A company files diligently at each raise, then handles three or four secondary transfers over two years without a single FC-TRS, because no fresh capital came in to force the issue. The bill lands during the next round’s due diligence, when the acquirer refuses to close until every historical transfer is reported and every LSF is paid.
This gate will keep tightening. The FIRMS portal has made every filing traceable, the RBI is issuing compounding orders on its own initiative, and acquirers now treat clean FEMA reporting as a condition precedent rather than a post-closing clean-up. A founder who wants an unblocked cap table at the next raise should treat FC-TRS as part of executing a share transfer, filed alongside the SH-4, not as paperwork to catch up on later.
How FC-TRS sits next to the filings founders confuse it with
FC-TRS is one form in a family of FEMA reporting obligations, and mixing them up is where the missed filings start. FC-GPR reports the primary issue of shares to a foreign investor within 30 days of allotment. The FLA return is an annual filing due by 15 July that reports foreign liabilities and assets on the outstanding position, not a specific transaction. Downstream investment by a foreign-owned or controlled company is reported through Form DI. FC-TRS is the only one of these tied to a change of ownership of existing shares, and it is the one most often discovered late because it rides on a transaction that felt purely commercial at the time. For the full picture on the primary side, see our FC-GPR filing and penalty guide.
Key takeaways
- ✓ File FC-TRS within 60 days of the transfer or of receipt of consideration, whichever is earlier.
- ✓ The resident party to the transfer files, whether buyer or seller.
- ✓ The Late Submission Fee is Rs 7,500 + 0.025% x amount x years, capped at 100% of the deal value.
- ✓ The LSF route stays open only three years; after that it is compounding under Section 15 and penalty exposure of up to three times the sum under Section 13.
- ✓ Pay any LSF advice within 30 days or it becomes void.
- ✓ Price the transfer on the correct side of fair value under the Rule 21 pricing guidelines, certified before you sign.
- ✓ A financing round with both new money and a secondary needs FC-GPR and FC-TRS, not one or the other.
- ✓ India Cements Ltd received an RBI compounding order dated 15 May 2026 for a late FC-TRS. The RBI acts on these on its own record.
Sources and references
- RBI, Master Direction – Reporting under the Foreign Exchange Management Act, 1999 (FC-TRS and FIRMS / Single Master Form): rbi.org.in
- RBI, Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019: rbi.org.in
- RBI, Late Submission Fee framework and FEMA Compounding Orders (India Cements Ltd, order dated 15 May 2026): rbi.org.in FEMA Compounding Orders
- Rule 21, Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 – pricing guidelines: indiacode.nic.in
- Sections 13 and 15, Foreign Exchange Management Act, 1999: indiacode.nic.in
Talk to a Company Secretary before the 60 days run out
If a secondary transfer has already happened, or one is about to, the time to fix the reporting is now, not at the next round’s diligence.
▸ Check your exposure with the FEMA Compliance Calculator
▸ Get help with your raise on the Fundraising Compliance service page
▸ Managing cross-border shareholders? See India & International Entity Management
▸ Or message CS Sapna Malpani directly on WhatsApp
Frequently asked questions
What is Form FC-TRS and when is it required?
Form FC-TRS, short for Foreign Currency Transfer of Shares, is the FEMA reporting form filed when capital instruments of an Indian company are transferred between a resident and a non-resident under the foreign direct investment route. It is required on a secondary transfer, for example when a resident founder sells shares to an overseas fund, when a non-resident investor exits to a resident buyer, or on a cross-border gift of shares. It is filed on the RBI’s FIRMS portal through the Single Master Form. It does not apply to a fresh issue of shares, which is reported through FC-GPR, or to a transfer between two residents.
What is the due date for filing FC-TRS?
FC-TRS must be filed within 60 days of the date of transfer of the shares or the date the consideration is received, whichever is earlier. Founders often assume the clock starts when the money arrives, but if the transfer deed is executed first, the 60 days run from that earlier date. The safest practice is to diarise the earlier of the two dates on the day the transaction is signed and treat the filing as part of closing the transfer.
What is the penalty or Late Submission Fee for a late FC-TRS?
If FC-TRS is filed after 60 days but within three years of the due date, the RBI system computes a Late Submission Fee of Rs 7,500 plus 0.025% of the amount involved multiplied by the number of years of delay, capped at 100% of the transaction value. The LSF advice must be paid within 30 days or it becomes void. Beyond three years, the Late Submission Fee route closes and the delay becomes a contravention under Section 13 of FEMA, which allows a penalty of up to three times the sum involved, alongside compounding under Section 15.
Who is responsible for filing FC-TRS, the buyer, the seller, or the company?
The resident party to the transfer is responsible for filing FC-TRS. If a resident sells shares to a non-resident, the resident seller files. If a non-resident sells to a resident, the resident buyer files. The obligation does not fall on the non-resident, and it does not automatically sit with the company. In practice the company’s secretarial team usually handles the filing because it controls the FIRMS entity master and the cap table, but the legal onus is on the resident party.
What documents are needed to file FC-TRS on the FIRMS portal?
The core documents are a fair value certificate under the Rule 21 pricing guidelines from a chartered accountant, merchant banker, or registered valuer, the executed share transfer deed, KYC of the non-resident through their banker, the relevant board or shareholder approvals, and a declaration of FEMA compliance. The company’s Entity Master must already be registered on FIRMS before an FC-TRS can be filed. Most rejections trace back to a missing valuation certificate or a mismatch between the transfer date and the consideration date, so aligning these before submission avoids repeat filings.
Does FC-TRS pricing have to follow fair value?
Yes. The transfer price has to respect the FEMA pricing guidelines, which are based on the fair value of the shares certified under an internationally accepted methodology. When a resident sells to a non-resident, the price must be equal to or more than fair value. When a non-resident sells to a resident, the price must be equal to or less than fair value. Pricing on the wrong side of fair value is a separate contravention from a late filing, and the two commonly appear together, so obtaining the valuation certificate before signing protects both the price and the report.