NRI investment in Indian startups: routes, accounts and tax
An NRI can invest in an Indian startup on a repatriable basis, as foreign investment with FEMA pricing rules and FC-GPR reporting, or on a non-repatriable basis under Schedule IV of the NDI Rules, which is treated as domestic investment. Money comes from abroad or an NRE, FCNR(B) or NRO account, directly or through an AIF.
By Akshay Kendurkar, CEO, MyStartupValley
Many Indian angel rounds now include someone writing from Dubai, Singapore or California. For a non-resident Indian, the cheque itself is the easy part; the route the money takes decides the paperwork, the price rules and whether the gains can ever leave India.
This guide sets out those routes from the RBI and tax texts. It explains the rules and gives no investment or tax advice; check your own case with a chartered accountant.
Who counts as an NRI for startup investment?
For FEMA investment rules, a non-resident Indian is an individual resident outside India who is a citizen of India. An Overseas Citizen of India, a registered OCI cardholder resident abroad, gets the same investment routes. Companies, trusts and firms abroad owned and controlled by NRIs or OCIs can use the non-repatriable route too.
The definitions sit in the RBI's Master Direction on foreign investment, updated up to 15 June 2026. One trap: shares you bought while resident in India don't become repatriable when you move abroad. The Master Direction treats them as held on a non-repatriation basis.
Should an NRI invest on a repatriable or non-repatriable basis?
A repatriable investment is foreign investment: sectoral caps, the fair value floor and FC-GPR reporting apply, and sale proceeds can be sent abroad. A non-repatriable investment under Schedule IV of the NDI Rules is deemed domestic: no pricing guidelines, but sale proceeds go only to an NRO account in India.
| Repatriable | Non-repatriable (Schedule IV) | |
|---|---|---|
| Treated as | Foreign direct investment | Domestic investment, like a resident's |
| What you can buy | Equity, CCPS, CCDs, warrants; convertible notes of Rs 25 lakh or more per tranche | Any capital instrument without limit, AIF and other investment vehicle units, LLP capital, startup convertible notes |
| Price floor | Fair value certified within 90 days | Pricing guidelines don't apply |
| Pay from | Inward remittance, NRE or FCNR(B) | Inward remittance, NRE, FCNR(B) or NRO |
| Sale proceeds | Can be remitted abroad, net of tax | Credited only to NRO |
| Company files | FC-GPR within 30 days | No FC-GPR, as it is not FDI |
Annex 4 of the Master Direction sets out the Schedule IV route and its exclusions: an NRI cannot invest in a Nidhi company, a company in agricultural or plantation activities, real estate business, construction of farm houses or dealing in transferable development rights.
The repatriable route follows the same rules as any foreign investor. Our explainer on foreign investment rules for Indian startups covers entry routes, caps and pricing in full.
Which bank account should the money come from?
Repatriable investments must be paid by inward remittance from abroad or from a repatriable account, such as an NRE or FCNR(B) account. Non-repatriable investments can also be paid from an NRO account. Either way, Schedule IV sale proceeds are credited only to the NRO account, whichever account paid.
The RBI's Master Direction on deposits and accounts, updated on 2 September 2026, explains the difference. An NRE account allows inward and outward remittances. An NRO account holds income earned in India, and its balances can be remitted abroad only up to USD 1 million, subject to conditions in the Remittance of Assets Regulations.
For an NRI, the account that pays for the shares quietly decides where the exit money can go.
Can NRIs invest in startups through AIFs or angel funds?
Yes. NRIs can buy units of SEBI-registered investment vehicles, which include alternative investment funds and angel funds, on a repatriable basis under Annex 7 of the Master Direction or on a non-repatriable basis under Schedule IV. The fund then invests in startups, and its own rules decide who may subscribe.
On the repatriable route, sale or redemption proceeds can be remitted abroad, and the fund files Form InVI within 30 days of issuing units to a person resident outside India. Citizens and entities of Pakistan and Bangladesh are excluded from this route.
Angel funds add their own gate: under SEBI's 2025 framework, new angel funds take money only from accredited investors. Our guide to angel funds and AIFs explains the categories, and convertible notes in India covers the instrument many angel rounds use.
