Foreign Direct Investment by NRI (Non-Resident Indian)

Foreign Direct Investment is the buying of shareholding in a firm by a corporation / investment based outside the nation’s boundaries for the expansion of their services overseas. Indian entities are not enough to meet the requirements. However, foreign direct investment (FDI) by the NRI (Non-Resident Indian) will help to grow the industrial sector and meanwhile increase the foreign exchange and the GDP (Gross Domestic Product). This help in the development of the nation. Further, we will discuss about foreign direct investment (FDI) by the NRI in detail in this blog.

Who is an NRI?

NRI stands for Non-Resident Indian .Any person who is residing outside India or holding OCI (Overseas Citizen of India) card is refer to as an NRI.NRI is defined under The Foreign Exchange Management Act,1999 and Income Tax Act, 1961.

For instances, if any person from India moves to Canada for studying. However, later became a permanent resident there is refer as a NRI. However, India doesn’t allow dual citizenship.

What are the different types of Foreign Direct Investment NRI’s can do?

There are two types of investment NRI’s can do i.e.

Repatriation basis – The provisions of Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 is necessary to amend timely and govern FDI by NRI on Repatriation basis.
Non – Repatriation basis – The provisions of Foreign Exchange Management Regulations, 2019 put forward in schedule 4 of the act. This schedule 4 governs FDI by NRI on Non-Repatriation basis.

Registration Regulations

Any investment in India made by a person residing outside India must comply with the following rules.

Any Indian firm that offers common shares to a group of residents anywhere outside India meanwhile that offer is review as Foreign Investment. However, Receipts of FDI i.e. money received from FDI to any Company from subscribing to shares of any company.
Within 30 days company must report about FDI received.
Within 180days of receiving money companies must a lot shares.
Generally, regulations clearly states and disclose the issue. However, in Form FC-GPR within 30 days of the date of the common shares are out.
Annual return of foreign liabilities must submit the particulars to the Reserve Bank of India before the prescribe date i.e. 15th July every year.
Foreign currency and transfer of equity shares in accordance will all the rules and regulations.

Rule of FC-TRS

A compliant transfer of equity goods by sale between a non-Indian resident and an Indian resident who owns the equity goods on a non-collectible basis is not requiring describing on Form FCTRS.

The transfer of stock goods on an authorized exchange by a non-Indian resident shall be reported by such person on Form FCTRS.
Further, the transfer of stock goods mention in Rule 9 (6) of the Rule is necessary to mention on Form FCTRS upon receipt of each payment tranche. Resident sellers / buyers are responsible for reporting.
Transfers of “Participating rights” in the oil field must be reported on Form FCTRS.
The form FCTRS shall be filed within sixty days of transfer of equity instruments or receipt/remittance of funds whichever is earlier.

Schedule 3

“Return-based investment” refers to an investment whose maturity income (after tax) is subject to return from India.
Payment Methods i.e. relevant amounts shall be reimburse from international remittances via banking channels. Further, from funds held in Non- Resident Account (NRE) maintained in accordance with the law {Foreign Exchange Management (Deposit) Regulation 2016}.
Further, the NRE account (PIS) account is the specific account is in use only to make the transactions permissible in this schedule.
Net of taxes of equity instrument may be t outside India or in NRE account to a specific person.

Schedule 4

Investment by NRI and OCI Card holder on non-repatriation basis
It is refer as a domestic financing and FC-GPR form is necessary to submit.

Amount of consideration is reimbursed overseas through special overseas banking channel.
Sum of money subsidize in any business enterprise.
Its allowance to any LLP is no longer authorized to be repatriated overseas.

Conclusion

FDI by NRI are necessary as it help to grow foreign reserves of a nationand its help to contribute to the Gross Domestic Product. Foreign investment brings industrial development. After the pandemic, FDI helped a lot to rebuild the economy of the nation and improving the GDP of the nation.