NRI starting LLP

FDI allowed in LLP under Automatic Route

Guides » Business Startup Guide » FDI allowed in LLP under Automatic Route

FDI allowed in LLP under Automatic Route

Foreign Direct Investment (FDI) under the automatic route was allowed only in Private Limited Company and Limited Company (Know about FDI in Company). Limited Liability Partnership (LLP) required prior Government Approval, making foreign investment in LLP – a cumbersome process. However, in an effort to improve ease of doing business and to make India a world class investment destination, the Government has allowed 100% FDI is LLP under the automatic route. In this article, we look at the implications of allowing 100% FDI in LLP under the automatic route.

FDI in LLP under the Automatic Route

Post changes to FDI regulations on 10th, November, 2015, 100% FDI in LLP is now permitted under the automatic route. 100% FDI in LLP is allowed for businesses operating in sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance conditions. Further, the terms ‘ownership and ‘control’ and ‘internal accruals’ with reference to LLPs have also been defined – allowing for smooth FDI in LLP.

In addition, LLPs will also be allowed to make downstream investment in another company or LLP in sectors in which 100% FDI is allowed under the automatic route and there are no FDI-linked performance conditions.

Implications for NRIs and Foreign Nationals Starting LLP

With the proposed relaxation of FDI norms for investment in LLP in India, NRIs and Foreign Nationals can choose to register as LLP if the annual sales turnover will be less than Rs.40 lakhs and the capital will be less than Rs.25 lakhs. LLPs that satisfy the above condition would not have to appoint an Auditor or conduct Board Meetings – making starting and managing a LLP easy for NRIs and Foreign Nationals.

FDI Reforms and Liberalizations announced in November, 2015

In addition to the reforms to FDI in LLP, the Government of India has also announced various other FDI reforms and liberalizations to boost foreign investment in the country. The announced changes affect FDI relating to:

  • Limited Liability Partnerships
  • Investment by companies owned and controlled by Non-Resident Indians (NRIs)
  • Establishment and transfer of ownership and control of Indian companies
  • Agriculture and Animal Husbandry
  • Plantation
  • Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities
  • Defence
  • Broadcasting Sector
  • Civil Aviation
  • Increase of sectoral cap
  • Construction development sector
  • Cash and Carry Wholesale Trading / Wholesale Trading (including sourcing from MSEs)
  • Single Brand Retail Trading and Duty free shops
  • Banking-Private Sector
  • Manufacturing Sector

FDI by Entities Owned & Controlled by NRIs

Currently, Non-Resident Indians (NRIs) have special dispensation for investment in the construction development and civil aviation sector. Further, investment made by Non-Resident Indians under schedule 4 of FEMA (Transfer or issue of Security by Persons Resident Outside India) Regulations is deemed to be domestic investment at par with the investment made by residents. However, investment by individual NRIs in their individual capacity would be restricted. Therefore, to attract larger investments, which are possible through incorporated entities only, the special privileges provided to NRIs has now been extended to companies, trusts and partnership firms, which are incorporated outside India and are owned and controlled by NRIs. Hence, any investment by a for-profit or not-for-profit legal entity that is owned and controlled by NRIs will be treated at par with NRIs for investment in India.

Starting a LLP?

If you are a NRI or Foreign National and would like to start a LLP, visit IndiaFilings.com. IndiaFilings offer LLP registration for NRIs and Foreign Nationals starting from just Rs.8000/-. Click here to know more.

Want to Consult a Incorporation Expert?

IndiaFilings provides the entire range of services required to register a business in India. We can help you register a Proprietorship, LLP, Indian company or USA company. Please provide your information to consult an Incorporation Expert for free.


Income Tax eFiling

We have made the Income Tax eFiling, simple and easy. File your income tax return online with the dedicated Tax Experts support from IndiaFilings.


Authorised eReturn Intermediary

IndiaFilings.com (ERI ID: ERIA100945) is an Income Tax Department authorised eReturn Intermediary.



Comments (4)

akshay

Apr 06, 2016 at 1:19 PM

can a nri invest in llp which inturn intends to invest in property in india.

Reply

Sumesh

Apr 06, 2016 at 3:35 PM

Hi Akshay,
Yes NRI can invest in LLP but the person should get RBI approval.you want to know more about that please call our business ad visors @ 04440247777.

Reply

Shakti kumar Singh

Apr 23, 2017 at 12:28 AM

Ok

Reply

Deepjyoti Deb

Sep 24, 2018 at 5:29 PM

If a foreign startup is looking to set up a branch in India (no equity dealings), is an LLP the way to go?

Reply

Leave a comment