What are the legal provisions for gifting a part of Indian business to a NRI?

—Name withheld on request

As you are an Indian citizen, the gift given by you to your NRI son will be governed by the provisions of the Foreign Exchange Management Act (FEMA), 1999 and the regulations, circulars and policies thereunder. As per FEMA, gift of shares by a resident Indian citizen to a resident outside India (including an NRI) is subject to prior written approval of the Reserve Bank of India (RBI). There are prescribed documents which are required to be submitted to RBI while filing the application before RBI. There are certain other conditions which are required to be complied with for the purpose of such application. two of the critical conditions are

(i) the gift should not exceed 5% of the paid-up capital of the Indian company;

(ii) the value of the shares during the financial year in which the gift is proposed to be made cannot exceed $50,000 or an equivalent amount in rupees.

We recommend that you consult an advisor in person to understand the entire legal framework that applies to such gifts, and then evaluate whether it is legally possible to conduct such a transaction.

I live in a rented premises (commonly known as turban) in Mumbai. I want to make a will whereby after my death, I would like this property to be transferred to my son who is living abroad. It is possible that?

—Name withheld on request

Section 7 of the Maharashtra Rent Control Act, 1999 (Rent Control Act) provides that

(i) any member of the family of the tenant who is residing with him at the time of his death and in the absence of such member, (ii) any heir of the deceased tenant, as may be decided by the court in default of the settlement , may step in, in the shoes of the deceased tenant. It is clear that other family members or third parties are excluded from such protection.

The Bombay High Court has considered the issue whether tenancy can be bequeathed under a will. After considering various propositions of the law, the Court laid down the principle of law that the prohibition against assignment or transfer would also apply to the testamentary and hence such transfer should not be allowed. In view of the aforesaid, it is clear that no tenant can dispose of tenancy rights by will. So in the present scenario it would not be appropriate for you to bequeath the tenancy rights to your son.

In any case, it is advisable to seek the opinion of legal experts with regard to any specific factual metrics.

Hemang Parekh is Partner and Mithali Naik is Associate Partner at DSK Legal