Foreign Direct Investment (FDI) in Proprietorship

Foreign Direct Investment (FDI) in Proprietorship

Foreign Direct Investment(FDI) in India is now experiencing a boom as a result of the government of India. As is common knowledge, foreign businesses, citizens, NRIs, and PIOs can invest in India by purchasing the shares or debt obligations of numerous Indian companies. However, as many compliances must be adhered to in the case of corporations, withdrawing money is not as simple as it is in partnerships or sole proprietorship organizations, where owners can do it whenever they choose.

Companies cannot remove money from the market other than through dividend payments or the sale of their stock to a third party.

Therefore, the idea of investing in proprietorships or partnerships frequently crosses the minds of our foreign clients who are NRIs, POIs, or foreign nationals. In this FAQ, we will address the question of whether foreign direct investment (FDI) is permitted in proprietorship and partnership firms.

A1: Do institutions such as partnership firms and proprietorship firms enable foreign direct investment?

Ans: Under the following conditions, only a Non-Residing Indian (NRI) or a Person of Indian Origin (PIO) resident outside of India may engage in the capital of a company or proprietary business in India on a non-repatriation basis;

1. The money is transferred by inward remittance or is taken out of an approved dealer's or bank's NRE/FCNR(B)/NRO account.

2. Neither the company nor the proprietary concern is involved in the ag/plantation, real estate, or print media industries.

3. Investment money cannot be repatriated outside of India.

A2: Can investments also be undertaken on a basis of repatriation?

Ans: NRIs and PIOs may get prior clearance from the Reserve Bank to engage in sole proprietorship businesses or partnership organizations with a repatriation option. The application's outcome will be decided after consultation with the Indian government.

Q 3: Can a foreign national who is not an NRI or PIO may also engage in partnership firms or real estate firms?

Ans: Non-residents who are not NRIs or PIOs may participate in the capital of a company, a sole proprietorship operation, or any association of people in India by submitting an application and requesting prior authorization from the Reserve Bank. The application's outcome will be decided after consultation with the Indian government.

Additionally, an NRI or PIO is not permitted to invest in a company or proprietorship involved in any agricultural or plantation industry, real estate business, or print media.


Therefore, it is abundantly obvious from the foregoing that even if investments can be made in proprietorship or partnership firms, it is important to keep in mind that NRIs and other foreign nationals are unable to repatriate their capital or income.

However, this can help NRIs who have money sitting in their NRO accounts use it wisely and increase their income by investing it once again in any Prop. / Partnership Business in India.


The author is a certified CSR professional who specializes in corporate social responsibility issues as well as an active company secretary who handles secretarial and FDI affairs. The material in this article, as supplied by the author, is meant to give the person who is reading it broad advice.

The data shouldn't be used as a replacement for particular consultations. Before acting on certain concerns, authors advise seeking expert guidance.

BY: Admin Tax4wealth

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