FDI in LLP in India 2026, Rules for Foreign Partners and Reporting

Written by CA Nandini Hasija, Krystal7 Consultants. Last updated 23 October 2026.

Yes, FDI in an LLP is allowed in India, but only under the automatic route. Paragraph 3.2.4 of the FDI Policy limits it to sectors with 100 percent automatic FDI and no FDI linked performance conditions. The LLP must have two designated partners who are individuals, one resident in India. It files Form LLP(I) on FIRMS within 30 days of receiving the money.

This page covers the sector test, who can invest, designated partners, pricing and payment, FEMA and MCA filings, and conversion. It then compares tax with a Private Limited company and explains when an LLP fits.

Is FDI allowed in an LLP in India?

Yes. Rule 6(b) of the NDI Rules lets a person resident outside India invest in an LLP under Schedule VI. The investment can be capital contribution or profit shares. The LLP's sector must allow 100 percent FDI on the automatic route, with no FDI linked performance conditions. Paragraph 3.2.4 of the FDI Policy provides no government route for an LLP.

The rules sit in three places:

1. Rule 6(b) and Schedule VI of the NDI Rules. The Ministry of Finance notified them in 2019, and RBI's copy is updated to 2 Sep 2026.
2. Paragraph 3.2.4 of the Consolidated FDI Policy, 2020, issued by DPIIT and effective from 15 Oct 2020.
3. RBI's Master Direction on Foreign Investment in India, updated to 15 Jun 2026. Paragraph 6.5 points to its Annex 5 for LLPs.

Paragraph 3.2.4 of the FDI Policy says it plainly: "Foreign Investment is permitted under the automatic route in Limited Liability Partnership (LLPs)". The rest of the paragraph sets the sector limit, the downstream investment rule, conversion and compliance with the LLP Act, 2008.

For FEMA purposes, "investment" in an LLP means capital contribution or acquisition or transfer of profit shares. The Explanation to rule 2(ac) of the NDI Rules says so. Paragraph 2.14.2 of the Master Direction repeats it.

Which sectors are open to FDI in an LLP?

Only sectors where 100 percent FDI is allowed under the automatic route and no FDI linked performance conditions apply. Most services qualify, such as IT services, consulting, design and engineering. Sectors with a cap below 100 percent, a government route or sector conditions are closed to FDI in an LLP.

Rule 2 of the NDI Rules defines "FDI linked performance conditions". They are "the sector specific conditions specified in Schedule I" for companies receiving foreign investment. So you test the sector against Schedule I. If Schedule I sets any condition for that activity, an LLP cannot take FDI in it.

Sector test	Company with FDI	LLP with FDI
100% automatic, no conditions (for example IT services, management consulting)	Allowed	Allowed
100% automatic with conditions (for example construction development, single brand retail)	Allowed, subject to conditions	Not allowed
Automatic up to a cap below 100%	Allowed up to the cap	Not allowed
Government route for any part	Allowed with approval	Not allowed
Prohibited sectors	Not allowed	Not allowed

Check the sector before you register. Our guide to FDI automatic route sectors lists the caps and conditions sector by sector. The examples in the table are common cases. Always read the current Schedule I entry for your activity.

The sector test applies for the life of the LLP. If the LLP later starts an activity with conditions, it breaches FEMA. Draft the business clause of the LLP agreement narrowly.

Who can invest in an LLP from abroad?

Any person resident outside India, other than a citizen or entity of Pakistan or Bangladesh, can invest under rule 6(b). Foreign companies, foreign individuals, NRIs and OCIs on a repatriation basis all qualify. NRIs and OCIs can also contribute on a non repatriation basis under Schedule IV.

Registered funds need care. The earlier RBI regulation on LLP investment, Notification FEMA 385/2017-RB of 3 Mar 2017, excluded Foreign Portfolio Investors, Foreign Institutional Investors and Foreign Venture Capital Investors. The current Schedule VI of the NDI Rules governs today. Read Schedule VI and Annex 5 of the Master Direction before an FPI or FVCI invests in an LLP. A fund that holds such a registration should plan on a company.

