Key takeaways
- NRIs and foreign nationals can own and run Indian companies, subject to India's foreign direct investment rules for their sector.
- A private limited company is the most common route; every company needs at least one director who stays in India for 182 days or more in the financial year.
- NRIs who are Indian citizens can form a One Person Company; foreign nationals cannot.
- Money must come through banking channels and be reported, for example in Form FC-GPR within 30 days of issuing shares.
Yes, an NRI or a foreign national can start a business in India, and many do. The real questions are which structure to use, whether your sector allows foreign investment under the automatic route, and how to bring money in and report it correctly. This guide covers the main structuring considerations for NRIs and foreign nationals.
First, which rules apply to you?
India's foreign exchange law, the Foreign Exchange Management Act, 1999 (FEMA), looks at whether you are a "person resident in India" or a "person resident outside India". Within the second group, the rules give some extra options to NRIs (Indian citizens living abroad) and OCIs (Overseas Citizens of India). Everyone else resident outside India, including foreign companies, follows the general foreign direct investment (FDI) rules.
Your tax residency is a separate question under the income tax law, and it can differ from your FEMA status.
The main structures
| Structure | NRIs | Foreign nationals | Points to note |
|---|---|---|---|
| Private limited company | Yes | Yes | The most common route. FDI is allowed under the automatic route in most sectors. |
| Limited liability partnership | Yes | Yes, in permitted sectors | Foreign investment is allowed under the automatic route only in sectors open to 100% FDI without performance conditions. |
| One person company | Yes, if an Indian citizen | No | Only an Indian citizen, resident or not, can form an OPC. |
| Proprietorship or partnership firm | NRIs and OCIs, on a non-repatriation basis | Only with RBI approval | Not allowed in agricultural or plantation activities or print media. |
A foreign company can also set up a branch, liaison or project office in India, which follows a separate approval process.
The resident director and partner rules
- Companies: under section 149(3) of the Companies Act, 2013, every company must have at least one director who has stayed in India for a total of at least 182 days during the financial year. For a newly incorporated company, the period is counted proportionately.
- LLPs: at least two designated partners are needed, and at least one must be resident in India, which for LLPs means staying in India for at least 120 days during the financial year.
Plan this early. If all the founders live abroad, you will need a trusted resident director or designated partner.
Sector rules and approvals
Foreign investment comes in through one of two routes:
- Automatic route: no prior government approval is needed. Most sectors fall here, sometimes with a cap on the foreign shareholding.
- Government route: prior approval is needed, for example in some regulated sectors.
A few activities are prohibited for foreign investment altogether, including lottery, gambling and betting.
Investment from an entity of a country that shares a land border with India, or where the beneficial owner is situated in or is a citizen of such a country, has needed government approval since 2020. In March 2026 the government relaxed this for small, non-controlling holdings, but investments that carry control still need approval. If any investor has a link to a neighbouring country, check the current position before you invest.
Bringing money in
- Banking channels: share capital must come through normal banking channels, as an inward remittance from abroad or from the investor's NRE or FCNR account, with KYC done by the receiving bank.
- Pricing: shares issued to a person resident outside India must be priced at or above their fair value, worked out under the FEMA pricing rules and certified by a chartered accountant, SEBI-registered merchant banker or practising cost accountant. Shares taken by non-resident subscribers to the memorandum at incorporation can be issued at face value.
- Timing: shares must be issued within 60 days of receiving the money, or the money refunded.
Reporting to the RBI
- Form FC-GPR: filed within 30 days of issuing shares to a person resident outside India, on the RBI's FIRMS portal.
- Form FDI-LLP(I): the equivalent filing for foreign investment in an LLP, also within 30 days.
- Annual return on foreign liabilities and assets (FLA): due by 15 July each year for companies and LLPs with foreign investment.
Late or missed reporting can attract late submission fees or compounding, so build these dates into your compliance calendar.
Documents for foreign directors and shareholders
Foreign nationals use their passport as identity proof, with a recent overseas address proof. Documents signed or issued abroad are usually notarised and apostilled, or attested by the Indian embassy, and translated into English if needed. Our documents checklist covers the details.
Step by step
- Check that your sector is open to foreign investment under the automatic route, and note any cap.
- Choose the structure: usually a private limited company.
- Arrange a resident director, or a resident designated partner for an LLP.
- Get passports and address proofs attested, and obtain digital signatures.
- Incorporate the company and open its bank account.
- Bring in the capital, value and issue the shares, and file FC-GPR within 30 days.
- Keep up with annual filings, the FLA return and tax compliance.
Our foreign business setup team handles incorporation for NRI and foreign founders, along with FEMA reporting.
This article explains the general position under FEMA, the FDI policy and the Companies Act as on the date shown. Foreign investment rules change and depend on your sector and facts, so take advice before investing.
Frequently asked questions
Does a foreign national need to visit India to register a company?
Usually not. Documents can be signed abroad, notarised and apostilled or attested by the Indian embassy, and the company incorporated online. The company still needs at least one director who meets the Indian residency test.
Can an NRI be the only director of a company?
Not of a private limited company, which needs at least two directors. An NRI can be the sole member of a One Person Company, but every company must have at least one director who stayed in India for 182 days or more in the financial year, so a non-resident owner usually appoints a resident director.
Can a foreign national run a sole proprietorship in India?
NRIs and OCIs may invest in a proprietorship or partnership firm on a non-repatriation basis, subject to conditions. Other persons resident outside India need prior approval from the Reserve Bank of India for this.
Are there sectors closed to foreign investment?
Yes. A few sectors are prohibited, such as lottery, gambling and betting, and others need government approval or have limits on foreign shareholding. Check the current FDI policy for your sector before investing.