Setting Up a Business in India as an NRI/OCI: Complete 2026 Guide

• Company formation / Compliances
• ||
• April 27, 2026

Are you also an NRI/OCI who is planning or researching how to start a business in India but keeps getting stuck because of complex compliances? You’re in the right place. In this blog, we’ll cover everything you need to know to set up your business in India in a simple and clear way.

ABOUT THIS GUIDE

Whether you hold an Indian passport or a foreign one, this guide covers everything you need to know before setting up a business in India — company structures, FEMA rules, tax obligations, OCI/PIO deadlines, expat considerations, and the latest 2025–2026 updates every NRI must be aware of.

Who exactly is an NRI? (FEMA vs. Income Tax Act)

The term Non-Resident Indian (NRI) sounds simple, but in India it is legally defined differently depending on which law applies. FEMA looks at whether a person left India for employment/business (intention). The Income Tax Act uses a rigid formula based on days spent in India during the previous year.

Under FEMA (Foreign Exchange Management Act)

Under FEMA, you are an NRI if you reside outside India — this is based on your intent and the purpose of your stay. If you have gone abroad for employment, business, education, or any other purpose indicating an indefinite or long-term stay outside India, you qualify as an NRI regardless of how many days you have physically spent in India.

Under the Income Tax Act, 1961

The Income Tax Act uses a pure physical presence test. You are classified as an NRI if:

• You stayed in India for fewer than 182 days during the financial year (April to March); or
• You stayed fewer than 60 days in the current year AND fewer than 365 days in the preceding four financial years.

IMPORTANT UPDATE — INCOME TAX BILL 2025 (Effective April 1, 2026)

If your income from Indian sources exceeds ₹15 lakh, the 60-day threshold is replaced by 120 days. High-income NRIs with ₹15 lakh+ Indian-sourced income face adjusted RNOR (Resident but Not Ordinarily Resident) rules. Consult a qualified tax advisor before planning extended visits to India as you may inadvertently trigger tax on your global income.

Why this dual definition matters: You could be a ‘non-resident’ under FEMA for foreign exchange purposes but still be classified as a ‘resident’ for income tax purposes if you spend too many days in India — triggering tax on your global income. This is a common and expensive mistake that many NRIs make.

What is your status? Understanding NRI, OCI & PIO

Before you set up your business/company in India, you need to understand your legal classification. It affects which bank accounts you can open, how your income is taxed, what property you can own, and how you can repatriate profits. So, understanding these three statuses helps you a lot:

NRI — Non-Resident Indian

An NRI is an Indian citizen holding an Indian passport who resides outside India. Under FEMA, you are an NRI if you have stayed outside India for more than 182 days in a financial year (April to March). Under the Income Tax Act, similar residency rules apply with key nuances.

OCI — Overseas Citizen of India

An OCI cardholder is a foreign citizen of Indian origin. OCI is not dual citizenship — India does not permit dual citizenship. But it is the closest equivalent. OCI holders receive a lifelong, multi-entry visa to India and enjoy investment rights largely on par with NRIs.

OCI Benefits:

• Visa-free, lifelong entry into India
• No FRRO (Foreigners Regional Registration Office) registration required
• Parity with NRIs on most economic, financial, and educational matters
• Ability to own residential and commercial property in India

OCI Restrictions:

• Cannot vote or hold constitutional office
• Cannot purchase agricultural land or farmhouses
• Cannot undertake missionary work, mountaineering, or journalism without prior government approval

PIO — Person of Indian Origin (URGENT UPDATE)

⚠️  URGENT: The PIO card scheme was discontinued in 2015. Physical PIO cards were valid for travel to India only until December 31, 2025. Effective January 1, 2026, PIO cards are NO LONGER accepted at Indian immigration. If you have not yet converted your PIO card to an OCI card, apply immediately at ociservices.gov.in.

Step-by-Step: How to Register Your Company in India as an NRI and OCI

The good news is that NRIs do not need to physically visit India to register a company. The entire process can be completed online. However, all documents signed outside India must be notarized and apostilled by the Indian consulate or embassy in your country of residence.

1. Choose Your Business Structure & Sector
Decide on Pvt Ltd, LLP, or subsidiary. Research FDI caps and whether your sector falls under the Automatic Route or Government (Approval) Route. Sensitive sectors like defence, telecom, print media, and real estate construction require prior government approval.

2. Obtain a Digital Signature Certificate (DSC)
Every proposed director must have a DSC to file forms on the MCA (Ministry of Corporate Affairs) portal. Documents required: passport, photograph, and foreign address proof — all apostilled if you are a foreign national.

3. Apply for Director Identification Number (DIN)
A DIN is mandatory for every director of an Indian company. It is obtained through the MCA portal as part of the SPICe+ (INC-32) company incorporation form.