NRIs and OCIs have a second route. Paragraph 6.4 of the Master Direction allows contribution to the capital of an LLP on a non repatriation basis under Annex 4. That investment counts as domestic. It does not need Form LLP(I), on our reading, because it is not foreign investment under FEMA.

An LLP needs at least two partners. A foreign company that wants full ownership needs a second partner. In practice, groups use a second group company as the other partner. The designated partners can then be individuals nominated by the corporate partners.

What are the designated partner requirements for an LLP with foreign partners?

Every LLP needs at least two designated partners who are individuals. At least one must be resident in India. Section 7 of the Limited Liability Partnership Act, 2008 sets this rule. Where the partners are bodies corporate, individuals nominated by them can act as designated partners.

The residency test is in the Explanation to section 7(1). Section 4 of the Limited Liability Partnership (Amendment) Act, 2021 (Act 31 of 2021, assent 13 Aug 2021) changed it. A person is now resident in India after a stay of at least 120 days during the financial year. Before the amendment, the test was 182 days during the immediately preceding one year.

Requirement	Rule	What it means for a foreign owned LLP
Minimum partners	LLP Act, section 6	At least two partners, so a parent needs a second partner
Minimum designated partners	LLP Act, section 7(1)	At least two individuals
Resident designated partner	Explanation to section 7(1)	At least one stays in India 120 days or more in the financial year
Nominee of a body corporate	Proviso to section 7(1)	A foreign parent can nominate an individual as designated partner
Identification number	LLP Act, section 7(6)	Each designated partner needs a DIN under sections 153 to 159 of the Companies Act, 2013
Liability	LLP Act, section 8	Designated partners answer for the LLP's filings and penalties

Paragraph 3.2.4 of the 2020 Policy has four clauses: sectors, downstream investment, conversion and LLP Act compliance. It sets no extra designated partner condition. Older FDI Policy texts carried such conditions, so older advice may still mention them.

A resident designated partner is a real job. They sign filings and answer to MCA for defaults. Many foreign groups appoint an Indian employee or a professional. Our note on the resident director requirement explains the matching rule for companies. For foreign designated partners, see our guide to the DIN for foreign nationals.

How is foreign capital in an LLP priced and paid?

Foreign capital must be at or above fair price, worked out under an internationally accepted valuation method. A Chartered Accountant, a practising Cost Accountant or an approved valuer from the Central Government panel must certify it. Payment must come by inward remittance through banking channels or from a repatriable account in India.

Paragraph 8.8 of the Master Direction sets the pricing rule for a fresh investment. Paragraph 8.9 covers transfers:

1. A transfer from a resident to a non resident must be for at least the fair price of the capital contribution or profit share.
2. A transfer from a non resident to a resident must be for no more than the fair price.

Paragraph 8.11 of the Master Direction expects the valuation certificate to be no more than 90 days old on the date of investment. Get the valuation before the money moves.

Schedule VI of FEMA 395/2019-RB sets the mode of payment. Capital contribution must arrive as an inward remittance through banking channels. It can also come out of a repatriable foreign currency or rupee account kept under the Deposit Regulations, 2016. Disinvestment proceeds can go abroad or into such a repatriable account.

Clause (iv) of paragraph 3.2.4 of the FDI Policy adds that foreign investment in an LLP must comply with the LLP Act, 2008.

Unlike a company, an LLP has no share certificate. The LLP agreement records each partner's contribution and profit share. Update the agreement and file it with MCA whenever the foreign partner's contribution changes. Our page on FEMA pricing guidelines covers valuation methods in more depth.

What FEMA reporting does an LLP with FDI file?

An LLP with FDI files Form LLP(I) within 30 days of receiving capital contribution. Form LLP(II) is due within 60 days of receiving funds on a transfer or disinvestment. Both go on RBI's FIRMS portal. It also files the annual FLA return by 15 July and Form DI for any downstream investment.

