Home / News / India /  Non-repatriable investment by NRIs not FDI, says govt

The government on Friday clarified that downstream investment by a company owned and controlled by non-resident Indians (NRIs) on a non-repatriation basis will not be considered foreign direct investment (FDI).

“Investments by NRIs on a non-repatriation basis as stipulated under Schedule IV of Foreign Exchange Management (non-debt instruments) Rules 2019 are deemed to be domestic investment at par with the investments made by residents. Accordingly, an investment made by an Indian entity which is owned and controlled by NRI(s) on a repatriation basis shall not be considered for calculation of Indian foreign investment," the department for promotion of industry and internal trade (DPIIT) said by issuing press note 1 of 2021 series.

Investment on repatriation basis means the sale or maturity proceeds of an investment, net of taxes, are eligible to be transferred out of India. In case of non-repatriation investments, this cannot be transferred out of the country. DPIIT said the press note will be effective from the date of notification under Foreign Exchange Management Act (FEMA).

NRI investments that are repatriable are considered FDI while non-repatriable investments are considered domestic investment. However, existing guidelines clearly lay down that an Indian company is one that is both “owned" and “controlled" by resident Indians and violating any one condition makes the company foreign-owned.

A senior chartered accountant requesting anonymity said that , till now there were different legal interpretations on whether non-repatriable investments by an NRI should be considered domestically controlled or foreign controlled. “The fresh clarification settles the position that it will be considered domestically controlled. This is a helpful clarification by the government," he added.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Recommended For You

Edit Profile
Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout