Can a Foreigner or NRI Start a Company in India?
India is one of the most attractive destinations for foreign investment and business setup. Whether you are a foreign national looking to establish a business presence or an NRI wanting to start a venture in India, the legal framework supports and encourages foreign entrepreneurship. However, the process involves specific rules around FDI regulations, director requirements, documentation, and RBI compliance that you must understand before getting started. This guide covers everything you need to know about starting a company in India as a foreigner or NRI.
Business Structures Available for Foreigners and NRIs
| Entity Type | Suitability for Foreigners | Key Considerations |
|---|---|---|
| Private Limited Company | Most recommended | 100% foreign ownership allowed, simplest FDI compliance |
| LLP | Limited use | Only in sectors with 100% automatic route FDI |
| Wholly-Owned Subsidiary | For foreign companies | Parent company holds 100% shares in Indian entity |
| Joint Venture | When partnering with Indian entity | Shared ownership with an Indian company |
| Branch Office | Limited operations | Cannot manufacture; can provide services, export/import |
| Liaison Office | Communication only | No commercial activity; for market research and liaison |
FDI Policy: What Foreigners Can and Cannot Do
Sectors Where 100% FDI is Allowed (Automatic Route)
- Information Technology and IT Services
- E-commerce (marketplace model only)
- Manufacturing
- Consulting and advisory services
- Tourism and hospitality
- Food processing
- Healthcare (greenfield projects)
- Renewable energy
- Infrastructure
- Construction development projects
Sectors with FDI Caps (Partial Restrictions)
| Sector | FDI Cap | Route |
|---|---|---|
| Insurance | 74% | Automatic |
| Telecom | 100% (up to 49% auto, beyond 49% government) | Mixed |
| Defense | 74% automatic, up to 100% government route | Mixed |
| Print media (newspapers) | 26% | Government |
| FM Radio | 26% | Government |
| Multi-brand retail | 51% | Government |
Prohibited Sectors (No FDI Allowed)
- Lottery business
- Gambling and betting
- Chit funds
- Nidhi companies
- Real estate business (except construction development)
- Manufacturing of cigars, cigarettes, and tobacco
- Atomic energy
Step-by-Step Registration Process for Foreigners
Step 1: Obtain DSC (Digital Signature Certificate)
Every director needs a DSC issued by an Indian Certifying Authority (like eMudhra, Sify, or NSDL). Foreign directors can obtain a DSC remotely through video verification. The process takes 1 to 2 working days.
Step 2: Apply for DIN (Director Identification Number)
DIN is obtained as part of the SPICe+ incorporation form. Foreign directors need to provide their passport (notarized and apostilled) and overseas address proof.
Step 3: Reserve Company Name
Apply for name reservation through SPICe+ Part A or RUN form. The name must comply with MCA naming guidelines and should not conflict with existing companies or trademarks.
Step 4: Prepare Incorporation Documents
- Memorandum of Association (MoA): Defines the company's objectives, capital, and registered office
- Articles of Association (AoA): Defines the company's internal rules and regulations
- Director consent and declarations
- Proof of registered office address
- Subscriber declarations
Step 5: File SPICe+ with MCA
Submit the SPICe+ form on the MCA portal with all documents. This single form covers name approval, incorporation, DIN allotment, PAN and TAN application, and GST registration (optional).
Step 6: Post-Incorporation Compliance
- Open a bank account with the Certificate of Incorporation
- Receive foreign investment and issue shares
- File FC-GPR with RBI within 30 days of share allotment
- Apply for any sector-specific licenses required
Documents Required
For Foreign Nationals
- Passport: Notarized and apostilled (or consularized if the country is not part of the Hague Convention)
- Address proof: Overseas utility bill, bank statement, or government-issued ID (notarized and apostilled)
- Photograph: Recent passport-size photographs
- PAN: Applied through Form 49AA (optional for incorporation, required for tax compliance)
- DSC: Class 3 Digital Signature Certificate from an Indian CA
For NRIs
- Indian passport (current or expired)
- PAN card
- Aadhaar card (if available)
- Address proof: Overseas address proof (utility bill, bank statement)
- DSC: Class 3 from an Indian CA
All foreign documents must be notarized by a local notary in the country of residence and then apostilled (for Hague Convention countries) or consularized by the Indian Embassy (for non-Hague countries). This process authenticates the documents for use in India and typically takes 5 to 10 business days.
Indian Resident Director Requirement
Every company in India must have at least one director who is an Indian resident. An Indian resident director is defined as a person who has stayed in India for at least 182 days in the previous calendar year.