Regulation 4 of FEMA 395/2019-RB sets the clocks. Under regulation 4(6), an LLP receiving consideration for capital contribution or profit shares files Form LLP(I). It is due within 30 days of receiving the consideration. Regulation 4(7) sets 60 days from receipt of funds for Form LLP(II). The filing duty sits with the resident transferor or transferee.

Report	When it applies	Due date	Who files	Where
Form LLP(I)	Non resident contributes capital or buys profit share	30 days from receipt of funds	The LLP	FIRMS, Single Master Form
Form LLP(II)	Transfer or disinvestment between resident and non resident	60 days from receipt of funds	Resident transferor or transferee	FIRMS, Single Master Form
Form DI	LLP with FDI makes a downstream investment	30 days from allotment	The investing LLP	FIRMS
FLA return	LLP has FDI or overseas investment at end March	15 July each year	The LLP	FLAIR

The clock for Form LLP(I) starts on receipt of funds. For Form FC-GPR in a company, the clock starts on issue of shares. So an LLP cannot wait for the partners to sign the amended LLP agreement before reporting.

RBI's FLA FAQ, updated 1 Jul 2026, names LLPs registered under the LLP Act, 2008 among the entities that file. An LLP with no FDI or overseas investment outstanding at the end of March in both years need not file.

A late Form LLP(I) or LLP(II) attracts the late submission fee. It is INR 7,500 plus 0.025 percent of the amount for each year of delay. Our guide to the late submission fee under FEMA shows the arithmetic.

What MCA filings does an LLP with foreign partners make?

An LLP files an annual return in Form 11 and a statement of account and solvency in Form 8 with MCA. It files Form 3 when the LLP agreement changes and Form 4 when a partner or designated partner joins or leaves. Its accounts need an audit above the limits in the LLP Rules, 2009.

Filing	Purpose	When it falls due
Form 11	Annual return	Each year, under the LLP Act and Rules
Form 8	Statement of account and solvency	Each year, under the LLP Act and Rules
Form 3	LLP agreement and changes to it	After incorporation and after each change
Form 4	Appointment, cessation or change of a partner or designated partner	After each change
Statutory audit	Audit of LLP accounts	Above the limits in rule 24(8) of the LLP Rules, 2009

We do not state due dates or audit limits here, because MCA can amend the LLP Rules, 2009 and extend dates. Read the time limit for each form and rule 24(8) on the MCA LLP page for the year you file. For scale, the LLP Act defines a small LLP as one with contribution up to INR 25 lakh and turnover up to INR 40 lakh. Section 2(1)(ta), inserted in 2021, sets those base limits, and the Government can raise them by rules.

Each new foreign partner usually means three filings and a valuation. The LLP files Form LLP(I) with RBI, Form 3 for the amended agreement and Form 4 for the new partner. Our LLP compliance service handles this cycle.

Can an LLP with FDI convert into a company, or a company into an LLP?

Yes, both ways, under the automatic route. The business must be in a sector with 100 percent automatic FDI and no FDI linked performance conditions. Clause (iii) of paragraph 3.2.4 of the FDI Policy permits it. Company law and tax rules then apply to the conversion.

The company law routes differ:

1. LLP to company. An LLP can register as a company under section 366 of the Companies Act, 2013, in Part I of Chapter XXI. The partners become shareholders.
2. Private company to LLP. The conversion provisions of the LLP Act, 2008 allow it. In our reading, all shareholders must become partners and no security interest can be outstanding. Read the Act's conversion schedule for a private company before you apply.

Conversion is common when an LLP outgrows its structure. A typical trigger is a venture investor who wants equity in a company. Another is a move into a sector with FDI conditions, which an LLP cannot enter.

After conversion to a company, the FEMA filings switch too. Shares that the company issues to the foreign partner on conversion need reporting. We found no RBI text that names the form for this case. Ask your AD bank in writing, before the conversion, whether it wants Form FC-GPR for the converted capital. If it does, the 30 day clock in regulation 4(1) of FEMA 395/2019-RB runs from the issue of the shares. Our FC-GPR guide covers the filing.