4. File SPICe+  with the MCA
The SPICe+  form is a single integrated form covering company incorporation, PAN, TAN, and GST registration. Draft the Memorandum of Association (MOA) and Articles of Association (AOA). Typical incorporation takes 12–18 days.

5. Open NRI/Business Bank Accounts
Open NRE, NRO, or FCNR accounts with an Authorised Dealer (AD) Category-I bank experienced in NRI and FDI transactions. Fund the company via FEMA-compliant inward remittances with proper KYC documentation.

6. Register for GST and Other Sector Licences
GST registration is mandatory if turnover crosses ₹40 lakh (₹20 lakh for services). Depending on your sector, you may also need an import-export code (IEC), food licence (FSSAI), or registrations with SEBI, RBI, or IRDAI.

7. Report Inward Remittance to RBI
Once you invest funds into the company, the Indian bank must report the inward remittance to the RBI using the applicable FEMA reporting formats. Failure to do so within prescribed timelines attracts steep penalties under FEMA.

At Mercurius, we also help NRIs, OCIs, and foreign nationals successfully set up their businesses in India. Our support doesn’t stop at incorporation—we also assist with all post-incorporation compliance to ensure your business runs smoothly. So, if you are stuck anywhere in the above steps, you can contact us!

FEMA Rules and FDI Compliance — The Backbone of NRI/OCI Business in India

The Foreign Exchange Management Act (FEMA), 1999 governs all foreign exchange transactions involving NRIs in India. Understanding FEMA is non-negotiable — violations can attract heavy financial penalties.

Automatic Route vs. Government Route

Under the Automatic Route, no prior RBI or DPIIT approval is needed. This applies to most sectors including IT and software, e-commerce (B2B), manufacturing, education, and pharmaceuticals. Under the Government Route, investments in defence (above 49%), telecom (above 49%), print media, and real estate construction require prior government approval before any funds are transferred.

Reporting of Foreign Investment

After receiving foreign funds, the company must report it to RBI.

👉 Key form:

• FC-GPR (Foreign Currency-Gross Provisional Return)
• Must be filed within 30 days of share allotment

Repatriation of Profits

After paying all applicable taxes in India, profits and dividends can be repatriated to your NRE or FCNR account freely. From NRO accounts, up to USD 1 million per financial year can be repatriated after tax compliance and submission of the required CA certificate and Form 15CA/CB.

NRI Banking Accounts

• NRE (Non-Resident External) Account: For foreign earnings. Fully repatriable. Interest is tax-free in India. Ideal for business capital brought from abroad.
• NRO (Non-Resident Ordinary) Account: For income earned in India (rent, dividends, business income). Repatriation limited to USD 1 million per year after taxes.
• FCNR (B) Account: Foreign currency fixed deposits. Fully repatriable. No currency conversion risk. Best for parking foreign earnings in India.

Tax Obligations for NRI/OCI Business Owners in India

NRIs are taxed in India only on income earned or accrued in India — not on global income. However, business income generated in India is fully taxable, and the structure of your company will determine the applicable tax rates.

Corporate Tax Rates

Indian companies (including those owned by NRIs) are subject to a flat corporate tax rate of 22% under the new tax regime (25.17% including surcharge and cess). New manufacturing companies incorporated after October 2019 enjoy a concessional rate of 15%.

TDS (Tax Deducted at Source) Rates for NRI Income

Double Taxation Avoidance Agreement (DTAA)

India has DTAA treaties with over 90 countries. This prevents you from being taxed twice on the same income — once in India and once in your country of residence. Always obtain a Tax Residency Certificate (TRC) from your country of residence to claim DTAA benefits. This single document can save NRI business owners significant amounts in cross-border tax payments.

NEW TAX REGIME — IMPORTANT NRI NOTE

The Union Budget 2025 increased the income tax exemption limit to ₹12 lakh for resident Indians. However, NRIs are EXCLUDED from the Section 87A rebate and continue with the ₹4 lakh basic exemption limit. NRIs can still choose between the old and new tax regimes. For opting back to the old regime, file Form 10-IEA within the ITR deadline for FY 2024-25.

Special Challenges for NRIs with Foreign Passports (OCI/PIO Holders)

NRIs holding a foreign passport — whether American, British, Canadian, Australian, or from the Gulf — face a distinct set of hurdles that Indian passport holders do not encounter.

1. Document Apostille Requirements
Every document signed outside India — including your passport copy, address proof, Memorandum of Association, shareholder agreements, and power of attorney documents — must be notarised and apostilled by the Indian consulate or embassy in your country. This adds time and cost to the incorporation process, but it is non-negotiable.

2. Director Residency Requirement
Indian law requires at least one director of a company to be an Indian resident who has spent a minimum of 182 days in India in the preceding calendar year. If you live abroad full-time, you must either appoint an Indian resident co-founder as a director or engage a professional nominee director service.

