Setting up an Indian private limited company as an NRI founder

An Indian private limited company must have at least one director who is resident in India. The test is a day-count one: a person who has stayed in India for 182 days or more during the financial year qualifies as resident for this purpose (Companies Act 2013, Section 149(3)). It is not about citizenship. A foreign citizen who lives in India enough days can satisfy it, and an Indian citizen living abroad usually cannot.

This is the single requirement that catches founders who are all based overseas. You can be a director, your co-founder abroad can be a director, and you can together hold all the shares, but the board still needs that one resident director on it. Many overseas founders solve this with a trusted family member or co-founder already living in India, or by appointing someone whose day count clearly meets the test.

The resident-director rule sits alongside the basic shape of a private limited company: a minimum of two directors and two shareholders, and a cap on members. A director and a shareholder can be the same person, so two people can cover both roles, as long as one of those directors meets the residency test.

When a non-resident subscribes to or buys shares in an Indian company, that investment is foreign direct investment governed by FEMA, not just the Companies Act. For most ordinary business sectors, FDI is allowed under the automatic route, no prior government approval needed, up to 100%. A handful of sensitive sectors are capped or need approval, so the sector is checked before the structure is locked.

The money comes in through proper banking channels, and the share allotment is reported to the Reserve Bank of India within the prescribed window (through the RBI's FIRMS portal). This reporting is a compliance step in its own right; missing it is common and avoidable.

Shares issued to a non-resident cannot simply be priced at face value by choice. Under the FEMA pricing guidelines, shares issued to a person outside India must be priced at or above the fair value of the share, and that fair value is worked out using an internationally accepted valuation method. For tax purposes, the related fair-market-value mechanics for unlisted shares sit in Rule 11UA of the income-tax rules.

The reason is straightforward: the rules stop value being quietly transferred out of (or into) India by issuing shares too cheaply or too dearly to an overseas party. So at incorporation, or whenever fresh shares are issued to a non-resident, the price per share is supported by a valuation rather than picked.

For a brand-new company subscribing its first shares, the valuation is usually simple. It becomes more involved once the company has been trading, has assets, or is taking investment at a premium, which is exactly when getting the pricing and its supporting valuation right protects you from a later dispute on either the FEMA or the tax side.

Beyond the people and the money, incorporation needs a few mechanical building blocks in place.

Every proposed director needs a digital signature certificate (DSC), because the incorporation forms are signed and filed electronically, and a foreign or NRI director's DSC application usually needs identity and address documents that are notarised and, depending on the country, apostilled or consularised. Each director also needs a director identification number (DIN), which for first-time directors is generally allotted through the incorporation application itself.

The company also needs a registered office address in India from the start: a real address where official correspondence can be received, supported by proof such as a utility bill and, if rented, the owner's consent. The company name is reserved, the constitutional documents (the memorandum and articles) are prepared, and the whole set is filed for incorporation. A PAN and TAN for the company are issued as part of the process, so it can transact and deduct tax from day one.

A private limited company isn't the only structure, and for some founders it isn't the right one.

If you're a solo Indian-citizen NRI founder who doesn't plan to raise outside investment soon, a One Person Company (OPC) is a real, cheaper alternative: since a 2021 amendment, an NRI who holds Indian citizenship can form one, with the member and nominee needing to meet a 120-day-in-India test rather than the private limited company's 182-day resident-director rule. A foreign national, someone who isn't an Indian citizen, cannot form an OPC at all, regardless of residency. An OPC caps at one member and converts to a private limited company later if the business grows past that.

If the actual goal isn't a for-profit venture at all but a charitable, educational or similar not-for-profit purpose, that's a Section 8 company, a different registration regime entirely, not a private limited company.

And if there's already an overseas company that just wants a presence in India rather than a fresh Indian legal entity, a branch, liaison or project office is the right vehicle, an RBI-regulated route separate from incorporating a subsidiary, with its own approval process and restrictions on what it can do.

See LLP or private limited for the closest comparison, a genuine alternative once outside investment is in the picture.

