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Written by Pragya Chandra pursuing Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) offered by Lawsikho as part of her coursework.  Pragya is a Legal Advisor with Portfolio Financial Services Ltd.


These are incredible times for our country. It is placed before the World with the largest potential for growth in multi-sectors. Recently, India climbed 23 points in the World Bank’s ease of doing business index to 77th place, becoming the top-ranked country in South Asia for the first time and third among the BRICS.

Thus the investment climate in India has historically never been as attractive. To highlight a case in reference, lately the figures of NRIs keenly investing in India have rocketed. Clearly, the NRI Community feels the Government efforts of easing the business process, removal of red-tape and booming domestic consumer market and that all of this combines to give handsome returns on investments. And of course, the emotional umbilical cord of NRI with the parent country is an added addition.

A report on the state of NRI investments in the Indian real estate sector, compiled by 360 Realtors, a leading real estate consulting company, has found that NRI investments in Indian real estate have already doubled from $5bn in 2014 to $10.2bn in 2018. Government of India has taken various steps to promote investments by Indians living abroad, in India. Investment promotion, through the dissemination of information on the investment climate and opportunities in India and advising prospective investors including the Non-Resident Indians (NRIs) about the investment policies and procedures and opportunities, has been taken up as a priority.

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The astonishing figures of new establishments and startups in the form of Limited Liability Partnerships and its immense growth are known by all. There were over 85,000 registered LLPs in India till February 2017. A total of 26,977 were incorporated in 2016, 28 per cent more than in the previous year. The number of LLPs grew around 81 per cent between 2014 & 2015.  India’s open and pluralistic society provides a stable and predictable socio-political environment when compared to the rest of the world.

As India beacons the global community to invest; the Government is now focusing on the Indians who reside in foreign countries and their ability to aid the Indian Economy by investing in India. Having established the raison d’etre let us delve into the structured nitty-gritty of how can an NRI invest in LLPs in India?

What does NRI really mean?

Before proceeding with the technicalities of the said topic, let us first have a look at who really is an NRI? People often misconstrue while differentiating whether a person really is an NRI or not.

There are two major laws in India which specifically define the term “Non-Resident Indian” -The Income Tax Act, 1961 and The Foreign Exchange Management Act, 1999; for the applicability of the respective laws. The fundamental difference between both the definitions is that in Income Tax Act, the determination of an NRI is based on the Number of Days the person resides abroad and that in FEMA is upon the intention or motive of that person to reside abroad.

According to the I.T. Act, 1961 

An individual who does not satisfy both the conditions as mentioned below will be treated as “non-resident” in that previous year; if he/she is in India for:

  1. At least 182 days in that year, OR

2. At least 365 days during 4 years preceding that year, and at least 60 days in that year.

According to the FEMA Act, 1999 

(i) Indian citizens who stay abroad for employment or for carrying on a business or Vocation or any other purpose in circumstances indicating an indefinite period of stay abroad.

(ii) Indian citizens working abroad on assignment with foreign government agencies like the United Nations Organisation (UNO), including its affiliates, International Monetary Fund (IMF), World Bank etc.

(iii) Officials of Central and State Government and Public Sector undertaking deputed abroad on temporary assignments or posted to their offices, including Indian diplomat missions, abroad.

Of course, there are few exceptions and conditions precedent which needs to be fulfilled under both the laws to attract the provisions. However, that is an altogether different aspect and needs a detailed understanding of the same.

Can an NRI Invest In LLPs In India? 

The most crucial question is whether an NRI can invest in Limited Liability Partnerships in India? And the answer is yes! In fact, NRIs can also be partners in such arrangements.

However, there are a few conditions and regulations introduced by the RBI, various FDI Policies and FEMA; which requires the process to be followed and permission to be sought from RBI before NRI investing in an LLP in India.