Tax neutrality is not automatic. The 1961 Act gave relief for conversions only under strict conditions, and the 2025 Act carries these in its provisions on transactions not regarded as a transfer. Take tax advice before you convert.

Can an LLP with FDI make downstream investment or borrow abroad?

Yes to both, within limits. An LLP with FDI may invest downstream only in a company or an LLP in a sector with 100 percent automatic FDI and no conditions. Under the 2026 ECB framework, an LLP qualifies as an eligible borrower, subject to the other ECB rules.

Clause (ii) of paragraph 3.2.4 of the FDI Policy lets an LLP with foreign investment invest in another company or LLP in such sectors. Paragraph 9.3.2 of the Master Direction covers downstream investment by an LLP and speaks of Indian companies in sectors that permit 100 percent foreign investment under the automatic route, with no FDI linked performance conditions. Paragraph 9.3.3 allows indirect foreign investment into an LLP on the same terms. Rule 23(7) of the NDI Rules applies the downstream compliance rules in rule 23(5) and 23(6) to LLPs. Our guide to downstream investment and Form DI explains them.

Control is tested differently for an LLP. Paragraph 2.4 of the Master Direction defines control of an LLP as "the right to appoint majority of the designated partners". Paragraph 9.1.2 says ownership of an LLP means contributing more than 50 percent of its capital and having a majority profit share.

External commercial borrowing changed in 2026. FEMA 3(R)(5)/2026-RB of 9 Feb 2026 restated the ECB framework in a new Schedule I.

Paragraph 1(1) of Schedule I sets the eligible borrower test. It covers any person resident in India, other than an individual, "incorporated, established or registered under a Central or State Act". The borrower must also be permitted to raise ECB under its own Act. An LLP under the LLP Act, 2008 meets the first test. A person resident outside India can then lend to the LLP as a recognised lender under paragraph 2. The cost, maturity and reporting rules still apply. See our ECB guide.

How is an LLP taxed compared with a Private Limited company?

An LLP pays tax at 30 percent, plus a 12 percent surcharge where income exceeds INR 1 crore, plus 4 percent cess. That is 34.944 percent at the top. A partner's share of profit is then exempt. A company under section 200 pays 25.168 percent. Dividends to a foreign parent are then taxed again in India.

The First Schedule to the Finance Act, 2026 sets the firm rate. Paragraph C of Part I-B charges "every firm" 30 percent on the whole of its total income. The surcharge table charges 12 percent where total income exceeds INR 1,00,00,000. An LLP is a firm for income tax.

A partner's share of profit stays exempt in the partner's hands. Section 10(2A) of the Income Tax Act, 1961 gave the exemption. The CBDT navigator, built on the Bill, maps it to Schedule III of the Income Tax Act, 2025. The Income Tax Department's tax free incomes page confirms the exemption under the 1961 Act for a partner of a firm or LLP. Interest on capital and remuneration are not exempt.

The LLP can deduct partner interest and remuneration within limits. Section 35(e) of the Income Tax Act, 2025 (old section 40(b)) caps interest at 12 percent simple a year in clause (e)(iv). Clause (e)(iii) allows remuneration only to working partners, within a book profit formula. Clause (e)(ii) requires both to be authorised by the LLP agreement. A foreign company partner is not a working partner, because clause (e)(v) needs an individual.

Point	LLP	Private Limited company (section 200)
Base rate	30%	22%
Surcharge	12% where income exceeds INR 1 crore	10%
Cess	4%	4%
Top effective rate	34.944%	25.168%
Minimum tax	Alternate minimum tax only if it claims certain incentive deductions	No MAT under the section 200 regime
Tax when profit reaches the foreign owner	Nil in India; profit share exempt	Dividend tax under section 207, or the treaty rate
Deduction for payments to owners	Interest up to 12% and working partner remuneration (section 35)	Salary to directors; no deduction for dividends
Home country view	May treat the LLP as transparent or opaque	Usually a foreign subsidiary

The answer turns on whether profit is paid out. If the LLP distributes every year, total Indian tax can be close to, or lower than, a company plus dividend tax. If profits are reinvested, the company's 25.168 percent is cheaper. The worked example below runs the numbers.

