(i) Under Section 19(1)(e) of FERA 1973, no person shall, except with the general or special permission of Reserve Bank, acquire, hold or dispose of any foreign security i.e. any security issued outside India or expressed to be payable in any currency other than Indian rupee or elsewhere than in India. By its Notification No. FERA.118/92-RB dated 7th September 1992, Reserve Bank has granted general permission to persons resident in India to acquire, hold or dispose of any foreign security in the following cases:
(A) Where it is obtained out of foreign exchange acquired by them (a) in a manner otherwise than in contravention of the provisions of FERA 1973 while they were resident outside India or (b) through employment, business or vocation outside India taken up or commenced while they were resident outside India and in either case, their stay outside India was for a continuous period of not less than one year.
(B) Where it is held since prior to 8th July 1947 and for which the permission/licence of Reserve Bank was obtained.
(C) Where it is acquired by way of gift or inheritance from persons referred to in category (A) and (B) above and covered by the exemption granted by Reserve Bank, provided in the case of gift, the recipient donee is a relative i.e. husband, wife, brother, sister or any lineal ascendant or descendant of the donor and the tax payable thereon, if any, has been paid in India.
The general permission also applies to acquisition of fresh securities out of the foreign exchange held by residents in terms of general exemption granted by Reserve Bank, vide paragraph 12.3(B) above.
(ii) Persons satisfying the conditions for the general permission referred to in sub- paragraph (i) above can credit the income or sale/maturity proceeds of such securities to their foreign currency accounts abroad and in the case of persons referred to in category (A) of sub-paragraph (i) above, the income or sale/maturity proceeds of securities can also be credited to their RFC accounts with an authorised dealer in India (see paragraph 14E.4).
(iii) Persons resident in India who are not covered by the general permission referred to in sub-paragraph (i) above and holding or becoming owners of foreign securities should make an application to Reserve Bank for permission to hold foreign securities, in form FAD 1.
(iv) Persons resident in India who are not covered by the general permission referred to in sub-paragraph (i) above and holding foreign securities with the permission of Reserve Bank will be allowed to remit up to US $ 10,000 in a block of 5 years towards acquisition of rights shares of foreign companies if the dividends received by them are not sufficient to cover the cost of rights issues. The applicants should approach Reserve Bank for necessary permission with relevant documents.
(V) Indian Software Companies are allowed to offer ADR (GDR) linked stock option schemes to their non-resident /resident permanent employees (including Indian and overseas working directors). The scheme is outlined in the Annexure to the Chapter 12. Indian software companies desiring to offer ADR/GDR linked stock option schemes for their resident employees should approach the concerned Regional Office of Reserve Bank on behalf of their resident employees for necessary permission, with relevant documents such as certificates from a Chartered Accountant that the company is engaged in manufacturing and/or production of software and its turnover from software activities is not less than 80 per cent of the total turnover, together with certified copies of approval of Ministry of Finance, Department of Economic Affairs, Government of India for issue of ADR/GDR, special resolution passed by the Board of Directors and a list of eligible employees. On exercise of the option each resident employee will be permitted to remit upto U.S.$ 50,000 in a block of 5 years to acquire the ADRs/GDRs. As the non-resident employees would normally be required to pay the cost of acquisition of the ADR/GDR issues out of their own resources abroad, no remittance of funds from India should be involved. However, non-resident Indian employees would be required to approach Reserve Bank on their return to India for issue of a licence for holding the ADRs/GDRs acquired during their stay abroad, if their continuous stay abroad before return to India is less than one year.