3. FRRO Registration
OCI cardholders are generally exempt from FRRO registration. However, if your foreign passport expires during your stay in India, you must apply for legalisation at the FRRO — failure to do so can attract a penalty of up to ₹20,000. Always ensure your foreign passport remains valid throughout your India visit.

4. Restricted Sectors for OCI vs. NRI Holders
OCI holders are generally treated on a par with NRIs for most economic and financial activities. However, OCI holders cannot:

• Purchase agricultural land, plantation property, or farmhouses in India
• Hold Indian constitutional offices or government employment
• Engage in journalism, missionary work, or mountaineering without prior government permission
• Vote in Indian elections (state or national)

5. Banking and PAN Card for OCI Holders
OCI card holders can use the OCI card as identity proof for applying for a PAN card, driving licence, and for opening an NRO/NRE bank account in India. This is especially useful for OCI holders who frequently travel to India for business purposes.

Latest Updates in 2025–2026 Every NRI Must Know

PIO Card Deadline — Final Warning

PIO cardholders must convert to OCI by December 31, 2025. From January 1, 2026, entry into India on a PIO card will be refused. Conversion is free and available through the OCI Services portal or your nearest Indian consulate.

OCI Card Renewal Simplified

You are now only required to apply for OCI card renewal once — after obtaining a new passport after turning 20 years of age. For those who received their OCI card after age 20, or those who are 50 years or older, there is no re-issuance required. Simply upload a copy of your new passport and photograph to the OCI portal.

New Digital E-Arrival Form (Effective October 2025)

All foreign travellers entering India — including OCI holders travelling on foreign passports — must submit an electronic arrival form via indianvisaonline.gov.in up to 72 hours before arrival. This replaces the paper disembarkation card. Budget time for this when planning business trips to India.

RBI Updated Master Direction on FDI (January 2025)

The RBI issued updated guidelines providing greater clarity on downstream investments by Foreign Owned or Controlled Companies (FOCCs) and share swap arrangements. This is particularly relevant for NRIs who have complex holding structures or are looking to restructure existing Indian investments.

NRI PINS Account Simplification

NRIs investing in Indian stock markets through the Portfolio Investment Scheme (PINS) no longer need a separate NRO PINS account — a single NRE PINS account is now sufficient. Contact your designated bank to consolidate your accounts.

Extended Window for Updated Income Tax Returns

NRIs can now file updated income tax returns within 48 months (4 years) from the end of the relevant assessment year — extended from the earlier 24-month window. This is a welcome relief for NRIs who may have missed reporting Indian income in prior years.

Union Budget 2026 — Key NRI Provisions

The Union Budget 2026 introduced several tax and compliance reliefs for NRIs including revised TCS provisions, changes in capital gains tax timelines for property transactions, and updated reporting requirements for foreign assets held in India. Consult your MAS LLP advisor for a personalised budget impact analysis.

NRI Business Compliance Checklist

Use this checklist as a quick reference before launching your business in India. A qualified professional firm like mercuirus  can help you tick every one of these boxes seamlessly.

• Confirm your NRI / OCI / PIO status under both FEMA and the Income Tax Act
• If you hold a PIO card, convert it to OCI before December 31, 2025
• Select the right business structure (Pvt Ltd recommended for most NRIs)
• Check if your sector requires Automatic or Government Route FDI approval
• Apostille and notarise all foreign-signed documents at the Indian consulate
• Obtain DSC and DIN for all proposed directors
• Incorporate via SPICe+ on the MCA portal and obtain Certificate of Incorporation
• Appoint a resident director (or engage a nominee director service)
• Open NRE / NRO / FCNR accounts and business current account in India
• Report inward remittance (FDI) to RBI within prescribed timelines
• Obtain PAN and TAN for the company
• Register for GST if turnover threshold is crossed
• Obtain sector-specific licences (FSSAI, IEC, SEBI registration, etc.) as applicable
• Obtain Tax Residency Certificate (TRC) from your country of residence for DTAA benefits
• Comply with annual ROC filings (AOC-4, MGT-7), board meetings, and statutory audit
• File annual income tax returns in India for the company and directors
• Set up a power of attorney (POA) with a trusted representative in India
• Monitor the 182-day rule each financial year to maintain NRI tax status

Ready to Set Up Your Business in India?

GET IN TOUCH WITH MERCURIUS

MERCURIUS is a full-service advisory firm specialising in NRI business setup, FEMA compliance, taxation, and corporate law. Whether you are in the US, UAE, UK, Canada, Singapore, or anywhere else in the world, our team can handle your entire India business setup remotely — from company registration to annual compliance and beyond.

Email: info@masllp.com  |  Website: www.masllp.com Our experts are available across time zones.