The home country matters as much as India. Some countries treat an Indian LLP as transparent and tax the partner directly. Others treat it as a company. The answer decides how the foreign partner claims credit for Indian tax. Get home country advice before you choose. Our page on corporate tax rates for foreign companies covers the company side.

Can investors from China or other land border countries invest in an LLP?

Not safely, on our reading. Rule 6(b) of the NDI Rules bars only citizens and entities of Pakistan and Bangladesh from LLPs. The FDI Policy goes further for land border investors, and no rule sets a government route for an LLP. Use a company for such an investor, unless your AD bank and DPIIT confirm the position in writing.

The texts do not line up. Paragraph 3.2.4 of the FDI Policy permits FDI in LLPs "under the automatic route". Paragraph 3.1.1(a) of the Policy, as replaced by Press Note 2 (2026 Series), says an entity or citizen of a land border country, or an investment with a beneficial owner who is a citizen of one, "can invest only under the Government route". That paragraph does not carve out LLPs.

The NDI Rules read differently. The land border provisos to rule 6(a) cover equity instruments of an Indian company. Rule 6(b), which covers LLPs, has no land border proviso. Paragraph 3.2 of RBI's Master Direction also speaks of investment under Schedule I of the NDI Rules, which is the company schedule. Neither Press Note 2 nor the Cabinet release of 10 Mar 2026 mentions LLPs. Because an LLP has only the automatic route, the safe course is a company.

The 2026 changes help companies more than LLPs. The Cabinet release of 10 Mar 2026 says investors with non controlling land border beneficial ownership of up to 10 percent are permitted under the automatic route, subject to the sectoral conditions and to reporting by the investee entity to DPIIT. Press Note 2 (2026 Series) of 15 Mar 2026 gives effect to it through a beneficial ownership test based on rule 9(3) of the PML Rules. Press Note 2 itself states no percentage, and it takes effect from the date of the FEMA notification. A small land border holding of this kind may fit the automatic route for an LLP too, but we would still ask the AD bank first. Our guide to Press Note 3 explains the test.

When does an LLP make sense for a foreign investor?

An LLP suits a services business with a few known partners that pays out most of its profit each year. A company suits a business that will raise equity, issue ESOPs or reinvest profits. It also suits a sector with FDI conditions or a land border investor.

An LLP fits these cases:

1. A consulting, design or engineering practice owned by two or three foreign partners.
2. A joint venture of two foreign groups that want profit shares, not dividends.
3. A captive services unit whose profits go back to the parent every year.
4. A business where the partners want flexible capital changes without share issues.

A company fits better in these cases:

1. The business will raise money from venture funds, FPIs or FVCIs.
2. The founders want ESOPs for Indian staff.
3. The sector has a cap, a government route or FDI linked conditions.
4. The investor is from a land border country.
5. The business will reinvest profits for several years.
6. Customers or banks expect a Private Limited company.

For a foreign parent, we usually recommend a wholly owned subsidiary. ESOPs, banking and the parent's own tax position usually decide it. An LLP remains a good fit for partner led services firms. Our LLP registration service covers the setup when it fits.

What changed in 2026

Point	Old rule	New rule	Date	Instrument
ECB eligibility	Earlier ECB framework	Any resident person other than an individual registered under a Central or State Act, which covers LLPs	9 Feb 2026 (Gazette 16 Feb 2026)	FEMA 3(R)(5)/2026-RB
Land border beneficial owner	Any land border beneficial owner sent the case to the government route	Non controlling ownership up to 10% stays automatic, with reporting	10 Mar 2026 (Cabinet) and 15 Mar 2026 (Press Note 2), effective from the FEMA notification	PIB release of 10 Mar 2026; Press Note 2 (2026 Series)
Income tax law	Income Tax Act, 1961	Income Tax Act, 2025: firm rate in the First Schedule, partner exemption in Schedule III, partner limits in section 35	1 Apr 2026	Income Tax Act, 2025; Finance Act, 2026
FDI reporting regulations	FEMA 395/2019-RB as amended to 2025	Amended 13 Jun 2026; regulation 4(6) and 4(7) unchanged	13 Jun 2026	FEMA 395(4)/2026-RB
Master Direction on Foreign Investment	Updated to 2025	Updated to 15 Jun 2026	15 Jun 2026	RBI Master Direction

The core LLP rules did not change in 2026. Paragraph 3.2.4 of the FDI Policy and Schedule VI of the NDI Rules still set the sector test, conversion and pricing.

