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Can OCI Cardholders Own Business in India? Complete Details
Table of Contents
- Key Takeaways
- What is the Legal Basis for an OCI Cardholder to Own a Business in India?
- What are the Different types of Business an OCI Cardholder Can Do in India?
- Dos and Don'ts of Business for OCI Cardholders in India?
- What are the Restrictions and Limitations on OCI Cardholders' Business?
- What is the Process for OCI Cardholders to Start a Business in India?
- What are the Advantages of Starting a Business for an OCI Cardholder?
- Major Risks and Challenges OCI Cardholders Face While Starting a Business in India
- Final Thoughts
Table of Contents
One of the most common questions among individuals who have acquired foreign citizenship is: Can an OCI cardholder own a business in India?
The answer to this question depends on the citizenship law, the company law in India, and the foreign investment policy.
An Overseas Citizen of India (OCI) is a foreign national of Indian origin who has a special status under Section 7A of the Citizenship Act, 1955. It provides various benefits to OCI cardholders, such as long-term visa-free entry, parity with NRIs, and the freedom to stay, live, or work in India for an indefinite period.
In this blog, we will provide you with a full explanation on how to start a business as an OCI cardholder in India, along with the legal frameworks, rights, restrictions, and other essential information.
Key Takeaways
- An OCI card is granted to a foreign national of Indian origin, which allows them to stay, live or work in India for an indefinite period.
- You can apply for the OCI card from the OCI service portal.
- An OCI card can start a business in the form of a sole proprietorship, LLP, Private limited company, or Partnership.
- You must follow all the FEMA rules and regulations and FDI policies.
What is the Legal Basis for an OCI Cardholder to Own a Business in India?
To start a business for an OCI cardholder in India, you must follow the conditions given below:
Rights under the Indian Law
Under the Indian laws, an OCI cardholder has the economic rights same as an NRI for the following:
- To start or run a business or work in India.
- For investing in Indian companies.
- An OCI cardholder can also act as a shareholder and director in Indian companies.
The Ministry of Home Affairs (MHA), with the Reserve Bank of India (RBI), has seen that OCI cardholders involved in business activities in India follow all the rules and guidelines of the Foreign Exchange Management Act, 1999 (FEMA).
Laws and Regulations Applicable to OCI Cardholders
There are many laws and regulations made for the smooth governance of the business owned by the OCI cardholders in India, such as:
- The Citizenship Act, 1955: It defines the rights of the OCI card and its restrictions.
- The Companies Act, 2013: It controls the company formation, requirements of directors, and ensures that all the rules and regulations are followed.
- The Foreign Exchange Management Act, 1999 (FEMA): It helps OCI cardholders' business through cross-border investments and repatriation of funds.
- The Foreign Direct Investment (FDI) Policy of India: It helps the foreign investors and OCI cardholders, on where and how they can invest in India.
What are the Different types of Business an OCI Cardholder Can Do in India?
There are a total of 3 types of business activities that an OCI cardholder can start in India.
Sole Proprietorship
In this business, an OCI cardholder can start a business that runs solely by the OCI cardholder. Making all the decisions of the business on a non-repatriation basis.
It provides the OCI cardholder with:
- The funds of a business that are taken from an Indian bank account in Indian currency (INR).
- Under a sole proprietorship, the business follows all the local Indian laws, taxation, and licensing compliance.
- You cannot send the profits made from the business abroad. They are generally retained in India and cannot be repatriated without RBI approval.
Example: An OCI cardholder named Raj has started a technology industry company in Delhi with full equity, and appointed a director who satisfies all the residence requirements.
Partnership or Limited Liability Partnership (LLP)
An OCI cardholder can also own a business in the form of partnerships or LLPs with Indian citizens.
Here are some of the following points which you should observe while forming a business in the form of a Partnership or LLPs:
- The business must be started in the region that is permitted for the foreign investment sector.
- The Foreign contributors must follow all the rules and guidelines of FEMA and FDI policy.
- An LLP or Partnership business should have a designated partner who is an Indian citizen or must be a resident in India.
This also allows OCIs to co-own the business along with their family members or associates in India.
Private Limited Company
A private limited company is the most chosen structure for the OCI cardholder for owning business in India.
