Investment in India on Non-Repatriation Basis

Key Terms related to Investment in India on Non-Repatriation Basis

The key terms related to Investment in India on Non-Repatriation Basis is as follows:

‘Capital Instruments’ are equity shares, debentures, preference shares and share warrants issued by an Indian company.

‘Convertible Note’ is an instrument issued by a startup company evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of such startup company, within a period not exceeding five years from the date of issue of the convertible note, upon occurrence of specified events as per the other terms and conditions agreed to and indicated in the instrument.

‘Investment on Repatriation Basis’ is an investment, the sale/ maturity proceeds of which are, net of taxes, eligible to be repatriated and the expression ‘Investment on non­-repatriation basis’, will be construed accordingly.

‘Limited Liability Partnership (LLP)’ is a partnership formed and registered under the Limited Liability Partnership Act, 2008

‘Non-Resident Indian (NRI)’ is an individual resident outside India who is citizen of India.

‘Overseas Citizen of India (OCI)’ is an individual resident outside India who is registered as an Overseas Citizen of India Cardholder under Section 7(A) of the Citizenship Act, 1955.

‘Unit’ is the beneficial interest of an investor in an investment vehicle.

Purchase or Sale of Capital Instruments or convertible notes of an Indian company or Units or contribution to the capital of an LLP by Non-Resident Indian (NRI) or Overseas Citizen of India (OCI)

Permitted Investment on Non-Repatriation Basis

A Non-resident Indian (NRI) or an Overseas Citizen of India (OCI), including a company, a trust and a partnership firm incorporated outside India and owned and controlled by NRIs or OCIs, is permitted to purchase/ contribute to the following on a non-repatriation basis:

  • Any capital instrument issued by a company without any limit either on the stock exchange or outside it.
  • Units issued by an investment vehicle without any limit, either on the stock exchange or outside it.
  • The capital of a Limited Liability Partnership without any limit.
  • Convertible notes issued by a startup company in accordance with FEMA 20(R).

The investment detailed above will be deemed to be domestic investment at par with the investment made by residents.

Prohibited Investment

An NRI or an OCI including a company, a trust and a partnership firm incorporated outside India and owned and controlled by NRIs or OCIs, cannot invest in capital instruments or units of a Nidhi company or a company engaged in agricultural/ plantation activities or real estate business or construction of farm houses or dealing in Transfer of Development Rights.

Mode of Payment

The amount of consideration should be received from abroad through banking channels or paid out of funds held in NRE/ FCNR(B)/ NRO accounts maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

The amount invested in capital instruments of an Indian company or the consideration for contribution to the capital of an LLP and the capital appreciation thereon cannot be repatriated abroad.

Sale/ Maturity Proceeds

The sale/ maturity proceeds (net of applicable taxes) of capital instruments purchased or disinvestment proceeds of an LLP should be credited only to the NRO account of the investor, irrespective of the type of account from which the consideration was paid.

The amount invested in capital instruments of an Indian company or the consideration for contribution to the capital of an LLP and the capital appreciation thereon cannot be repatriated abroad.

Investment in a Firm or a Proprietary Concern

Contribution to Capital of a Firm or a Proprietary concern

An NRI or an OCI is permitted to invest, on a non-repatriation basis, by way of contribution to the capital of a firm or a proprietary concern in India.

Prohibited Investment

The investee firm or proprietary concern should not be engaged in any agricultural/ plantation activity or print media or real estate business i.e., dealing in land and immovable property with a view to earning profit or earning income therefrom.

Mode of Payment

The amount of consideration should be received from abroad through banking channels or paid out of funds held in NRE/ FCNR(B)/ NRO accounts maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

Sale/ Maturity Proceeds

The disinvestment proceeds should be credited only to the NRO account of the person concerned, irrespective of the type of account from which the consideration was paid.

The amount invested for contribution to the capital of a firm or a proprietary concern and the capital appreciation thereon cannot be repatriated abroad.


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