## What are the rules for NRI investment in Indian companies? An NRI (Non-Resident Indian) can invest in an Indian private limited company under two routes: the **automatic route** (no prior approval needed) or the **approval route** (prior government clearance required). Most sectors — software, professional services, e-commerce, manufacturing — are on the automatic route. The full FDI Policy is issued by DPIIT and updated periodically; the RBI's Master Direction on Foreign Investment in India (updated as of 2024) is the primary regulatory document. The short answer: if your sector is on the automatic route and you're investing from NRO/NRE/FCNR accounts or foreign currency, you can receive investment without filing anything *before* the money comes in. The compliance happens *after* — and missing it has consequences. --- ## The two routes explained ### Automatic Route No prior approval from the RBI or government. Covers the vast majority of sectors. The investor wires money, the company allots shares, and the company then files Form **FC-GPR** (Foreign Currency — Gross Provisional Return) with the RBI through the FIRMS portal within **30 days** of share allotment. Missing the 30-day window requires a compounding application to the RBI — a process that adds weeks and a penalty. ### Approval Route Required for sectors like defence (above certain thresholds), media, satellite, and a few others listed in the FDI Policy. The company (or investor) must obtain prior approval from the relevant administrative ministry before funds are received. --- ## NRI vs Foreign National: the distinction that matters NRIs are treated differently from other foreign investors under Schedule 3 of **FEMA 20(R)** — the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. - NRIs investing on a **repatriation basis** (money can be taken back out): treated identically to FDI. Subject to sector caps and the automatic/approval route framework. - NRIs investing on a **non-repatriation basis** (money stays in India): treated as domestic investment. No sector caps apply. Not counted toward FDI limits. Governed by Schedule 4 of FEMA 20(R). Most NRIs who want to co-found or invest in an Indian startup choose the repatriation basis — it preserves optionality. The non-repatriation route is common for family investments where the funds are effectively permanently deployed in India. --- ## Step-by-step: what actually happens when an NRI invests 1. **Agree on valuation** — the price per share must be at or above fair market value determined by a SEBI-registered valuer or a CA using the DCF/NAV method (for unlisted companies). This is mandatory. You cannot issue shares to a foreign investor below fair value. 2. **Board resolution** — the company passes a board resolution approving the allotment to a non-resident. 3. **Receive funds** — money comes into the company's bank account via wire transfer. The bank issues an FIRC (Foreign Inward Remittance Certificate) or a debit advice. **Keep this document** — it's required for the FC-GPR filing. 4. **Allot shares** — update the register of members, issue share certificates. 5. **File FC-GPR** — within 30 days of allotment, file on the FIRMS portal (firms.rbi.org.in). You'll need: FIRC, KYC of investor, CS certificate, board resolution, valuation certificate. 6. **Annual compliance** — the company must file the **Foreign Liabilities and Assets (FLA) Return** with the RBI every year by July 15, as long as there is any outstanding foreign investment. --- ## Common mistakes that lead to RBI notices **Receiving money before the board resolution.** The allotment timeline matters — funds received before a formal decision to allot creates a regulatory gap. **Missing the FC-GPR deadline.** 30 days is measured from the date of allotment, not the date of receipt of funds. If allotment happens 20 days after funds arrive, you have 10 days left, not 30. **Wrong valuation method.** Seed-stage companies sometimes agree on a round number per share without getting a proper valuation certificate. The RBI can query this. **Not filing FLA.** Many companies receive NRI investment once and forget about the annual return obligation. The RBI has been actively following up on non-filers since 2023. **Sector caps overlooked.** Retail trading (single brand vs multi-brand), e-commerce marketplace vs inventory model — the classification of your business model determines which FDI cap applies. Getting this wrong at the investment stage can unwind the entire investment. --- ## What Budget 2026 signals for NRI investors The Union Budget 2026 and subsequent DPIIT notifications have signalled a clearer policy intent to simplify NRI participation in Indian businesses. FDI inflows reached approximately $50 billion in FY2024-25, a 13% increase, with significant NRI-led flows into startups and real estate. Practically, faster processing of compounding applications and DPIIT's single-window facilitation under Invest India's online portal has reduced approval-route timelines. The regulatory intent is positive — but the compliance mechanics haven't simplified. FC-GPR, FLA, and valuation requirements remain as they were. --- ## Frequently asked questions **Can an NRI be a director in an Indian company without investing?** Yes. Directorship doesn't require investment. An NRI can be an executive director or even a whole-time director without holding any shares. However, if they receive ESOPs, those constitute a foreign investment once exercised. **Does an OCI cardholder follow the same rules as an NRI?** Yes. Under FEMA, OCI cardholders are treated on par with NRIs for investment purposes. They can invest on repatriation or non-repatriation basis under the same FEMA 20(R) framework. **What if the NRI invests through a foreign company they own?** Then it's a foreign company investing — not an NRI investing. The investment is classified as FDI from that foreign jurisdiction, and different beneficial ownership rules may apply (including FATF jurisdiction considerations). **Is there a minimum investment amount?** No minimum for private limited companies on the automatic route. For LLPs, NRI investment is permitted on the automatic route in sectors where 100% FDI is allowed. **How long does FC-GPR filing take?** If the application is complete, the RBI typically processes it in 2–4 weeks. Incomplete applications get returned — which is why the valuation certificate and FIRC need to be in order before filing. --- ## The bottom line NRI investment in Indian companies is well-governed and, in most sectors, straightforward — if you follow the sequence. The failures happen at the edges: wrong timing, missed filings, undocumented valuation. The RBI's FIRMS portal has made the process significantly more traceable, which is good for compliant companies and increasingly costly for non-compliant ones. --- *Harun Raaj is a Chartered Accountant practising in Visakhapatnam, AP. This article is for informational purposes and does not constitute legal or financial advice. Key references: FEMA 20(R) — Foreign Exchange Management (Non-Debt Instruments) Rules, 2019; RBI Master Direction on Foreign Investment in India; DPIIT Consolidated FDI Policy; RBI FIRMS portal.* --- ## See Also - [ITR Form Selection Guide for AY 2026-27: Who Must File ITR-1, ITR-2, ITR-3, and ITR-4](https://www.harunraaj.com/blog/itr-form-selection-guide-ay-2026-27) Canonical: https://www.harunraaj.com/blog/nri-fdi-compliance-india-2026