NRIs can invest in India in the form of FDI in Indian firms

V Nagarajan, Business columnist

As per FDI Policy, 2013 a non-resident entity (Entity here means NRIs, POIs, OCBs, SEBI registered FVCI, FIIs etc.) can invest in India, subject to the FDI Policy except in those sectors/ activities, which are prohibited, according to Mohit Sauja, a member Corporate Law Committee of ICSI. The following are the areas where NRIs can invest in India.

1. NRIs can invest in India in form of foreign direct investment (FDI) in Indian Companies i.e. private limited/ limited companies. The Indian Companies can issue capital against FDI.

The FDI is allowed in the various sectors through automatic route or through approval route.

In case of automatic route, only the intimation to RBI is sufficient when the money is being invested in Indian Companies or the money is repatriated outside the country.

And in case of approval route, first the approval is required from the Government i.e. FIPB Approval (Foreign Investment Promotion Board) for investment in Indian Company and only after the approval from FIPB, The investment can be made in such Indian Companies.

2. NRIs can also invest in Limited Liability Partnerships (LLPs) through automatic route where the FDI is allowed 100 per cent and in other cases with the Government Approval Route.

Moreover, LLPs with FDI will not be allowed to operate in agricultural/plantation activity, print media or real estate business.

3. NRIs or PIOs) can also invest in capital of the firms whether partnership firms/ sole proprietorship concerns but the biggest advantage is that they cannot repatriate the money back to abroad i.e. they can invest on non-repatriation basis and that even subject to some conditions like

(i) The investments must have not been done in agricultural/plantation or real estate business or print media sector.

(ii) Amount is invested by inward remittance or out of NRE/FCNR (B)/NRO account maintained with Authorized Dealers / Authorised banks.

(iii) Amount invested shall not be eligible for repatriation outside India.

The NRIs/ PIOs can repatriate such investments back to abroad from such sole proprietorship./ partnership firms subject to the prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation option. The application will be decided in consultation with the Government of India.

4. Investment is allowed in Indian Venture Capital Undertakings (IVCUs) /Venture Capital Funds (VCFs) etc. through automatic route or approval route depending upon the company set up i.e. whether VCF has been incorporated as a Trust or as Company under Companies Act, 1956 and subject to the pricing guidelines, reporting requirements, mode of payment, minimum capitalisation norms, etc.

Q: I have inherited my family property in India. What are the documents required to take it forward for sale. Please clarify. Dayanand, Sharjah
When you inherit family property, the first thing you must do is to transfer the title of the property to your name. This can be done by a process called mutation of revenue records. For this, you require a copy of the Will or in the absence of the Will, a succession certificate issued by the local court.

Q: I am receiving commercial property as gift from my relative in India? Is it taxable? Balal Chandran, Dubai
No. From October 1, 2009, gifting of immovable property was also included as taxable income. However, there are certain circumstances under which gift (including an immovable property) will not be subject to income-tax. Further, if the gift is received from a relative, received on marriage, under a Will, by way of inheritance, etc.

Q: I am planning to build a house in my home town in India. If I include my wife’s name while seeking home loan for the construction, can she claim tax benefit on the interest amount paid? Please advice. Kazim, Dubai
The tax deduction is available to only those in whose name the income from the property is assessed under “income from house property”. In case of joint names, assessment is done in both persons-husband and wife — on the basis of shareholding in the property.

When the house is in husband’s name only, the wife is not assessable for any income out of such property. Therefore, she cannot claim any deduction of interest or other expense irrespective of the fact whether she is paying the loan or not.

You and your wife can avail the tax benefits if (a) the title to the property is in joint names as per property documents. (b) both of you are co-borrowers against the same property. (c) ratio of ownership can be based on your income levels. There is a need for separate agreement for the purpose. Otherwise it will be presumed in case of husband and wife that it is equal.