Investment by a foreigner resident in sole proprietorship

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Shekhar (Querist)

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)

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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