Under the Companies Act, 2013, an OCI cardholder is allowed to:
- An OCI cardholder can start a private limited company in India.
- They can own all 100% equity, which is subject to the sectoral caps under the FDI policy.
- An OCI also serves as a director, but also needs to make at least one director who is resident in India.
Dos and Don'ts of Business for OCI Cardholders in India?
See the table given below for Dos and Don'ts for OCI cardholder start business in India.
| Do's | Dont's |
|---|---|
| An OCI cardholder should choose the correct business option from the Sole proprietorship, LLP, partnership, or private limited company. | An OCI cardholder does not provide the same equal citizenship rights, such as voting, purchasing agricultural land, etc. |
| Under the Companies Act of 2013, you need to appoint at least one director of Indian resident for all Indian companies. | Don't start a business as an OCI cardholder without proper registration. As for every business, you will need a valid PAN card, GST, and a local license. |
| Make sure you follow all the rules and regulations of FEMA and all FDI policies. All the reported finds and investments should be reported to the RBI. | Make sure you do not invest in the restricted sectors such as agriculture, lottery, gambling, plantation, and defence. |
| You can open a current bank account in India, with smooth financial services in business transactions through the authorised Indian banks. | You cannot use foreign bank accounts for doing Indian business in India. This is against the FEMA Guidelines. |
| You can apply for PAN and DSC, which are essential documents for business registration, Income tax return filing, and for digital documentation. | OCI business needs to pay the Indian tax and GST. So, don't look for taxation obligation. |
| Maintain transparent records for the smooth fund approvals, annual filings, and shareholding patterns. | Do not delay in filing the ROC or ITR. It can lead to heavy penalties or rejection for the business for an OCI cardholder. |
| You can take professional advice from an accountant or an expert agent who knows all the FEMA rules and guidelines. | Do not rely on a single piece of information, any source or assumption for OCI cardholder rules for businesses in India. |
| You must check the sectoral limits and the FDI policy to confirm the ownership percentage in your chosen sector. | Do not invest in any restricted or sensitive areas without taking approval from the Indian government. |
| Make sure you have a smooth annual reporting. File the income tax return on time every year with the Registrar of Companies and the Income Tax Department. | Do not try to send profit funds without the RBI approval. |
| Use the benefits of OCI status smartly, as it provides you with a long-life visa free access, with an indefinite period to live, stay or work in India. | Do not misuse the OCI card. Violating the Indian laws can lead to the cancellation of your OCI registration. |
What are the Restrictions and Limitations on OCI Cardholders' Business?
There are many restrictions and limitations on an OCI cardholder to start a business in India.
OCI Investment Prohibited Sectors
Most of the business sectors are open to OCI cardholders. However, in many areas, you can see restrictions under the Indian laws.
See the table given below for more Information
| Restricted Sector | Nature of Restriction |
|---|---|
| Plantation and Agriculture | OCI cardholders are not allowed to buy any agricultural or plantation land in India, regardless of inheritance. |
| Real estate (Agricultural Land) | An OCI cardholder cannot purchase any farmhouse, plantation property, or Farmland in India. |
| Media, Defence, and Space | All are subject to government approval and FDI caps. |
| Betting, lottery, and gambling | These are strictly prohibited for OCI investors and foreign nationals. |
Foreign Exchange Restriction and Repatriation
As the OCI cardholders are foreign nationals of Indian origin. Their profit from the investment and repatriation is controlled by FEMA.
Given below are some of the important points for Foreign Exchange and Repatriation for OCI cardholders:
- All the investments made by the OCI cardholders are on a non-repatriation or repatriation basis.
- You must follow all the RBI guidelines for the funds transfer of profit or sale.
- An OCI cardholder must report all currency inflows to the Reserve Bank of India with the help of an authorised dealer.
Requirement for Resident Director
In India, every company should have at least one director who should be an Indian resident. If the OCI cardholder is a founder who is living abroad, then the appointed director, who is an Indian resident, should be responsible for all the statutory conditions.
Taxation for the OCI-Owned Business
All OCI cardholders must follow all the rules and regulations for business taxation in India.
These include:
- Any business income on the Indian income tax.
