Ans. Yes, an NRI/ OCI can contribute to capital of a firm or proprietary concern in India on non-repatriation basis, subject to certain restrictions (Refer FAQ 2).

Ans.

Yes, conditions subject to which NRI/OCI’s can make investments in a firm or a Proprietary concern are as follows:

a. The partnership firm or the proprietorship concern in which investment is proposed to be made should not be engaged in any agricultural/plantation activity or Print Media or real estate business.  

b.  The manner in which consideration is to be discharged for making the aforesaid investment should be in accordance with the extant FEMA Regulation (Refer FAQ 3).

^*Real estate business means dealing in land and immovable property with a view to earning profit therefrom. However, it does not include development of townships, construction of residential/ commercial premises, roads or bridges or real estate broking services, and investment in Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations, 2014.

In simple terms, firms or proprietary concern engaged in construction business and earn income by selling/renting such constructed units may not be covered under Real estate business activity and NRI/OCI's can invest in such firms or proprietary concern. In other cases, it may be advised to seek professional assistance before investing in an entity engaged in real estate activity. 

Ans.

Investment by NRI/ OCI to the capital contribution of a firm or proprietary concern can be made either by way of:

      a) inward remittance from abroad through banking channels; or

      b) out of funds held in NRE/ FCNR(B)/ NRO A/c maintained in accordance with FEMA regulations.

Ans. No. Only NRI/OCI can make investment in firm or proprietary concern in India. However, a person resident outside India other than NRIs/ OCI may make an application and seek prior approval of RBI for making such investment in firm or proprietary concern in India.

Ans. A firm or proprietary concern in India may make payment to or for credit of a NRI or OCI, the capital contributed by such person in that firm or proprietary concern or income accruing to such person by way of profit on such contribution in his/her NRO A/c only, irrespective of the type of account from which capital contribution was paid.

Ans.

No. The amount invested for contribution to the capital of a firm or a proprietary concern and the capital appreciation thereon is not be allowed to be repatriated abroad.

However, RBI has given general permission to NRIs to repatriate upto USD 1 million per Financial Year (April – March) out of balances held in their NRO A/c and accordingly, various banks in the past has allowed repatriation of such proceed under USD 1 Million scheme. Hence, it is advisable to seek professional assistance and bank's guidance and understand the conditions associated with repatriability of funds before investing into the firm/proprietary concern.

Ans.

Following persons/entity outside India can invest in an LLP in India:

·  NRI or OCI can contribute to the capital of an LLP on non-repatriation basis. The contribution has to be made by way of inward remittance from abroad through banking channels or out of funds held in NRE/ FCNR(B)/ NRO A/c maintained in accordance with FEMA regulations. Further, capital contribution and appreciation thereon can be repatriated outside India in the manner given in FAQ 6 above.

·  A company, a trust and a partnership firm incorporated outside India and owned and controlled by NRIs or OCIs can also contribute to the capital of an LLP without any limit on non-repatriation basis.

·   A person resident outside India including NRI/OCIs or an entity incorporated outside India shall be eligible investor for the purpose of Foreign Investment in LLPs, subject to certain conditions (Refer FAQ 9). Investment in LLP can be made either by way of capital contribution or by way of acquisition or transfer of profit share of LLP. However, the following persons shall not be eligible to invest in LLPs under automatic route and shall require prior RBI approval:

   · A citizen/ entity of Pakistan and Bangladesh or

   · Foreign Portfolio Investor (FPI) or

Ans.

·    Foreign investment is permitted under the automatic route in LLPs operating in sectors/ activities where 100% Foreign Direct Investment (FDI) is allowed, through the automatic route and there are no FDI linked performance conditions.

·     Foreign Investment in LLP is subject to the compliance of LLP Act, 2008.

·    Pricing guidelines norms - The price at which investment is made in an LLP should not be less than the fair price worked out as per any valuation norm which is internationally accepted or adopted as per market practice. Further, a valuation certificate to this effect shall be issued by the Chartered Accountant or by a practising Cost Accountant or by an approved valuer from the panel maintained by the Central Government.

·   In case of transfer of capital contribution or profit share from a person resident in India to a person resident outside India, the transfer should not be for consideration less than the fair price of capital contribution or profit share of LLP.  Further, in case of transfer of capital contribution or profit share from a person resident outside India to a person resident in India, the transfer should not be for consideration more than the fair price of capital contribution or profit share of LLP.

·   The amount of consideration should be paid by way of inward remittance from abroad through banking channels out of funds held in NRE/FCNR(B)/NRO Account maintained in accordance with the FEMA Regulation.

Ans.

The mode of investment allowed on non-repatriation and repatriation is tabulated below:

Ans.

      · Investment on repatriation basis:

The disinvestment proceeds of an LLP shall be remitted outside India or may be credited to NRE or FCNR(B) A/c of the investor.

       · Investment on non-repatriation basis:

The disinvestment proceeds of an LLP shall be credited only to the NRO A/c of the investor, irrespective of the type of account from which the consideration was paid.

Ans. Yes. A company having foreign investment, engaged in a sector where foreign investment upto 100% is permitted under automatic route and there are no FDI linked performance conditions may be converted into LLP under the automatic route. Such investment in LLP shall be construed as investment on repatriation basis.

Ans. No. Such investments are treated as domestic investments at par with investments made by residents and there is no reporting requirement.  

Ans.

Yes, the reporting requirement are as under:

• Form LLP (I):  An LLP receiving amount of consideration for capital contribution and acquisition of profit shares shall file Form LLP(I) within 30 days from the date of receipt of amount of consideration.
• Form LLP (II): The dis-investment/transfer of capital contribution or profit share between a resident and a nonresident (or vice versa) shall be filed in Form LLP (II) within 60 days from the date of receipt of funds. The onus of reporting shall be on the resident transferor/transferee.

Updated 11/2023