Key Compliance Guidelines for Non-Resident Indians (NRIs) Investing in India under the FDI Policy

1. FDI Policy Compliance:

NRIs and foreign entities (except from Pakistan and Bangladesh) can invest in India subject to the FDI Policy in India. Investment limits and requirements vary by sector, as detailed in the FDI Policy. Some sectors require government approval, while others allow investment under the automatic route, which is crucial for NRI company registration in India.

2. Sectors Prohibited for FDI:

• Lottery Business
• Gambling and Betting
• Chit Funds
• Nidhi Companies
• Trading in Transferable Development Rights (TDRs)
• Real Estate Business
• Manufacturing of Tobacco Products
• Restricted Activities

Note: Foreign technology collaboration is also prohibited in the lottery business and gambling/betting sectors. For NRIs, it's important to check these prohibitions to avoid complications when starting a company in India.

3. Types of Investment Instruments:

Indian companies can issue:

• Equity Shares
• Fully and Mandatorily Convertible Debentures
• Fully and Mandatorily Convertible Preference Shares
• Warrants

These must comply with pricing guidelines, valuation norms, and reporting requirements as per FEMA Regulations. NRIs interested in online registration of companies must ensure their investment instruments follow these norms.

4. Share Issuance and Refunds:

• Equity shares must be issued within 60 days of receiving consideration.

• If shares are not issued within this period, the consideration must be refunded within 15 days after the 60 days. This requirement is part of the document requirement for company incorporation for NRIs.

5. Compliance Requirements:

• Form FC-GPR: Report the issuance of equity instruments to foreign residents within 30 days of issuance.
• Form FLA: Submit annually by July 15th if the company has received FDI in the previous or current year. This is part of post-incorporation compliance for NRI companies.

6. Transfer of Shares:

• Must comply with FEMA Regulations.
• Form FC-TRS: Required if transferring shares. It should be filed within 60 days of the transfer or receipt/remittance of funds.
• The resident director for NRIs is responsible for filing Form FC-TRS.

7. Remittance of Sale Proceeds:

• AD Banks can remit sale proceeds (net of taxes) directly to the foreign seller’s account or NRE/FCNR(B) account, provided the sale adheres to FEMA guidelines. NRIs must ensure they understand the tax on Indian company to avoid any penalties related to the repatriation of funds.

For NRIs, understanding the cost of incorporating a company in India for NRIs and the post-incorporation compliance for NRI companies is crucial to avoid delays in business operations. Resident director services for NRI companies can also help in meeting compliance requirements, including filing necessary forms and handling virtual office for NRI businesses in India.

Also Read: What is a Resident Director?