Company Incorporation Options and FDI Compliance for Foreign Entities and NRIs in India

Joint Venture or Wholly Owned Subsidiary:

Foreign entities or NRIs can incorporate a company under the Companies Act, 2013. Investment is allowed under the FDI Policy in India, except for entities from Pakistan and Bangladesh. NRIs interested in NRI company registration in India can explore the option of a joint venture or a wholly owned subsidiary depending on their investment preferences.

FDI Compliance:

• Sectoral Caps: Investment limits vary by sector, and certain sectors require approval from the RBI, FIPB, or other authorities. NRIS needs to understand these restrictions while incorporating a company, as certain sectors may have specific compliance requirements under the FDI Policy in India.

• Prohibited Sectors: FDI is not allowed in sectors like lotteries, gambling, chit funds, and real estate (except development activities). Other prohibited sectors include tobacco manufacturing, atomic energy, and specific railway operations. NRIs must ensure that their investments are not in these prohibited sectors when considering how to start a company in India step-by-step.

Instruments for Investment:

• Equity Shares: Indian companies can issue equity shares, convertible debentures, and convertible preference shares, subject to pricing guidelines and FEMA regulations. NRIs must comply with FEMA regulations when investing in Indian companies and understand the cost of incorporating a company in India for NRIs to ensure proper financial planning.

Remittance of Sale Proceeds:

Sale proceeds of securities can be remitted abroad if they are held on a repatriation basis, following proper guidelines and after obtaining a tax clearance certificate. Understanding tax on Indian company laws is crucial for NRIs who wish to remit funds back to their home country.

Investment in LLPs:

NRIs can become designated partners in LLPs with at least one partner residing in India for 182 days in the previous year. Investments must comply with the LLP Act and FEMA regulations. NRIs can also opt for resident director services for NRI companies if they wish to have a local partner for their LLP.

Investment in Proprietorship/Partnership Firms:

NRIs can invest in these firms, but the business must not involve prohibited sectors like real estate or agricultural activities. Capital contributions can be made without limits. NRIs who are interested in setting up such businesses must ensure proper post-incorporation compliance for NRI companies to avoid legal challenges.

Compliance with FEMA:

Equity instruments must be issued within 60 days of receiving the subscription amount, and details must be reported through Form FC-GPR. Cross-border share transfers require filing in Form FC-TRS within 60 days of the transfer or receipt/remittance of funds. NRIs must adhere to these FEMA regulations for smooth operations.

For NRIs interested in online registration of a company or seeking a virtual office in India for NRIs, it's essential to ensure full compliance with both the FDI Policy in India and FEMA regulations. Professional advice can help navigate these regulations, and using services like a resident director for NRIs or a virtual office for NRI businesses in India can simplify the process.

If you're wondering can NRI open a company in India? the answer is yes, and with proper planning, it can be a smooth process with the right guidance and understanding of the cost of incorporating NRIs.

Also Read: Key Stages in the Process of Company Registration and Incorporation