Choosing a business structure and FDI route
A Private Limited Company is the most common vehicle for NRI-backed ventures in India,
allowing 100% foreign/NRI shareholding in most sectors under the automatic route, offering limited
liability, and giving investors a familiar governance structure recognized by Indian banks and regulators.
An LLP is also permitted for FDI in sectors where 100% FDI is allowed under the automatic
route with no performance-linked conditions, and can suit smaller ventures wanting lighter compliance than
a company. A company incorporated in India needs at least one director who is a resident of India for a
specified minimum number of days in the preceding calendar year, per the Companies Act, 2013 -- NRIs
without a suitable India-resident co-founder or relative often engage a professional nominee resident
director to satisfy this requirement. Under India's FDI policy, most sectors fall under the
automatic route, needing only post-investment reporting rather than prior approval; a
smaller list of sectors -- including defence, media, and certain multi-brand retail activities -- requires
government approval, and a few sectors remain fully or partly restricted, so NRIs should
confirm their specific sector's current FDI classification before committing capital, since the policy is
revised periodically.
FEMA reporting once the investment is made
Foreign investment into an Indian company generally must be reported to the RBI through the Foreign
Investment Reporting and Management System (FIRMS) portal -- covering the initial share allotment (Form
FC-GPR) and any subsequent share transfer between a resident and non-resident (Form FC-TRS), each subject
to a strict reporting window from the date of allotment or transfer. Missing these deadlines can result in
compounding proceedings with the RBI, involving a formal application and typically a monetary penalty
scaled to the amount and duration of the delay, so NRIs and their Indian company secretary or CA should
track FIRMS deadlines as closely as the underlying commercial transaction itself.
Repatriating profits and common structuring mistakes to avoid
Dividends declared by an Indian company are freely repatriable for NRI shareholders, subject to
applicable Indian tax and DTAA relief against New Zealand tax on the same income under the India-New
Zealand DTAA. Capital gains on an eventual sale of shares are similarly repatriable after payment of
applicable tax and FEMA reporting. The most common structuring mistakes NRIs from New Zealand should watch
for are: not appointing a qualifying resident director before incorporation, which can stall the entire
incorporation process; assuming a sector is under the automatic route without checking the current FDI
policy, since policy changes are not always widely publicized; and missing FIRMS portal reporting
deadlines for share allotment or transfer, which is one of the most frequent sources of RBI compounding
applications among NRI-founded Indian companies.
Can an NRI be the sole director of an Indian private limited company?
No -- the Companies Act, 2013 requires at least one director who satisfies India's residency
requirement.
Does an NRI need RBI approval to invest in an Indian startup?
Not for most sectors -- the majority fall under the automatic route, requiring only post-investment
reporting.
Can profits be freely sent back to New Zealand?
Dividends and capital gains are generally repatriable after applicable Indian tax is paid and the correct
FEMA reporting is completed.
What happens if FIRMS portal reporting is missed?
A missed or late reporting deadline can be regularized through the RBI's compounding process, involving
an application and typically a monetary penalty.
