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NRIs investment on non-repatriation basis in Indian firm will be treated as domestic

PTI/New Delhi
Filed on March 20, 2021
Photo: Reuters

The clause was added in the guidelines for calculation of direct and indirect foreign investments.

Investment by non-resident Indians (NRIs) on non-repatriation basis in an Indian company will be treated as domestic investment for the purpose of calculating indirect overseas inflows, according to a DPIIT press note.

The Department for Promotion of Industry and Internal Trade (DPIIT) said that the government has reviewed the FDI (foreign direct investment) policy in relation to investments made by an Indian company owned and controlled by non-resident Indians (NRIs) on a non-repatriation basis.

In order to provide a clarity on downstream investments made by NRIs, a clause has been added in the FDI policy.

The clause was added in the guidelines for calculation of direct and indirect foreign investments.

It said that "investments by non-resident Indians (NRIs) on a non-repatriation basis" as stipulated under a schedule of Foreign Exchange Management (non-debt instruments) Rules 2019 "are deemed to be domestic investments at par with the investments made by residents".

"Accordingly, an investment made by an Indian entity which is owned and controlled by NRIs on a non-repatriation basis shall not be considered for calculation of indirect foreign investments," it added.

It said that this decision will take effect from the date of FEMA notification.

Commenting on the decision, Rajesh Gandhi, Partner, Deloitte India, said that the press note provides a useful clarification that NRI investment on non-repatriation basis in an Indian entity will not be considered as FDI for the purpose of calculating indirect foreign investment by such Indian entity.

"This is in line with the existing policy that NRI investment on non-repatriation basis is treated on par with rupee investment," he said.





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