NRI stands for Non-Resident Indian, but it can be classified into two categories;
This is defined under the FEMA Act, 1999 where a Private Limited Company is the most simpler medium for the NRI or Foreign Investors to invest in a business in India.
A person residing outside India may purchase equity or preference shares or convertible debentures offered on the right basis by a Private Limited Company or Public Limited Company, under specific conditions:
When an NRI is transferring shares to an Indian Resident, it is possible as the Reserve Bank of India has given general permission for such transfers and it can be done by gifting it to a resident of India.
This transfer needs prior permission from the Reserve Bank of India, as the shares that are being transferred by a person who is residing outside of India to a person who is residing in India.
The Reserve Bank of India permits to transfer of shares of a Company from one NRI to another NRI/PIO.
Under FEMA regulations, an Indian Company can issue shares under the automatic route to a person resident outside India. The following are some of the types of companies that can avail the automatic route of FDI:
An India company issuing shares to a person resident outside India should receive the payment for the shares through one of the following routes:
In the case of NRIs, they can also execute the transfer of shares via their demat accounts. Such transfer of shares from the demat account can either be for consideration or without consideration.
For all the foreign investments made by NRIs and foreign nationals, it is mandatory to file a report to the Regional Office of the RBI within 30 days from the date of receipt of the amount and also another report in FC-GPR for the acquisition of right shares and bonus shares.
Details of Foreign Development Investments are to be provided in Part A and B.