The foreign investment by NRI in Indian Company is regulated by Master Direction – Foreign Investment in India issued by RBI and updated from time to time. The last time it was updated on 8th March 2019. The Annexure 4 of the same is dedicated to investment by NRI in an Indian Company. Please refer to the attached pdf and go to page number 46.

The important points for your consideration are as under

  1. That the investment by NRI in India company shall be treated as an investment at Par with other Indian investors
  2. 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.
  3. In case the NRI wishes to sell his investment in an Indian company then the sale proceeds shall be remitted to the NRO account only, irrespective of the mode of remittance at the time of making the investment in India.

The FDI Reporting is not required and the allotment shall be as per the normal procedure as done for Indian investors. you must increase the authorized capital then allot shares at the correct valuation and then file form PAS-3 for intimation of the ROC.

Also, the investment made by NRI shall not be considered as a foreign liability, hence the annual reporting to RBI is also not required

Master Direction FDI

Master Direction Reporting under FEMA