Can NRI open sole proprietorship in India?

Yes, NRI can open the sole proprietorship business in India however that is highly regulated and shall also require prior permission from the government to start. In other words, if any NRI wants to start a sole proprietorship business, then he shall need to take prior permission from the government first or else he need to invest on non repatriation basis i.e. amount once invested cannot be taken back to the country outside India.

The investment in sole proprietorship business can be divided into three parts:

• Investment in a firm or a proprietary concern in India on non repatriation basis.
• Investment in firm or proprietary concern in India on repatriation basis.
• Investment by nonresidents other than NRIs/PIOs

Let us discuss each of the terms in detail.

Investment by NRI in firm or proprietary concern in India on Nonrepatriation basis

A Nonresident Indian (NRI) or Person of Indian origin (PIO) may invest in partnership firm or sole proprietorship in India on Nonrepatriation basis, i.e. money invested shall not be eligible for repatriation outside India subject to two conditions:

• The amount must be invested by inward remittance or out of NRE/FCNR/NRO account maintained with an authorised dealer.

• The business of the firm or proprietary concern is not engaged in any agricultural/plantation or real estate business or print media sector.

Let us proceed to discuss the second point.

Investment by NRI in firm or proprietary concern in India on repatriation basis

Investment by NRI on repatriation basis shall require prior permission of Reserve Bank for investment in sole proprietorship concerns or partnership firms with repatriation basis.

Further, the application made by the Nonresident Indian shall be decided on the basis of consultation with the government of India.

Let us move to discuss the third point

Investment by nonresidents other than NRIs/PIOs

Any investment made by any person resident outside India other than NRIs or PIO’s may make an application and seek prior approval of the Reserve Bank for making the investment in the capital of the firm or a proprietary concern.

Conclusion

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