- Goods and Services Tax (GST) if it crosses a certain limit.
- You must register the annual filing requirements with the Registrar of Companies (ROC).
If you failed to follow all the guidelines, then you will get penalties or may be disqualified under the Companies Act.
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What is the Process for OCI Cardholders to Start a Business in India?
Here is the process given below to apply for a business for OCI cardholders in India.
- Identification of the Business Structure
- An OCI cardholder must select the preferred business in India from a proprietorship, partnership, LLP, or private limited company.
- Get DSC or PAN
- An OCI cardholder must get a PAN (Permanent Account Number) card and a Digital Signature Certificate.
- Apply Business Name
- Get a name by applying through the Ministry of Corporate Affairs (MCA) portal.
- Prepare MOA and AOA
- Draft the Articles and Memorandum of Association for the company incorporation.
- Appoint Resident Director
- Make at least one Indian resident director of your business.
- Open an Indian Bank account
- Open a current account in an Indian bank in your business name.
- Follow FEMA Guidelines
- Make sure you follow all the rules and regulations to receive funds from foreign countries and accurately report to the RBI.
- Tax and GST registration
- An OCI cardholder must register for GST and tax to start a business in India. It includes GST, professional tax, and other mandatory registrations.
- File Annual ITR
- You should file the income tax return every year to avoid getting any financial or legal consequences, and maintain all compliance with the income tax department and the ROC.
What are the Advantages of Starting a Business for an OCI Cardholder?
Here are the advantages and disadvantages given below for the OCI cardholders starting a business in India.
- An OCI card allows the foreign national to travel easily in India and stay for a long time visa-free without reporting the duration of stay.
- It also provides you with more economic opportunities as India has a growing market that offers you a door to show your innovation and expansion of your business.
- OCI cardholders also get the same rights as the Non-resident Indians (NRIs) in the economic, financial and education sectors.
- The process for the OCI cardholder owning a business in India is no longer simpler, as the Ministry of Corporate Affairs has made it online.
Major Risks and Challenges OCI Cardholders Face While Starting a Business in India
When an OCI cardholder applies for a business setup in India, they need to face some major challenges and risks. These are given below:
- Most of the risks and challenges faced by OCI cardholders are sudden changes in the OCI policies and FDI norms, which can impact their business planning in India.
- Applying for multiple registrations, or filing also a major challenge for the OCI cardholder.
- You cannot start your business in the sectoral restriction areas, which are sensitive or capped.
- For the KYC of OCI applicants, some banks require additional verification.
Final Thoughts
An OCI cardholder can start a business in India legally by following all the guidelines of the FEMA, the Companies Act, and the FDI policy. They have the option to start a business as a sole proprietorship, LLP, private limited company, or partnership.
However, OCI cardholders are not allowed to purchase agricultural or plantation land, or in any sectoral restricted areas.
For assistance in opening a business for OCI cardholders in India. Visament can provide you with a smooth and easy application process. We handle all the documentation and reduce the chances of errors and mistakes in your application for the OCI cardholder business in India.
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Frequently Asked Questions
Yes, an OCI cardholder can start their own 100% company in India. FDI allowed this under the automatic route.
No, the OCI entrepreneurs don't need a local partner, but they need an Indian resident director for a company, which is mandatory.
Yes, an OCI cardholder can buy property in India apart from the agriculture or plantation land or any restricted sectoral area.
Yes, they can send the profit which they made from the business to a foreign country. For this, OCI cardholders need to follow all the FEMA and RBI repatriation rules.
Any business which is owned by the OCI cardholder is subject to the Indian Income Tax, GST and Indian company laws.
Yes, you can open a sole proprietorship, on the non-repatriation through the Indian funds.
Yes, through following all the FDI policy and Sectoral guidelines, an OCI cardholder can invest in Indian startups.
For most of the sectors, OCI can open business without taking any special government approval. However, you need to take special approval from the Indian government for restricted media, telecommunication, or defence reasons.
No, only an Indian resident can form a One Person Company (OPC). An OCI cardholder can apply for the LLP, partnership, sole proprietorship, or private limited company.
All businesses, apart from the ownership, must follow the ROC filing, tax audits, FEMA guidelines, and GST returns.