There is no version of an Indian private limited company with zero resident directors. Even with every founder, shareholder and parent company entirely overseas, at least one director must have stayed 182 days or more in India in the financial year (Companies Act 2013, Section 149(3)). For a newly formed company, the day-count is applied proportionately to the period of existence.

In practice the resident director is a co-founder, sibling, parent or trusted associate already in India, appointed to the board so it is validly constituted, while the overseas founders keep control through their shareholding and their own directorships.

The step founders most often miss: once shares are allotted to a non-resident, the allotment must be reported to the Reserve Bank of India on Form FC-GPR (Foreign Currency: Gross Provisional Return), filed online through the RBI's FIRMS portal broadly within 30 days of the date the shares are allotted. The clock runs from allotment, not from when the money arrived.

The automatic route does not cover everything. A few sectors are prohibited to foreign investment altogether (lottery, gambling, chit funds), and others are capped or need prior government approval (certain defence, media and similar sectors). The very first check is therefore whether your sector is automatic, capped, or off-limits, before any money moves.

The authentication step is what trips up timelines for overseas directors. Identity documents, passport above all, must be notarised and apostilled in the country of residence (for Hague Apostille Convention countries), or consularised / attested by the Indian embassy where apostille is not available. Start this early. It is the step that most often stretches the incorporation timeline.

The DSC (typically Class 3, issued after a short video verification) and DIN (normally allotted through the incorporation filing itself) sit alongside the authentication. The whole filing runs through the integrated SPICe+ form (Part A reserves the name, Part B incorporates), bundled with AGILE-PRO-S (Form INC-35) for GST, EPFO, ESIC, professional tax and bank-account registration, and INC-9, the subscribers'-and-directors' declaration, auto-generated and e-filed in the same application. One filing covers roughly ten registrations, including the company's PAN and TAN.

Once the company is running, two separate money questions follow: what the company pays in tax, and what you pay when profit is paid out to you as a shareholder abroad.

The company is its own taxpayer. It pays Indian corporate income tax on its profits at the company rate, files its own return, and that is entirely separate from your personal NRI return.

When the company pays a dividend to you as a non-resident shareholder, tax is withheld at source under Section 195 of the Income-tax Act, 1961 (from FY 2026-27 onwards, Section 393(2) under the Income-tax Act 2025, same substance and rates): the provision for payments to non-residents (not the resident dividend-TDS section). The default withholding rate is higher, but most tax treaties cap the rate on dividends (commonly 10% or 15%). To get that lower treaty rate, you give the company a Tax Residency Certificate (TRC) from your country plus the prescribed declaration. That declaration has historically been Form 10F; from FY 2026-27 (income from 1 April 2026 onwards) Form 41 replaces Form 10F under the Income-tax Act 2025 for non-residents claiming treaty relief, filed electronically with the TRC.

The dividend itself, and later your share-sale proceeds, can be repatriated abroad through the banking channel once the tax has been accounted for: so the profit you earn in India can be moved out cleanly rather than being stuck onshore.

Arjun, an NRI in Singapore, wants an Indian private limited company, partly a subsidiary to hire a team in India, partly to bill Indian clients. He and his Singapore company will hold the shares; he and an overseas co-founder will be directors.

Neither Arjun nor his co-founder meets the 182-day residency test, so he appoints his cousin in Pune, who clearly does, as the resident director (Section 149(3)). Board valid.

Both shareholdings come in as FDI. Ordinary software services falls under the automatic route; funds are remitted through the banking channel, shares are allotted, and the allotment is reported to the RBI within the window. Because the shares go to non-residents, the price is supported by a valuation under the FEMA pricing guidelines and Rule 11UA.

In parallel: DSCs (Arjun's needing notarised, apostilled documents), DINs allotted through the SPICe+ filing, a Pune registered office documented, and the company incorporated with its PAN and TAN. Valid board, FEMA-compliant investment, defensible share pricing, far simpler to get right at incorporation than to unwind a year later.