What must be reported when an NRI invests?
For repatriable investment, the startup reports the share issue in Form FC-GPR within 30 days, and transfers between residents and non-residents go on Form FC-TRS within 60 days. Non-repatriable investment is deemed domestic, so the FC-GPR requirement, which covers issues counted as FDI, does not arise.
These rules are in regulation 4 of the FEMA reporting regulations, amended up to 13 June 2026. A sale between a non-repatriable NRI holder and a resident doesn't need FC-TRS. Convertible notes issued to a person resident outside India go on Form CN within 30 days, and a company with FDI files the FLA return by 15 July.
What should an NRI check before signing a startup investment?
Before signing, an NRI should confirm in writing which route the investment uses, which account pays, and who files what. Most problems surface years later, at exit, when a buyer or the bank asks for proof that the original investment followed FEMA. The paperwork at entry is what makes the exit money movable.
- The route: the share subscription agreement and board resolution should say repatriable or non-repatriable.
- The money trail: keep the bank's inward remittance certificate or the NRE, FCNR(B) or NRO debit advice.
- The price: on the repatriable route, ask for the fair value certificate and its date.
- The filing: ask the company for its FC-GPR or Form CN acknowledgement.
- The cap table: check your holding appears with the right residency status in the register of members.
How is an NRI's startup investment taxed?
Under the Income-tax Act, 2025, in force since 1 April 2026, unlisted shares held for more than 24 months are long-term capital assets, and long-term gains are taxed at 12.5% under section 197. A buyer paying a non-resident deducts tax at source under section 393(2), and a tax treaty may reduce the tax.
The Act's Gazette text sets the 24-month test in section 2(101); shares held for less are short-term and taxed differently. Section 197(4) adds a computation rule for non-residents selling unlisted shares, and the table in section 393(2) covers other sums paid to non-residents at the rates in force.
Section 159 is the basis for India's tax treaties, which can give relief. The investor's home country may tax the gain too, so the treaty and any foreign tax credit matter. Treat this as background, and have a chartered accountant in both countries check the numbers before you invest.
Questions
Can an NRI invest in an Indian startup?
Yes. An NRI, an individual resident outside India who is an Indian citizen, can buy shares, CCPS or convertible notes of an Indian startup. On a repatriable basis the investment is treated as foreign investment; on a non-repatriable basis under Schedule IV of the NDI Rules it is treated like a resident's investment.
What is the difference between repatriable and non-repatriable investment for NRIs?
A repatriable investment's sale proceeds, net of taxes, can be sent abroad, so FEMA pricing, sectoral caps and FC-GPR reporting apply. A non-repatriable investment under Schedule IV is deemed domestic, pricing guidelines don't apply, and sale proceeds are credited only to the investor's NRO account in India.
Can an NRI invest in a startup from an NRO account?
Yes, for a non-repatriable investment. The FEMA payment rules let Schedule IV investments be paid by inward remittance or from NRE, FCNR(B) or NRO accounts. Repatriable investments must come by inward remittance or from a repatriable account such as NRE or FCNR(B), not from NRO money.
How is an NRI taxed on selling startup shares in India?
Under the Income-tax Act, 2025, unlisted shares held for more than 24 months are long-term capital assets, and long-term gains are taxed at 12.5% under section 197. The buyer deducts tax at source under section 393(2). A tax treaty may lower the tax; a chartered accountant should confirm.
Sources: Reserve Bank of India, Master Direction: Foreign Investment in India, updated up to 15 Jun 2026 · Reserve Bank of India, FEMA (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, amended up to 13 Jun 2026 · Reserve Bank of India, Master Direction: Deposits and Accounts, updated as on 2 Sep 2026 · SEBI, Revised regulatory framework for Angel Funds under AIF Regulations, circular, 10 Sep 2025 · Ministry of Law and Justice, The Income-tax Act, 2025, Gazette of India, 21 Aug 2025
For more on how startup funding works in India, read the MyStartupValley blog or visit mystartupvalley.com.