Which situation applies to you?
You live and work outside India. You want to invest in or incorporate a company in India – for a business you'll manage remotely or through a local team.
You are returning to India to start or run a business. Your residency status is changing – from NRI to Resident. This triggers specific FEMA obligations.
How NRI investment in India works – Schedule 4 FEMA
NRI investment in Indian companies is governed by Schedule 4 of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 – not the FDI regulations that apply to foreign companies. This is a separate and simpler route: no RBI FCGPR filing, no valuation certificate requirement, and no sectoral cap complications in most cases.
An NRI can invest in an Indian Private Limited Company by subscribing to shares at incorporation or purchasing shares from existing shareholders. The investment must be made from an NRE (Non-Resident External) or FCNR (Foreign Currency Non-Resident) account – not from an NRO account (unless specific conditions are met).
NRI investment follows Schedule 4 FEMA. We confirm your residency status, investment amount, sector eligibility, and source of funds before any filing.
For a new company: SPICe+ filing with NRI as shareholder. For investment in an existing company: share transfer or fresh allotment, updated share register, Form SH-4 or MGT-7 as applicable.
Investment must be received from NRE/FCNR account or inward remittance. Bank account opened in company name. Share capital deposited.
For certain NRI investments, intimation to authorised dealer bank is required. We handle the documentation and ensure the investment is properly recorded under the correct FEMA schedule.
FEMA transition – what changes when you return
Must be re-designated as Resident Foreign Currency (RFC) accounts or converted to regular resident savings accounts within a reasonable period (typically within 3 months of becoming a resident).
Existing foreign assets (bank accounts, investments, property) held as an NRI can generally be retained as a resident. However, income from those assets becomes taxable in India from the year of return.
Investments made as an NRI in foreign stocks, mutual funds, or property can be retained. However, fresh overseas investment after becoming a resident requires RBI approval or falls under the LRS (Liberalised Remittance Scheme).
In the year of return, you may be 'Resident but Not Ordinarily Resident' (RNOR) – a transitional status that provides a 2-year window where foreign income may not be taxable in India. Proper tax planning before return is essential.
NRI setup in practice
US-based NRI incorporated an India company while still residing abroad
NRI based in the US wanted to start a technology business in India, with 60% shareholding from his US savings (NRE account) and 40% held by his India-based co-founder. Needed correct FEMA route, proper share structure, and US FBAR/PFIC implications considered.
Private limited company incorporated with NRI holding via Schedule 4 FEMA route. Investment received from NRE account. Share structure set up to be VC-friendly. US CA coordinated for FBAR disclosure.
Company operational within 3 weeks. Zero FEMA compliance issues. First angel round closed 6 months later with no structural complications.
What NRIs get wrong
NRI investment in Indian companies must typically come from an NRE (repatriable) account or via inward remittance. Using an NRO account for share subscription requires specific conditions to be met. Getting the source of funds wrong creates a FEMA violation at the point of investment.
NRIs who return to India without planning the transition often convert NRE accounts too early, lose RNOR tax status benefit, or fail to properly declare foreign assets. The planning should happen 3 - 6 months before physical return.
NRI investment under Schedule 4 does not require RBI FCGPR filing. But many NRIs and their advisors prepare FDI documentation unnecessarily – creating confusion at future funding rounds about the nature of the investment.
Indian companies with NRI shareholders must correctly disclose NRI ownership in annual returns. Misclassification of an NRI shareholder as a resident in MCA filings creates compliance gaps.
NRI company registration questions
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