Options for Meeting This Requirement
- Appoint an Indian co-founder or business partner as a resident director
- Hire a professional director: Some CA/CS firms and professional organizations provide nominee director services
- Relocate to India: If the foreign founder plans to relocate, they can qualify as a resident director after spending 182 days in India
RBI and FEMA Compliance
Companies with foreign investment must comply with Reserve Bank of India (RBI) regulations and the Foreign Exchange Management Act (FEMA):
Mandatory Filings
- FC-GPR (Foreign Currency Gross Provisional Return): Filed within 30 days of allotment of shares to foreign investors through the RBI's FIRMS portal
- FLA Return (Foreign Liabilities and Assets): Annual return filed by July 15 with RBI, reporting all foreign investment received
- FCGPR Single Master Form: Used for reporting various FDI-related transactions
Pricing Guidelines
- Shares issued to foreign investors must be priced at or above fair market value (FMV)
- FMV is determined by a SEBI-registered merchant banker or CA using DCF (Discounted Cash Flow) method for unlisted companies
- Shares cannot be issued to foreigners below FMV (to prevent under-reporting)
Tax Implications for Foreign-Owned Companies
| Tax Type | Rate/Details |
|---|---|
| Corporate Income Tax | 25% (turnover up to Rs. 400 crore) or new regime options |
| Dividend Distribution | Taxable in the hands of shareholders at applicable rates |
| Transfer Pricing | Required for transactions between Indian company and foreign parent/associates |
| Withholding Tax on Dividends to Non-Residents | 20% (can be reduced under DTAA) |
| DTAA Benefits | India has tax treaties with 90+ countries to avoid double taxation |
Common Challenges and How to Overcome Them
- Document apostille delays: Start the apostille process early (at least 2 to 3 weeks before planned incorporation)
- Finding a reliable Indian resident director: Work with professional services firms that provide vetted nominee directors
- Bank account opening: Some banks require physical presence of at least one foreign director; choose banks experienced with foreign-owned companies
- Time zone differences: Work with professionals who can coordinate across time zones for document signing and verification
- Understanding compliance requirements: Engage a CA and CS who specialize in companies with foreign investment
Conclusion
Starting a company in India as a foreigner or NRI is entirely feasible and actively encouraged by the Indian government through progressive FDI policies. The key requirements are having proper documentation (notarized and apostilled), at least one Indian resident director, and compliance with RBI and FEMA regulations for foreign investment. With the right professional guidance, the entire process can be completed in 15 to 30 days.
IncorpX specializes in company registration for foreign nationals and NRIs. We handle document verification, apostille coordination, DSC and DIN procurement, MCA filing, and post-incorporation RBI compliance to make the process seamless.
Frequently Asked Questions
Can a foreigner start a company in India?
Yes, a foreigner can start a company in India. Foreign nationals can incorporate a Private Limited Company, LLP (with some restrictions), or a wholly-owned subsidiary. Foreign direct investment (FDI) is allowed in most sectors under the automatic route. The foreigner does not need to be physically present in India for incorporation.
Can an NRI incorporate a company in India?
Yes, NRIs (Non-Resident Indians) can easily start a company in India. NRIs holding Indian passports can incorporate Private Limited Companies, LLPs, or OPCs. They can invest in Indian companies under the FDI automatic route. NRIs have fewer documentation requirements compared to foreign nationals since they hold Indian PAN cards and Aadhaar.
Does a foreign-owned company need an Indian director?
Yes, every company incorporated in India must have at least one director who is an Indian resident (someone who has stayed in India for at least 182 days in the previous calendar year). The other directors can be foreign nationals or NRIs residing outside India.
What documents does a foreigner need for company registration?
A foreign national needs: valid passport (notarized and apostilled), address proof from the home country (utility bill or bank statement, notarized and apostilled), PAN card (can be applied for through Form 49AA), DSC (Digital Signature Certificate) from an Indian certifying authority, and passport-size photographs.
Is 100% FDI allowed in India?
100% FDI is allowed in most sectors under the automatic route, meaning no prior government approval is needed. Sectors where 100% FDI is permitted include IT, e-commerce (marketplace model), manufacturing, consulting, and many services. Some sectors like defense, media, insurance, and telecom have sectoral caps (ranging from 26% to 74%), and certain sectors like gambling and lottery are prohibited for FDI.
Does a foreigner need a PAN card to start a company in India?
A PAN card is not mandatory for incorporation, but foreign directors will need a PAN for tax-related compliances if they earn income in India. Foreign nationals can apply for PAN through Form 49AA. A DIN (Director Identification Number) is mandatory and can be obtained during incorporation through SPICe+ without a PAN (using passport details).
Can a foreigner be the sole owner of an Indian company?
A foreigner can own 100% shares of an Indian company (in sectors where 100% FDI is allowed). However, a Private Limited Company requires at least 2 shareholders and 2 directors, with at least one director being an Indian resident. So while ownership can be 100% foreign, the management structure must include an Indian resident director.
What is the difference between automatic and government route FDI?
Under the automatic route, foreign investors do not need prior government approval and can invest directly after complying with sectoral conditions and RBI reporting requirements. Under the government route, prior approval from the concerned ministry or department is required before making the investment. Most sectors now fall under the automatic route.
Can a foreigner start an LLP in India?
Yes, but with significant restrictions. An LLP with FDI is allowed only in sectors where 100% FDI is permitted under the automatic route and there are no FDI-linked performance conditions. Additionally, the total foreign investment in the LLP must comply with the LLP Act and FEMA regulations. In practice, most foreigners prefer to set up a Private Limited Company due to its simpler FDI compliance.
What RBI compliances are required for foreign-owned companies?
Foreign-owned companies must comply with several RBI (Reserve Bank of India) requirements: file FC-GPR (Foreign Currency Gross Provisional Return) within 30 days of share allotment to foreign investors, report the investment in the Annual Return on Foreign Liabilities and Assets (FLA), and comply with FEMA (Foreign Exchange Management Act) regulations for all cross-border transactions.
Can a foreign company open a branch or liaison office in India?
Yes, foreign companies can establish a Branch Office, Liaison Office, or Project Office in India with RBI approval. A Liaison Office can only perform communication and liaison activities (no commercial activities). A Branch Office can carry out business activities specified in the approval. However, setting up an Indian subsidiary (Private Limited Company) is generally preferred for full-scale business operations.