What has happened since 4 Mar 2026

This page went live on 4 Mar 2026. Since then:

1. 10 Mar 2026. The Union Cabinet approved changes to the land border guidelines, including the 10 percent non controlling threshold.
2. 15 Mar 2026. DPIIT issued Press Note 2 (2026 Series), rewriting paragraph 3.1.1 of the FDI Policy. It takes effect from the FEMA notification.
3. 1 Apr 2026. The Income Tax Act, 2025 came into force, with the Finance Act, 2026 rates for tax year 2026-27.
4. 13 Jun 2026. FEMA 395(4)/2026-RB amended the reporting regulations, without changing the LLP forms.
5. Before 2 Sep 2026. The NDI Rules were amended to match Press Note 2. RBI's copy of the Rules, updated to 2 Sep 2026, carries the new beneficial ownership tests in the Explanations to rule 6.

Worked example

Company or LLP for a profit making services business

A UK consulting group plans an Indian unit that will earn INR 10,00,00,000 a year before tax. It will pay out all profit each year. The UK India treaty rate on dividends is 10 percent, per the 2013 protocol. We compare an LLP with a Private Limited company under section 200.

Step	LLP (INR)	Company, dividend at 10% (INR)
Profit before tax	10,00,00,000	10,00,00,000
Indian tax on profit (34.944% or 25.168%)	3,49,44,000	2,51,68,000
Profit after tax	6,50,56,000	7,48,32,000
Tax on payout to the UK owner	Nil (profit share exempt)	74,83,200
Amount reaching the UK owner	6,50,56,000	6,73,48,800
Total Indian tax	3,49,44,000	3,26,51,200
Total Indian tax as a share of profit	34.94%	32.65%

For this UK owner, the company leaves INR 22,92,800 more after Indian tax. With a US parent at the 15 percent treaty rate, the dividend tax is INR 1,12,24,800. Total Indian tax on the company route becomes INR 3,63,92,800, or 36.39 percent. The LLP then wins by INR 14,48,800.

If the unit reinvests its profit, the company pays only 25.168 percent. The LLP still pays 34.944 percent. Reinvestment favours the company by INR 97,76,000 a year on these numbers.

We apply the treaty rate without surcharge and cess, as tribunals have allowed; the Act itself does not say so. The numbers ignore home country tax. The UK or US partner may get credit for Indian tax in different ways for the two structures.

Late Form LLP(I)

An Indian LLP receives INR 2,00,00,000 from its US partner on 5 Jan 2026. Form LLP(I) is due on 4 Feb 2026. The LLP files it on 20 Jun 2026.

Step	Working	Result
Delay after the due date	4 Feb 2026 to 20 Jun 2026	4 months and 16 days
Rounded up	Next whole month	5 months
n	5 ÷ 12, to two decimals	0.42
Variable part	0.025% × INR 2,00,00,000 × 0.42	INR 2,100
Late submission fee	INR 7,500 + INR 2,100, rounded up to the nearest hundred	INR 9,600

