NRIs non-repatriable investment now out of FDI numbers: DPIIT

Given the projected irregularities in the estimation process of FDI by NRIs, DPIIT has recently presented its clarification on the readjustment of its FDI policy for NRIs non-repatriable investments.

Clarifying for the downstream investment of NRIs, DPIIT stated that any further institutional investment made by companies held by NRIs on a non-repatriable basis shall on the issue of their clarification, would not be considered a part of the FDI summation process.

This means that investments made by NRIs on a non-repatriable basis would be wiped out of the FDI computation process by considering them as non-FDIs.

The department said “it is now a part of the policy and has been clarified for NRIs investors, those opting or planning for downstream investment through NRI route. The clause has been included in the guidelines exhibited for the calculation of Direct and Indirect foreign investments.

Some analysts are of the view that this shall now open more avenues for NRIs to invest in their vowed choices for investment including multi-brand retail chains, the insurance, or the banking sector as their NRI investment on a non-repatriable basis shall now be a domestic investment.

The investment made by NRIs on repatriation or non-repatriation has been stipulated under the Foreign Exchange Management (non-debt instrument) Rules 2019 where investments non-repatriation basis means when the net proceeds of the investment after its sale, taxes, fees, and all charges applicable are not permitted to be taken out of the country.

The clause with inclusion in the rules specifies for conformity of investments made by NRIs on the non-repatriable basis to be domestic investments at par with the investments made by residents.

The said clarification will be taken into effect from the date of issue of clarification by the DPIIT board through FEMA.

Within the existing rules, an Indian company was entitled to be domestic if completely owned or managed by resident Indians, but with the issue of this clarification companies held by NRIs on a non-repatriable basis shall also be treated as Indian domestic companies. This clarification settles the position for all the NRI institutional investors and interpreters.

While the clarification above changes position for non-repatriable investments, the investments made on a repatriable basis shall still be treated as FDIs and will subject to norms of FDI and FEMA.

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