Under Schedule 4 of the TISPRO Regulations, an NRI can invest, on non-repatriation basis, in:

(a) the capital instruments (i.e., equity shares, compulsorily convertible debentures, compulsorily convertible preference shares and share warrants) (“Capital Instruments”) of an Indian company, without any limit, either on the stock exchange or outside it;

(b) units issued by an investment vehicle (i.e. AIF, REIT or InvIT), without any limit,

either on the stock exchange or outside it;

(c) the capital of a limited liability partnership, without any limit; and

(d) convertible notes issued by a start-up company.

Also, an NRI can also invest in the capital of a firm or proprietary concern in India, by way of contribution.

Further, NRIs are now also allowed to make above-said investments, through the

companies, trusts or partnership firms that are incorporated outside India and are owned and controlled by NRIs.

Procedure- How to Invest?

In case of NRI investments on non-repatriation basis may be paid in the following manners:

  1. Directly through inward remittance from abroad via paper booking;
  2. Indirectly through Non-Resident External (NRE) or Foreign Currency Non-Resident (FCNR(B)) or Non-Resident Ordinary (NRO) Accounts.

The said Accounts and Deposits/Transfers have to be in strict compliance with all the applicable rules and law along with RBI Notifications and Policies. However, the opening of such accounts is very simple and very similar to the opening of a regular bank account and requires just a few documents for the KYC.

a) Non-Resident External Account

It is an exclusive type of a Bank Account, wherein, only NRIs are permitted to open and maintain a Rupee Account. Such bank accounts can be opened and maintained by banks and authorised dealers which are authorised by the RBI. They may be Savings Account, Current Account, Recurring Account or Fixed Deposit Account.

There are strict constraints on the kind of inward remittances allowed in such accounts :

  1. Any transfer from NRE/FCNR Accounts;
  2. All interests accrued on the account or on the investment; and
  3. Any maturity proceeds from investments.

Only Local Disbursements, Transfer to other NRE/FCNR Accounts or investments in India are permitted in NRE Accounts. The account can be withdrawn for making local payments in Rupees. Interest earned on NRE accounts is exempt from Indian Income tax. Rupee loan is available against NRE Deposits.

b) Foreign Currency Non-Resident (Bank) (FCNR(B))

It is an account maintained only by NRIs in foreign exchange with the authorised dealers and banks authorised by the RBI to maintain such accounts. This account can be maintained only in the form of fixed deposits. The Income Tax Act is not applicable to the principal amount or the return on investments in such account.

The currency in such account cannot be converted into INR and has to be maintained in foreign currency only.

The Reserve Bank of India allows the FCNR account holder to avail a loan against his account for personal or business purposes. However, a loan cannot be taken for the following purposes:

  • Re-lending
  • Speculative purpose
  • Agricultural or plantation activities
  • Real estate investment

These accounts can be opened with:

  • Funds from an existing FCNR account
  • Foreign currency notes
  • Traveller’s cheque

c) Non-Resident Ordinary (NRO)

Any person who is a resident outside India can maintain this account with an authorised dealer or bank.

Following credits can be made in an NRO Account:

  1. Any inward from outside India;
  2. Legitimate dues in India;

3. Transfer from other NRO Accounts; and

4.Gift or Loan made by a resident in India (in Indian Currency).

Following Debits can be made in an NRO Account:

  1. Local payments;
  2. Transfer to other NRO Accounts;
  3. Current income abroad;
  4. USD 1 million in one financial year; and
  5. Any other bonafide transaction.


To encapsulate, never was the convergence of so many factors and probabilities so ideal to make an enterprise bloom and boom. The route plan and procedures are clear cut. To actuate and make the project operational, all infrastructure of office space, selection and training of human resources at varying levels, are there for the picking. The need is to plant a seed now and nurture for a brief period with local talent and see the institutions soar. NRI’s wistful wish of connection with its nation’s umbilical cord will fructify, as also his hard earned money grow phenomenally and safely.

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill. 



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