NRI Investment in India Under FEMA: The Two Routes
Which route, which account pays, and where the proceeds land: the three questions behind every NRI investment.
An NRI who wants to buy Indian shares, units or a stake in an Indian business has two doors under FEMA: invest on a repatriation basis, where the sale proceeds can go back abroad, or on a non-repatriation basis, where the money stays in India. The rules live in the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (the NDI Rules): Schedule III for the repatriable stock-exchange route, Schedule IV for the non-repatriable route.
The branch question is always the same: which route, which account pays, and where do the proceeds land. Get those three right and most CCFE questions on this topic answer themselves.
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Non-Repatriation Basis: Treated Like a Resident's Investment
Under Schedule IV, an NRI or OCI (including a company, trust or partnership firm outside India owned and controlled by NRIs or OCIs) may invest without any limit in capital instruments of an Indian company, on or off the stock exchange, in units of an investment vehicle, in the capital of an LLP, and in convertible notes of a startup. The investment is deemed domestic investment, at par with a resident's, so it does not count towards foreign investment caps.
Payment may come from abroad through banking channels or from NRE, FCNR(B) or NRO accounts. The catch is on the way out: sale or maturity proceeds go only to the investor's NRO account, whatever account paid for the purchase, and the principal and capital appreciation cannot be repatriated as such. NRO balances can then leave India only under the separate facility of up to USD 1 million allowed under the Remittance of Assets Regulations.
The Two Routes Side by Side
Who
Repatriation basis (Schedule III)
Any individual resident outside India, including NRIs and OCIs
Non-repatriation basis (Schedule IV)
NRIs and OCIs, and entities abroad they own and control
What
Repatriation basis (Schedule III)
Listed equity instruments, bought and sold on a recognised stock exchange
Non-repatriation basis (Schedule IV)
Capital instruments of any Indian company, investment vehicle units, LLP capital, startup convertible notes
Limits
Repatriation basis (Schedule III)
Below 10% per investor; 24% for all such individuals together
Non-repatriation basis (Schedule IV)
No limit; counted as domestic investment
Paid from
Repatriation basis (Schedule III)
Inward remittance or a repatriable deposit account, via a designated account
Non-repatriation basis (Schedule IV)
Inward remittance, or NRE, FCNR(B) or NRO account
Proceeds go to
Repatriation basis (Schedule III)
Abroad, or the designated repatriable account
Non-repatriation basis (Schedule IV)
NRO account only
| Point | Repatriation basis (Schedule III) | Non-repatriation basis (Schedule IV) |
|---|---|---|
| Who | Any individual resident outside India, including NRIs and OCIs | NRIs and OCIs, and entities abroad they own and control |
| What | Listed equity instruments, bought and sold on a recognised stock exchange | Capital instruments of any Indian company, investment vehicle units, LLP capital, startup convertible notes |
| Limits | Below 10% per investor; 24% for all such individuals together | No limit; counted as domestic investment |
| Paid from | Inward remittance or a repatriable deposit account, via a designated account | Inward remittance, or NRE, FCNR(B) or NRO account |
| Proceeds go to | Abroad, or the designated repatriable account | NRO account only |
Route, account and proceeds, tested the way CCFE asks.
Where an NRI Cannot Invest on a Non-Repatriation Basis
Schedule IV bars investment in equity instruments or units of:
- check_circleA Nidhi company.
- check_circleA company engaged in agricultural or plantation activities.
- check_circleA company in real estate business or construction of farm houses.
- check_circleA company dealing in Transfer of Development Rights (TDRs).
- check_circleFor contributions to a firm or proprietary concern, the bar also covers print media and real estate business (dealing in land and property for profit).
How CCFE Tests This
Expect a scenario MCQ: an NRI sells shares bought on a non-repatriation basis, using NRE funds, and the options offer NRE, FCNR(B), NRO or remittance abroad. The answer is NRO, because the route decides where proceeds go, not the account that paid. A second favourite is the limit question. Courseware written before June 2026 gives the older, lower caps that applied only to NRIs and OCIs; the current position is below 10% per investor and 24% in aggregate. Read the question's framing, and learn the current rule.
FAQs
Can an NRI invest in Indian shares on a repatriation basis?expand_more
Yes. Listed shares bought on a recognised stock exchange through a designated AD branch, paid by inward remittance or from a repatriable account, can be sold and the proceeds remitted abroad. The holding must stay below 10% of the company's paid-up capital.
What is the NRI shareholding limit in a listed Indian company?expand_more
Since June 2026, each individual resident outside India must hold below 10%, and all such individuals together up to 24%. The older, lower caps that applied only to NRIs and OCIs were replaced by the June 2026 amendment.
Where are sale proceeds of non-repatriable investments credited?expand_more
Only to the investor's NRO account, even if the purchase was paid from an NRE or FCNR(B) account.
Can an NRI invest in an agricultural company?expand_more
Not on a non-repatriation basis. Schedule IV excludes companies engaged in agricultural or plantation activities, along with Nidhi companies, real estate business, farm house construction and TDR dealing.
Next steps
- Repatriable vs Notarrow_forward
- NRO Accountarrow_forward
- NRI Propertyarrow_forward
- FEMA & Trade Finance Conceptsarrow_forward
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