Nri partner

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Rajesh

Rajesh (Querist)
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10 May 2015 Can an nri individual become partner in a firm without remuneration ? What precautions required?

Rajesh

Rajesh (Querist)
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11 May 2015 pl.reply the above query

Asha Kanta Sharma

Asha Kanta Sharma

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03 August 2024 Yes, an NRI (Non-Resident Indian) individual can become a partner in a firm in India without receiving remuneration, but there are specific considerations and precautions to ensure compliance with Indian laws and regulations. Here’s a detailed guide on how to approach this:

### **1. Legal Framework**

#### **A. Partnership Act, 1932**
- **Partnership Agreement:** The partnership agreement should clearly specify the terms of the partnership, including the non-remuneration aspect if applicable.

#### **B. Foreign Exchange Management Act (FEMA), 1999**
- **FEMA Regulations:** Compliance with FEMA is crucial. Non-residents are allowed to be partners in Indian firms, but specific conditions apply, particularly concerning investments and repatriation of profits.

### **2. Requirements and Precautions**

#### **A. Registration and Documentation**

1. **Partnership Deed:**
- **Drafting:** The partnership deed should be drafted carefully to include the NRI as a partner. Ensure it mentions that the NRI partner will not receive remuneration.
- **Signatories:** Ensure all partners, including the NRI, sign the partnership deed.

2. **Registration with Registrar of Firms:**
- **Application:** The firm must be registered with the Registrar of Firms, and the partnership deed should be submitted.

3. **Compliance with FEMA:**
- **Investment Compliance:** Ensure that the NRI partner’s investment in the firm complies with FEMA regulations, including any necessary approvals from the Reserve Bank of India (RBI) for foreign investments.
- **Reporting:** File any required reports with the RBI or the Foreign Investment Promotion Board (FIPB) if applicable.

#### **B. Tax and Regulatory Compliance**

1. **Income Tax:**
- **Taxability:** Even if the NRI does not receive remuneration, the income of the firm may be subject to tax, and the NRI’s share of profits will be taxed in India.
- **Tax Return:** The firm must file tax returns reflecting the income distribution, and the NRI partner should comply with Indian tax laws.

2. **Compliance with FDI Regulations:**
- **Foreign Direct Investment (FDI):** If the NRI’s involvement is considered as a form of FDI, ensure compliance with FDI policy regulations.

#### **C. Remittances and Profit Repatriation**

1. **Repatriation of Profits:**
- **FEMA Guidelines:** Profits can be repatriated according to FEMA regulations. Ensure that the necessary procedures are followed for remitting profits abroad.

2. **Non-Resident Status:**
- **Documentation:** Maintain clear documentation of the NRI’s status and ensure compliance with any requirements for repatriation of funds.

### **3. Key Considerations**

- **Legal and Tax Advisory:** Seek advice from legal and tax professionals to ensure compliance with all applicable laws and regulations.
- **Regulatory Approvals:** Depending on the nature of the firm’s business and the NRI’s role, approvals from relevant authorities may be required.
- **Record-Keeping:** Maintain thorough records of all transactions, agreements, and compliance documentation related to the NRI’s involvement in the firm.

### **Summary**

An NRI can become a partner in an Indian firm without remuneration, provided all regulatory, legal, and tax compliance requirements are met. Proper documentation, adherence to FEMA and FDI regulations, and clear understanding of tax implications are essential. Consulting with professionals specializing in international and Indian regulations will help navigate these requirements effectively.

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