FEMA Foreign Investment

Repatriable and Non-Repatriable Investments

Repatriable and Non-repatriable Investments

Under the Foreign Exchange Management Act (FEMA), the RBI has allowed inbound investments and outbound investments. These inbound and outbound investments can be made by individuals, companies, Non-Resident Indians (NRI), and Partnerships. These investments are made through one of the permitted routes. The routes for investment in India are the Automatic Route and Approval Route. This article describes the Repatriable and Non-repatriable Investments.

Investments that are made under the automatic route do not require any form of prior approval from the government. Investments which are made under the approval route/ government route require prior approval from the government. The investor or company would receive a suitable rate of return on the investment. Such a return would be received by the investor or the company, depending on the conditions related to the investment.  Some conditions are a minimum lock-in period what the investment would be subjected to. Apart from this, there are also other conditions related to the investment. Performance linked conditions would also be considered as a condition on the investment.

The investor would want to take back the proceeds of the investment to the investor’s home country. In some transactions, this is allowed. However, this is not permitted in all transactions. When proceeds of investment or sale are transferred to the home country from where the investment was made, then the investment is called a repatriable investment. Proceeds of the investment of the money are not allowed to be transferred to the home country; such investment is called as Non-Repatriable Investment.

Repatriable and Non-Repatriable Investments would apply to a non-resident or a foreign company that is investing in India.  The legal and regulatory framework for repatriable and non-repatriable investments is the FEMA. Apart from this, the RBI makes rules related to repatriable and non-repatriable investments.

Regulatory Framework- Repatriable and Non-Repatriable Investments

Under the Foreign Exchange Management Act 1999, the meaning of repatriation has been stated. Repatriation means the process of transferring or bringing money into a particular country. The investment must be from the same country where the funds want to be repatriated.

When foreign currency is repatriated to India, it means the following:

  • Foreign currency which is allowed to be sold to an authorized person who is a bank or exchanged with the authorized person; and
  • When the authorized person is allowed to hold the foreign currency for a particular period, and such foreign currency is used for realizing some form of debt, and the RBI permits this.

The above meaning is from the Foreign Exchange and Management Act 1999[1].

According to the Foreign Exchange Management (Realisation, Repatriation, and Surrender of Foreign Exchange) Regulations, 2000 repatriable and non-repatriable investments have been separately construed.

Any form of foreign exchange that is realized can be repatriable to India. This means that the foreign exchange can be brought into India. However, the following conditions have to be satisfied with any form of foreign exchange to be brought into India:

  • The investor or the company cannot hold Foreign Exchange that is brought into India. It has to be sold to the Authorised dealer of such foreign exchange. An authorized dealer is considered as a bank that is dealing in foreign exchange. The RBI would regulate the authorized dealer.
  • The bank is allowed to hold it for a specified period as per the directions of the RBI.
  • The foreign exchange can be used to relinquish any form of liability which is pending payment.
  • The foreign exchange can also be used to relinquish any debt following the requirements of the RBI.
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For understanding Repatriable and Non-Repatriable investments, the foreign exchange would be repatriable to India when the individual receives the payment in the form of Indian Rupees. The payment has to be made from an account or a scheduled bank that has a branch office outside India.

Repatriable and non-repatriable investments are regulated and permitted by the RBI. If money has been received by an individual and maintained, then such investment is considered to be repatriated. If the investment is not permitted, then such investment is considered to be a non-repatriable investment.

NRI – Repatriable and Non-Repatriable Investments

Repatriable and Non-Repatriable Investments are subject to compliance-related to the RBI. As India receives a lot of investment from NRIs, they are subjected to certain conditions laid down by the RBI and FEMA. Under the Consolidated FDI Policy, which was brought out in 2017 (“FDI Policy”), the following requirement was brought out related to investments made by an NRI.

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 (“TISPRO Regulations”) were brought out in 2017. These regulations apply to Non-Resident Indians. Compliance with this is required for Repatriable and Non-Repatriable Investments.

An NRI is allowed to invest in India on a repatriable or non-repatriable basis due to the TISPRO regulations. Under the TISPRO regulations, the meaning of repatriable and non-repatriable investments has been mentioned. Repatriable investments are those investments where the proceeds of maturity or the sale are allowed to be taken outside India. This would be applicable after the taxes and other expenses are paid before repatriation. Repatriable investments are subject to Schedule 1 of the TISPRO Regulations. Schedule 1 would apply to any Non-resident Investor.

Investment which is not allowed to be transferred outside India is called as Non-Repatriable Investments. Therefore these investments would be treated as domestic investments. These investments would be treated as an investment that is made by domestic investment. From the above, These Investments are treated differently.

For understanding repatriable and non-repatriable investments outside India, it is crucial to understand the difference between an NRI and an OCI. TISPRO regulations have covered this area to provide the difference between an NRI and OCI.

  • NRI- an NRI is the abbreviation for Non-Resident Indian.
  • OCI- an OCI is the abbreviation for Overseas Card Holder.

An Individual is considered as an NRI if he is an outside India but considered as a resident of India. An individual is an OCI, if he is a resident outside India and has an OCI card under Section 7(A) of the Citizenship Act 1955.  As per the TISPRO regulations, both NRI and OCI would come under one category of individuals under Repatriable and Non-Repatriable Investments.

