All one should know about NRIs investing in Start-ups in India

Compliances and Procedures for NRI Investment in India

FOR NRIS INVESTING IN INDIA –

Under Foreign Investment in India guidelines, all NRI investments can be invested in Repatriable or Non-Repatriable basis.  3 major differences of the same are highlighted for understanding the concept –

1. Source of Funds

Repatriable – Fund has to come from a Foreign Currency account of the Investor i.e. NRE or Foreign Bank account

Non-Repatriable – Source has to be in Indian Rupee or payment from Rupee account (NRO/Current/ Savings account of the NRI)

2. Sale Proceeds/ Income of the Investment

Repatriable -The  sale proceeds of the investments including profit earned in India   and income  earned (net of applicable taxes)   can be transferred  back to their foreign currency account i.e. NRE or Foreign Bank account

Non-Repatriable – The  sale proceeds of the investments including profit earned in India   and income  earned shall not be permitted to transferred  back to their foreign currency account and  this has to be remitted to NRI’s  Rupee account i.e. NRO/Current/ Savings account

3. Approvals  

Repatriable – Foreign Investment (NRI) is allowed under the automatic route without prior approval of the Government or the Reserve Bank of India (the present Business covered under automatic route) however some post Investment intimation / approvals are required from RBI. Further during repatriation back also some RBI intimation / approvals are required

Non Repatriable – This will be treated as the issue of shares to Indian public hence post or pre approvals are not required

FOR ORGANISATION RECEIVING THE INVESTMENT –

Detailed Procedure of Post Investment intimation / approvals to be followed by Company receiving investment.

Organization receiving foreign investment must report the transaction to the Reserve Bank of India in the stipulated timeline.

Within 30 days of receipt of share application money/amount of consideration from the foreign investor, the Indian company must report details of the FDI inflow to Reserve Bank of India, containing the following details –

1. Name and address of the foreign investor(s);
2. Date of receipt of funds and the Rupee equivalent;
3. Name and address of the authorized dealer through whom the funds have been received;
4. Details of the Government approval, if any; and
5. KYC report (Identify and Address proof) on the non-resident investor from the overseas bank remitting the amount of consideration.

The money received from the foreign investor for the purchase of shares in the Company is required to issue shares within 180 days from the date of inward remittance to the foreign investor.

Within 30 days from the date of issue of shares, form FC-GPR must be filed with the RBI along with the following documents.

1. Certificate from the Company Secretary of the company accepting investment:
2. Certificate from Statutory Auditors/ SEBI registered Merchant Banker / Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.

While repatriation back also Investor needs to provide FC GPR approval and certificate from the Chartered Accountant for tax payable and proof of payment of Tax etc. need to be filed through AD (Authorised Dealer Bank).

All this process to be done by a CA/CS firm will cost around INR 15k to the Company on average. Anyone needing any further guidance on this can contact Mr. Shivadutt Bannanje at +91-9845286251 or bshivadutt@gmail.com