Inbound Investments by NRI

Investment in Proprietorship/Partnership Firm

Foreign Exchange Management (Non debt Instruments) Rules, 2019 SCHEDULE IV.

Investment in Proprietorship/Partnership can be by NRI or OCI Proprietorship refers to any business activity in individual capacity.
Capital contribution without any limit.
Business of Proprietorship/Partnership should not be into prohibited sectors such as agricultural/plantation activities or real estate business or construction of farm houses or dealing in Transfer of Development Rights Real estate development activity is permitted.
The NRI cannot engage in any of the prohibited sector business activity stated above even after seeking RBI approval.
Investment through NRE NRO FCNR Direct Remittance.
Amount invested and the capital appreciation thereon to be credited in NRO A/c.

Bank Accounts by NRI for Proprietorship Business SNRR Account (Special Non Resident Rupee Account):

This account can be maintained by any person who is a Non Resident under FEMA (other than Pakistan and Bangladesh nationals) having business interest in India.
This account is a rupee denominated non interest bearing account which is repatriable, but transfers from NRO account are prohibited.
There shall not be any term for holding this account if it is opened in accordance with the RBI guidelines.
The SNRR account shall be used only for the specific business for which it is in operation.
The amounts shall be credited to the NRO/NRE account of the nominee of the death of account holder.

NRI as Designated Partner of an Indian LLP.

As per Section 7 of the LLP Act, 2008 every LLP shall have at least one designated partner who has stayed in India for a total period of not less than 182 days in the previous calendar year.
Therefore, one or more NRI can become a partner/s in any Indian LLP provided there is at least one designated partner.
There are no restrictions on acceptance of deposits by the LLP from its partners.

Foreign Exchange Management (Non debt Instruments) Rules, 2019 SCHEDULE IV:

Investment in LLP can be by NRI or OCI.
Capital contribution without any limit.
Business of LLP should not be into prohibited sectors such as agricultural/plantation activities or real estate business or construction of farm houses or dealing in Transfer of Development Rights Real estate development activity is permitted.
Investment through NRO FCNR Remittance.
Disinvestments receipts from LLP to be credited in NRO bank account.
Investment in LLP can be done by any NRI or OCI at a value not less than the FMV of the share in the firm.
LLP should be in business activities, where FDI up to 100 percent is permitted under automatic route In sectors/activities not listed in the FDI policy, FDI is permitted up to 100 under the automatic route, subject to applicable laws/regulations.
No restriction on Capital Contribution subject go conditions of LLP Act.
Investments through Remittance/NRE/FCNR bank account
Disinvestments receipts from LLP can be remitted out of India or can be credited in NRE FCNR bank account.

Taxation of Limited Liability Partnerships:

The incomes can be distributed in form of interest on capital (max. 12 % p. and remuneration to some or all the partners. Such distributions will become the incomes of the respective partners taxable at normal slab rates of income.
The balance income of the firm will be taxable at a rate of 31.2 % (including cess ) and surcharge at 12 % if the income crosses 1 crore.
The income distributed after such payment of tax will be tax free in the hands of partners as per their respective profit sharing ratio.

Foreign Exchange Management (Non debt Instruments) Rules, 2019 SCHEDULE IV:

Investment in Indian companies can be by NRI or OCI’.
Companies should be in business activities, which are under automatic route of FDI or after appropriate approvals.
Investment through Remittance/NRE/FCNR/NRO and shall not be allowed to be repatriated abroad.
Disinvestments receipts from shares to be credited in NRO A/c.
Investment in Indian companies can be done by any NRI or OCI.
No restriction on Capital= Contribution subject to conditions of the Companies Act Companies should be in business activities, which are under automatic route of FDI or after appropriate approvals.
Investments through Remittance/NRE/FCNR A/c.
Disinvestments receipts from Indian companies can be remitted out of India or can be credited in NRE A/c.

NRI as Director of an Indian company:

As per Section 149 3 of the Companies Act, 2013 every company shall have at least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year.
Therefore, one or more NRI can become a director/s in any Indian company provided there is at least one resident director.

Taxation of Companies:

The incomes can be distributed in form of interest on deposits and director remuneration to the partners. Such distributions will become the incomes of the respective partners taxable at normal slab rates of income.
The balance income of the firm will be taxable at an effective tax rate of 26% under the old regime and at an effective tax rate of 25.17 under the new regime u/s 115BAA (with applicable conditions).
Surcharge at 7% if the income crosses Rs.1 crore and 12% if the income crosses Rs.10 crores will be applicable on the tax liability.
The income distributed after such payment of tax in form of dividend will be taxable in the hands of partners as per normal slab rates.