A Complete Guide to NRI & OCI Investments in India under FEMA (Non-Debt Instruments) Rules, 2019

By CS Avil Rakshith Salins, Company Secretary | Salins & Co. | www.csavilsalins.com Helping NRIs and Global Indians invest compliantly and confidently in India.

10/18/20255 min read

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1. Introduction

India’s economy continues to offer exciting opportunities for global Indians — whether through entrepreneurship, property, or capital markets. Yet, for every Non-Resident Indian (NRI) or Overseas Citizen of India (OCI), one question consistently arises: what is the correct and compliant way to invest in India?

The answer lies in a set of legal rules framed under the Foreign Exchange Management Act, 1999 (FEMA) — specifically, the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, issued by the Ministry of Finance in consultation with the Reserve Bank of India (RBI).

These rules clearly define what kind of investments are allowed, how money can be brought into India, and when funds can be sent back abroad. Broadly, the law distinguishes between:

Repatriation basis: The investor can take back both the capital and profits to their foreign account.
Non-repatriation basis: The investment and returns must stay in India.

A sound understanding of these two routes is essential for making lawful, efficient, and tax-smart investments.

2. Who Can Invest: The Basics

Non-Resident Indian (NRI)

An NRI is simply an Indian citizen living outside India for work, business, or any other purpose that makes their stay abroad indefinite. Their residential status is determined under FEMA and the Income Tax Act.

Overseas Citizen of India (OCI)

An OCI is a foreign citizen of Indian origin who holds an OCI card under the Citizenship Act, 1955.

Both NRIs and OCIs are permitted to invest in India under FEMA, except in certain sensitive sectors or where special approval is needed.

3. Investments Where Funds Can Be Taken Abroad (Repatriation Basis)

When an NRI or OCI invests on a repatriation basis, the money they bring into India — and any income or profit from it — can later be transferred back to their overseas account. This is governed by Schedule III of the FEMA (Non-Debt Instruments) Rules.

3.1. Investments in Listed Indian Companies

NRIs and OCIs can invest in shares or securities of Indian companies listed on the stock exchange through an authorised dealer bank.

Key limits:

Individual limit: Up to 5% of the company’s total paid-up capital.
Overall limit: All NRI and OCI investors together can hold up to 10%, which may be increased to 24% through a special resolution by the company’s shareholders.

3.2. Investments in Private Sector Banks

For private banks, the same principles apply:

Individual limit: 5%
Aggregate limit: 10%, extendable to 24% with shareholder approval.

3.3. Other Repatriable Avenues

Apart from listed shares, NRIs and OCIs may also invest in:

Mutual funds that invest less than 50% in equity.
Public sector disinvestments, in line with Government offer terms.
National Pension System (NPS), where contributions are made on a repatriable basis.
Exchange-traded derivatives, using instruments approved by the RBI.
Indian Depository Receipts (IDRs) issued by foreign companies.

These options provide a wide range of ways to participate in India’s financial markets while keeping the ability to repatriate profits abroad.

4. Investments That Stay in India (Non-Repatriation Basis)

If an investment is made on a non-repatriation basis, the funds remain in India. The capital and profits cannot be transferred abroad later. Such investments are considered domestic investments, offering simpler compliance.

4.1. What’s Allowed

NRIs and OCIs may:

Buy shares in Indian private or unlisted companies.
Contribute capital to a Limited Liability Partnership (LLP).
Invest in units of AIFs, REITs, or InvITs.
Subscribe to convertible notes of registered startups.

4.2. What’s Not Allowed

Investment on non-repatriation basis is not permitted in:

Agricultural or plantation activities.
Real estate business, except construction and development projects.
Nidhi companies.
Businesses dealing in Transfer of Development Rights (TDRs).

4.3. Small Businesses and Firms

NRIs and OCIs may also invest in partnership or proprietary firms, as long as these are not engaged in agriculture, plantation, real estate trading, or print media.

5. Transferring or Gifting Your Investments

5.1. Repatriable Investments

You can sell or gift your repatriable shares to another non-resident.
However:

The total value of gifts in a year cannot exceed USD 50,000 (approximately ₹40 lakh).
If the transfer breaches overall investment limits, RBI approval is necessary.

5.2. Non-Repatriable Investments

Such investments can only be sold or gifted to another eligible investor, and the new holder must continue to keep them on a non-repatriation basis.

6. Buying and Selling Property in India

Real estate continues to be one of the most common investment areas for NRIs and OCIs, but FEMA imposes clear boundaries.

6.1. What You Can Buy

You may purchase residential or commercial property, but not:

Agricultural land,
Plantation property, or
Farmhouses.

Payment must come from:

Funds remitted through banking channels, or
Balances in your NRE, NRO, or FCNR(B) accounts.

You may also inherit property, provided it was originally acquired under the law.

6.2. What You Can Sell

You may sell or gift your property to:

A person resident in India, or
Another NRI or OCI.

6.3. Restrictions for Certain Nationalities

Citizens of Pakistan, Bangladesh, China, Afghanistan, Iran, Sri Lanka, Nepal, Bhutan, Hong Kong, Macau, or North Korea require prior RBI approval to acquire or transfer immovable property in India.

7. Restrictions Based on Citizenship

Under Press Note 3 (2020 Series), any investment from a person or company based in a country sharing a land border with India — such as China, Pakistan, Bangladesh, Nepal, Myanmar, Bhutan, or Afghanistan — requires Government approval.

This restriction applies even to indirect or beneficial ownership, as well as ESOPs and mergers.

8. Comparison at a Glance

9. Common Mistakes by NRI Investors

Even well-meaning investors sometimes fall foul of FEMA due to lack of clarity. Some frequent errors include:

Buying property using a relative’s local account instead of your own NRE/NRO account.
Investing in startups or LLPs engaged in prohibited activities.
Receiving ESOPs from Indian companies without RBI approval.
Repatriating sale proceeds incorrectly through NRO accounts.

Violations can attract penalties under Section 13 of FEMA, which may require compounding before RBI.

10. Practical Guidance for NRIs and OCIs

Before investing, keep these simple but crucial points in mind:

Open the correct type of account — NRE, NRO, or FCNR(B).
Verify if the company’s sector allows foreign investment.
Maintain proof of inward remittance and valuation reports.
Use only banking channels for property payments.
Seek professional advice before investing in unlisted shares or LLPs.

11. How Salins & Co. Can Support You

At Salins & Co., we help NRIs and OCIs invest confidently by ensuring every step aligns with FEMA.

Our services include:

Structuring of investments (repatriable and non-repatriable).
Drafting compliant Shareholder and Subscription Agreements.
Handling RBI filings and sectoral approvals.
FEMA compounding and regularisation of past violations.
Legal and valuation due diligence for startups and property investments.

📞 Email: connect@csavilsalins.com
🌐 Visit: www.csavilsalins.com
📍 Based in Bengaluru | Serving clients globally

12. Conclusion

The FEMA (Non-Debt Instruments) Rules, 2019 offer a clear path for NRIs and OCIs to become part of India’s growth story — through equity, startups, or real estate. The key is to understand the difference between repatriable and non-repatriable investments and to follow RBI’s reporting framework closely.

With the right structure and guidance, your India-focused investments can remain both compliant and rewarding.

Disclaimer:
This article is for general information and should not be treated as legal advice. Please seek professional guidance based on your personal situation before making or repatriating any investment.