Starting a Business in Kerala as an NRI: Structure, FEMA and Compliance

Many Keralites working abroad plan to start a business at home, either while they are still overseas or when they return. The law allows this, but the structure chosen, the account from which money is invested, and who manages the business in India together decide which FEMA rules apply and what has to be reported.

This article explains the options available to a non-resident Indian (NRI) setting up a business in Kerala.

Choosing the structure

Structure	Can an NRI invest?	Points to note
Private limited company	Yes	Most flexible. At least one director must be resident in India.
LLP	Yes	Foreign investment allowed under the automatic route only in sectors where 100% is permitted without conditions.
One Person Company	Yes, since 2021	The NRI must be an Indian citizen; only one OPC per person.
Sole proprietorship or partnership firm	Yes, on a non-repatriation basis	Not permitted in certain activities such as agriculture, plantation, real estate business and print media.

For most NRIs planning a business of some size, a private limited company is the practical choice. It separates the business from personal assets, allows other shareholders to be brought in, and can be managed through a resident director. See company registration in Kerala.

Repatriable or non-repatriable investment

This is the decision that most affects compliance.

• Repatriable basis: investment from an NRE or FCNR account, or by remittance from abroad. It is treated as foreign direct investment. The company must report the investment to the RBI in Form FC-GPR within 30 days of allotment of shares, and the pricing guidelines apply. Capital and profits can be taken back abroad.
• Non-repatriation basis: investment from an NRO account under Schedule IV of the FEMA (Non-Debt Instruments) Rules. It is treated on par with investment by residents, and FDI reporting does not apply. The capital cannot ordinarily be taken back abroad.

See FDI in private limited companies, filing FC-GPR and reporting foreign remittances.

Managing the business from abroad

• At least one director of a company must be resident in India, meaning that person stayed in India for 182 days or more in the previous calendar year. A trusted family member or associate is often appointed.
• Board meetings can be held by video conference, and most MCA filings are signed digitally, so the NRI director can take part from abroad.
• Bank accounts, GST registration and local licences usually need an authorised person available in Kerala.
• Clear written authority, through board resolutions and, where needed, a power of attorney, avoids disputes later.

Documents an NRI usually needs

• Passport and PAN
• Overseas address proof, such as a bank statement or utility bill
• Notarisation or apostille of documents executed abroad, where required
• Digital signature certificate, which for applicants abroad involves additional verification
• Details of the NRE or NRO account from which the investment will be made

Support available in Kerala

Returned NRIs may be eligible for NORKA Roots’ NDPREM scheme, which provides capital and interest subsidy on bank loans for self-employment projects. See the NDPREM project report.

Frequently asked questions

Can an NRI be the only director?

No. A company needs at least one resident director. An NRI can be a director alongside a resident director.

Does the company need to be registered differently because the promoter is an NRI?

No. The incorporation procedure is the same. The differences lie in documents, FEMA reporting and how investment is brought in.

What changes when the NRI returns to India?

The person’s residential status changes, and NRE and FCNR accounts must be redesignated. Investments made on a repatriable basis continue, but the person’s status should be updated with the company and the bank.

ചുരുക്കം (Summary in Malayalam)

വിദേശത്തുള്ള മലയാളികൾക്ക് കേരളത്തിൽ ബിസിനസ് തുടങ്ങാം. പ്രൈവറ്റ് ലിമിറ്റഡ് കമ്പനിയാണ് സാധാരണ ഏറ്റവും അനുയോജ്യം; ഒരു ഡയറക്ടർ ഇന്ത്യയിൽ താമസിക്കുന്നയാളാകണം. NRE അക്കൗണ്ട് വഴിയോ വിദേശത്തു നിന്ന് അയച്ചോ നിക്ഷേപിച്ചാൽ അത് FDI ആയി കണക്കാക്കും; 30 ദിവസത്തിനകം FC-GPR ഫയൽ ചെയ്യണം; തുക തിരികെ കൊണ്ടുപോകാം. NRO അക്കൗണ്ട് വഴി തിരികെ കൊണ്ടുപോകാത്ത അടിസ്ഥാനത്തിൽ നിക്ഷേപിച്ചാൽ ഇന്ത്യക്കാരുടെ നിക്ഷേപം പോലെ കണക്കാക്കും. തിരികെ എത്തിയ പ്രവാസികൾക്ക് NORKA-യുടെ NDPREM പദ്ധതി ഉപയോഗപ്പെടുത്താം.

This article gives a general overview of business set-up by non-resident Indians under Indian company law and FEMA. FEMA rules, sectoral conditions and forms are revised from time to time; for accurate and current requirements, refer to the FEMA (Non-Debt Instruments) Rules, RBI directions and the Consolidated FDI Policy as amended. The article is not advice on any particular case.