India changes rules on investment by non-residents in domestic companies

INDIA's industrial promotion department has said that 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.

The government has reviewed the foreign direct investment (FDI)  policy in relation to investments made by an Indian company owned and controlled by non-resident Indians, the department for promotion of industry and internal trade said in a statement.

It added that a clause has been included in the guidelines for calculation of direct and indirect foreign investments to provide clarity on downstream investments.

Investments by NRIs 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, the statement added.

The decision will take effect from the date of foreign exchange management act (FEMA) notification.

"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," said Rajesh Gandhi, Partner, Deloitte India.

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