What FEMA and FDI compliances apply when an NRI invests in a Private Limited Company? Archives

Many Non-Resident Indians (NRIs) are keen to invest in Indian Private Limited Companies. While this opens opportunities, there are certain legal rules they must follow under FEMA (Foreign Exchange Management Act) and FDI (Foreign Direct Investment) regulations. Compliance ensures smooth investment and avoids penalties.

NRIs can invest in a Private Limited Company either through automatic route or government approval route, depending on the sector. All investments must be routed through authorized banks and proper filings must be made with the Reserve Bank of India (RBI).

Under FEMA, NRIs must use funds transferred from abroad through proper banking channels, and the investment must be reported in the company’s records. FDI regulations require that the sector allows NRI investment and that the company files Form FC-GPR with the RBI within 30 days of receiving the investment. For example, if an NRI invests ₹50 lakh in a tech company, the company must issue shares against foreign remittance and report the same via FC-GPR.

• Ensure the sector of the company permits NRI investment under FDI rules.
• Route the investment through an authorized dealer bank in India.
• Maintain records of funds received from the NRI.
• File Form FC-GPR with the RBI within 30 days of allotment of shares.
• Comply with pricing guidelines under FEMA for issuing shares.
• Report any changes in shareholding structure as required by RBI.

❓ Can NRIs hold 100% shares in a Private Limited Company?
👉 Yes, if the sector allows 100% FDI under automatic route.

❓ What is Form FC-GPR?
👉 It is the form filed with RBI to report allotment of shares against foreign investment.

❓ Do NRIs need a PAN to invest?
👉 Yes, a PAN is mandatory for taxation and investment compliance.

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