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Schedule 4 of the TISPRO Regulations- Repatriable and Non-Repatriable Investments

Schedule 1 deals with the method of repatriable investments. Schedule 4 of the TISPRO regulations deal with Non-repatriable investments.

The following investments are classified on Non-Repatriable Basis:

  • All the form of capital instruments (i.e., equity shares, compulsorily convertible debentures, compulsorily convertible preference shares and share warrants). Capital Instruments are considered as that form of investment, which are securities. Investments can be made on Capital Instruments on a non Repatriable basis.
  • Any units issued by an investment vehicle which would be considered as AIF, REIT or InvIT without any limit, either on the stock exchange or outside it;
  • Any capital of a limited liability partnership, without any limit, and
  • Convertible notes (Convertible Notes are also called as capital instruments. a start-up company issues these types of capital instruments to the foreign investor).

An NRI or an OCI can invest in the capital of a proprietorship firm. Apart from these investments, which are made on a Non-Repatriable basis, can be made through a trust or a partnership, where NRIs have a majority stake of control.

Prohibition on Investment- Repatriable and Non-Repatriable Investments

There are specific prohibitions on investment which is made by an NRI. These prohibitions would apply to both investments which come through the automatic route and the approval route.

  • Investment in Capital Instruments cannot be made in a Nidhi Company.
  • It also cannot be made in the sectors related to agriculture and real estate.
  • Investment in Capital Instruments cannot be made in a firm which is engaged in agricultural business or real estate business.

Differences between Repatriable and Non-Repatriable Investments for an NRI- Repatriable and Non-Repatriable Investments

Repatriable investment would be allowed to be taken outside India. Therefore the proceeds would be considered after the payment of tax and consideration. Hence there would be filing requirements regarding the investment which is taken outside India. On the other hand, are not permitted to be transferred outside India. Hence the proceeds of Non-Repatriable investments would be treated as per domestic investment. There would be no filing requirements for these forms of investments.

Another added advantage is that as the proceeds are non repatriable, the investment can be made in any sector. Whichever sector the investment is made in, the proceeds of the investment would not be allowed outside India. Apart from this for a Non-Repatriable investment, there are no forms of filing. One such requirement would be the filing that is required as per Form FC-GPR. For a repatriable investment, such filing would be mandatory and necessary as the funds are leaving the country.

Transfer of Investment- Repatriable and Non-repatriable Investments

The consideration for a repatriable investment would be through normal banking channels. The consideration would be transferred to the NRE or the FCNR account or the NRO account. Even when it comes to Non-repatriable investments, the consideration would be through the same banking channels. The proceeds of sale or investment would be transferred to the NRO account. For a repatriable investment, this amount would be allowed to be transferred outside India. For non-repatriable investment, such an amount would not be allowed to be transferred outside India.

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There has been a debate for investments that are made on a non-repatriable basis. The debatable issues are the amount of investment, any sector limit, and any form of cap related to investments on a non-repatriable basis. These limits and caps apply to foreign direct investment and investment made on a repatriable basis by a Non-Resident Indian. However, the RBI has clarified these doubts and considered that such investments, made on a Non-repatriable basis, would be treated as the same as domestic investments which are made by resident Indians.

The amount which an Investor or an NRI can repatriate outside India is capped to an amount of 1 Million Dollars. Therefore this would be considered as an issue in the light of the amount of investment that is made in India. The proceeds of sale and consideration are limited only to the above amount. Therefore when an investment is made under a Non-repatriable basis, the only amount of investment which can be repatriated back is limited to USD 1 Million. The rest of the investment is not allowed to be repatriated. This investment would be considered as a non-repatriable investment. Domestic regulation would apply to this form of investment.

Transfer of Shares- Repatriable and Non-Repatriable Investments

Transfer of shares would also be subjected to repatriable and non-repatriable investments. An NRI or an OCI can make such a transfer of capital instruments of an Indian company which are held on a Non-repatriable basis. The transmission can happen through sale to a person outside India. However, certain conditions are required to be complied with. The transfer can also be made to another NRI, who is acquiring such shares on a non-repatriable basis. Apart from this, the NRI or the OCI who has capital instruments of the Indian company can make the transfer by way of gift. There is no requirement of any form of prior approval from the RBI. However, the shares which are transferred must be held by the transferee also on a non-repatriable basis. Therefore shares can be transferred as repatriable and non-repatriable investments.


When an investor or NRI invests in a capital instrument of a company, a specific rate of return would be earned on the investment. The NRI would want a specific return on the amount of investment. The proceeds of sale and consideration would sometimes be allowed to be transferred to a country where the investment came from. This investment is called as repatriable investment. When an investment is not allowed to be transferred, then such an investment is called an investment which is made on a non-repatriable basis.

Under the TISPRO regulations, Schedule 1 applies to investments that are made on a repatriable basis. Schedule 4 would apply to investments that are made on a non-repatriable basis. Investments made on a non-repatriable basis would be treated as domestic investments. There are more compliance needs for repatriable investments. Therefore there are differential treatments when it comes to repatriable and non-repatriable investments.

Read our article:Purpose of NRI Investment -Non-Repatriation Basis

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