OCI Partners Doing Business through a Partnership Firm on a Non-Repatriation Basis (India – RBI/FEMA)

 

OCI Partners Doing Business through a Partnership Firm on a Non-Repatriation Basis (India – RBI/FEMA)

An OCI (Overseas Citizen of India) is permitted to be a partner in a partnership firm in India, only on a non-repatriation basis, subject to RBI and FEMA conditions.

1. Is it permitted?

✅ Yes.
RBI allows an OCI to invest in or set up a partnership firm in India without RBI approval, provided the investment is on a non-repatriation basis and the activity is permitted.

2. Meaning of “Non-Repatriation Basis” (in Partnership Context)

For an OCI partner, this means:

  • ❌ Capital contribution is not repatriable

  • ❌ Sale proceeds of partnership interest are not repatriable

  • ✔ Only income / profit share may be repatriated, within limits

  • ✔ Investment is treated as domestic Indian investment, not FDI

3. Permitted & Prohibited Activities

✔ Permitted Activities

  • Trading

  • Consultancy

  • Services

  • Manufacturing

  • Other sectors permitted under FEMA

❌ Prohibited Activities

  • Agriculture

  • Plantation

  • Real estate business

  • Farm house trading

4. Capital Contribution & Bank Account

Capital Introduction

  • Must be brought in through:

    • NRO account only

  • ❌ NRE / FCNR accounts not permitted

Operating Account

  • Partnership firm should open an:

    • NRO Current Account

5. Profit Sharing & Repatriation

  • Profit share credited to:

    • NRO account

  • Repatriation allowed:

    • Up to USD 1 million per financial year

    • After payment of applicable Indian taxes

    • Subject to Form 15CA & 15CB

6. Tax & Other Compliances

  • PAN mandatory for OCI partner

  • Income taxable in India

  • Partnership firm to file:

    • Income tax return

    • GST returns (if applicable)

  • Local registrations (Shop Act, etc.)

7. RBI Approval – When Required?

❌ Not required, if:

  • Non-repatriation basis

  • Permitted business activity

✅ Required, if:

  • Repatriation of capital is intended

  • Activity is restricted/prohibited

8. Practical Example

An OCI contributes ₹30 lakh as capital in an Indian partnership firm.

  • ₹30 lakh capital → ❌ not repatriable

  • Annual profit share ₹8 lakh → ✔ repatriable (after tax, within USD 1 million limit)


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