Where NRI can Invest In India

 

 

In India, a no. of families have their relatives living abroad who have gone either for earning livelihood or otherwise, always have intension to send/ remit the money in India for starting any business or to put their money in some projects. But many laws and regulations of Indian Government and restrictions imposed by RBI restrict the NRIs, Foreign Nationals to invest the money. So For a Common Man/ Lay Man, there is always a question in mind whether NRIs can invest in India through FDI or not and if yes, then what are the entities where NRIs can invest through FDI as in India, or what are the ways/ sources/ areas where they can invest. Hence, in this Article, I have tried to elaborate in simple language that what are the entities where NRIs can invest in India as FDI.

Master Circular is being circulated by Department every year on July 1, 2013 carrying and describing the various guidelines/ instructions/ routs/ areas/ ways/ sources through which NRIs and Foreign Nationals can invest in India. This year the consolidated FDI Policy was issued which had been effective from April 5, 2013.

Hence, as per FDI Policy, 2013 a non-resident entity (Entity here means NRIs, POIs, OCBs, SEBI registered FVCI, FIIs etc.) can invest in India, subject to the FDI Policy except in those sectors/ activities which are prohibited. But again such investments are to be made in some entities like Trusts, Companies, Firms etc. Following entities where the NRIs can invest through FDI:

1. NRIs can invest in India in form of FDI in Indian Companies i.e. private Limited/ Limited Companies. The Indian Companies can issue capital against FDI. The FDI is allowed in the various sectors through automatic route or through approval route. In case of automatic route, only the intimation to RBI is sufficient when the money is being invested in Indian Companies or the money is re-patriated outside the country. And in case of approval route, first the approval is required from the Government i.e. FIPB Approval (Foreign Investment Promotion Board) for investment in Indian Company and only after the approval from FIPB, The investment can be made in such Indian Companies.

2. NRIs can also invest in Limited Liability Partnerships (LLPs) through automatic route where the FDI is allowed 100% and in other cases with the Government Approval Route. Moreover, LLPs with FDI will not be allowed to operate in agricultural/plantation activity, print media or real estate business.

3. NRIs or PIOs (Person of Indian Origin resident outside India) can also invest in capital of the Firms whether Partnership Firms/ Sole Proprietorship Concerns but the biggest advantage is that they cannot re-patriate the money back to abroad i.e. they can invest on non-repatriation basis and that even subject to some conditions like

(i) the investments must have not been done in agricultural/plantation or real estate business or print media sector.

(ii) Amount is invested by inward remittance or out of NRE/FCNR (B)/NRO account maintained with Authorized Dealers / Authorized banks.

(iii) Amount invested shall not be eligible for repatriation outside India.

The NRIs/ PIOs can re-patriate such Investments back to abroad from such Sole Prop./ Partnership Firms subject to the prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation option. The application will be decided in consultation with the Government of India.

4. Investment is allowed in Indian Venture Capital Undertakings (IVCUs) /Venture Capital Funds (VCFs) etc. through automatic route or approval route depending upon the company set up i.e. whether VCF has been incorporated as a Trust or as Company under Companies Act, 1956 and subject to the pricing guidelines, reporting requirements, mode of payment, minimum capitalization norms, etc.

NOTE: No investment can be made in any entities other than the above mentioned as per Consolidated FDI Policy, 2013.

There is a condition for investment in Prop./ Partnership Firms that Amount must be invested by inward remittance or out of NRE/FCNR (B)/NRO account maintained with Authorized Dealers / Authorized banks. NRE/ NRO Accounts have been described as follows:

NRE/ NRO Accounts: If a person is a Non Resident Indian (NRI), he can open two kinds of account in India – a non-resident rupee accounts (NRE), and non resident ordinary rupee accounts (NRO). Here’s the difference between the two.

NRE: A Non-Resident External (NRE) account is a bank account that’s opened by depositing foreign currency at the time of opening a bank account. This currency can be tendered in the form of traveler’s checks or notes. The account can opened in the names of two or more non-resident individuals provided all the account holders are persons of Indian nationality or origin. Amount held in the NRE account are freely repatriable.

NRO:A Non-Resident Ordinary (NRO) account is the normal bank account opened by an Indian going abroad with the intention of becoming an NRI. An NRI can also open this account by sending remittances from his home country or by transferring funds from his other NRO account. The account can be held jointly by residents. It’s easy to transfer funds from an NRE to an NRO account. But it’s not possible to transfer funds from an NRO account to an NRE account. Once you transfer funds from an NRE to an NRO account, the amount is non-repatriable. Consequently, you cannot transfer it back.