Investment by a foreigner resident in sole proprietorship

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Shekhar (Querist)
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30 March 2012 Hi All,
Can anyone tell me rules & compliances if a foreigner resident wanna to investment in a sole proprietorship firm. What are the con's & pro's in that?
What is the method to take this investment?
What are the tax implications for both parties?

Thanks in advance.

Ajay Mishra

Ajay Mishra (Expert)
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31 March 2012 Hi

Read master circular issued by RBI on FDI.

FDI in Partnership Firm / Proprietary Concern:
(i) A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India can invest in the capital of a firm or a proprietary concern in India on non-repatriation basis provided;
(a) Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers / Authorized banks.
(b) The firm or proprietary concern is not engaged in any agricultural/plantation or real estate business or print media sector.
(c) Amount invested shall not be eligible for repatriation outside India.
15
(ii) Investments with repatriation option: NRIs/PIO may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation option. The application will be decided in consultation with the Government of India.
(iii)Investment by non-residents other than NRIs/PIO: A person resident outside India other than NRIs/PIO may make an application and seek prior approval of Reserve Bank for making investment in the capital of a firm or a proprietorship concern or any association of persons in India. The application will be decided in consultation with the Government of India.
(iv)Restrictions: An NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business or print media.

Regards

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