Common mistakes

1. Choosing an LLP in a sector with conditions. An LLP cannot take FDI if Schedule I sets any condition for the activity. Fix: test the exact activity against Schedule I before incorporation.
2. Starting the Form LLP(I) clock at the agreement date. The 30 days run from receipt of funds. Fix: file within 30 days of the credit to the LLP's bank account.
3. No resident designated partner. The LLP breaches section 7 of the LLP Act. Fix: appoint an individual who stays in India at least 120 days in the financial year.
4. Skipping the valuation. FEMA requires fair value for every contribution and transfer. Fix: get a valuation certificate no more than 90 days old before the money moves.
5. Forgetting MCA filings after a change. A new partner needs Form 3 and Form 4 as well as Form LLP(I). Fix: run all three filings together.
6. Using an LLP for a land border investor. The FDI Policy gives LLPs only the automatic route, and the rules do not say how a land border investor fits it. Fix: use a company and apply for approval, unless your AD bank and DPIIT confirm the LLP route in writing.
7. Planning ESOPs in an LLP. An LLP has no shares to grant. Fix: use a company if employee equity matters.
8. Assuming the LLP is always cheaper. Reinvested profits pay more tax in an LLP. Fix: model both structures with your payout plan and treaty rate.

Checklist

1. Confirm the activity has 100 percent FDI on the automatic route with no conditions in Schedule I of the NDI Rules.
2. Confirm no partner is a citizen or entity of Pakistan or Bangladesh, and check the land border rule for every beneficial owner.
3. Identify at least two partners and two individual designated partners, one resident in India.
4. Obtain DINs and digital signatures for the designated partners.
5. Incorporate the LLP and file the LLP agreement in Form 3.
6. Obtain a valuation certificate before each foreign contribution.
7. Receive the contribution by inward remittance through banking channels.
8. File Form LLP(I) on FIRMS within 30 days of receipt.
9. Update the LLP agreement and file Form 3 and Form 4 for each change in partners or contribution.
10. File the FLA return by 15 July each year.
11. File Form 11 and Form 8 with MCA, and audit the accounts where required.
12. Review the structure before raising equity, issuing ESOPs or entering a new sector.

Frequently Asked Questions

Is FDI allowed in an LLP in India?+

Yes, under the automatic route only. Rule 6(b) and Schedule VI of the NDI Rules, 2019 allow a person resident outside India to invest in an LLP. The LLP must be in a sector where 100 percent FDI is automatic, with no FDI linked performance conditions. Paragraph 3.2.4 of the Consolidated FDI Policy, 2020 says the same.

Is government approval available for FDI in an LLP?+

No. Paragraph 3.2.4 of the Consolidated FDI Policy, 2020 provides only the automatic route for FDI in LLPs. An LLP cannot take FDI in a sector that needs government approval or has a cap below 100 percent. If your activity needs approval, set up a Private Limited company instead.

Can a foreign company be a partner in an Indian LLP?+

Yes. A foreign company can be a partner and contribute capital under Schedule VI of the NDI Rules. It must nominate an individual to act as a designated partner, under the proviso to section 7(1) of the LLP Act, 2008. The LLP still needs at least two partners and one resident designated partner.

Can an LLP be 100 percent foreign owned?+

Yes, in a sector with 100 percent automatic FDI and no conditions. Because an LLP needs at least two partners, a foreign group usually uses two group companies as partners. One resident designated partner is still required under section 7 of the LLP Act, 2008. That person can be a nominee of a partner.

Who is a resident designated partner?+

At least one designated partner must be resident in India under section 7(1) of the LLP Act, 2008. Since the LLP (Amendment) Act, 2021, that means a person who stayed in India for at least 120 days during the financial year. The person must be an individual and needs a DIN.

What is Form LLP(I) and when is it due?+

Form LLP(I) reports capital contribution or acquisition of profit shares by a non resident in an LLP. The LLP files it on RBI's FIRMS portal within 30 days of receiving the money, under regulation 4(6) of FEMA 395/2019-RB. A late filing attracts the late submission fee.

What is Form LLP(II)?+

Form LLP(II) reports a transfer or disinvestment of capital contribution or profit share between a resident and a non resident. Regulation 4(7) of FEMA 395/2019-RB requires it within 60 days of receipt of funds. The resident transferor or transferee files it on FIRMS.

How is FDI in an LLP valued?+

Capital contribution and transfers to a non resident must be at or above fair price under an internationally accepted valuation method. Transfers back to a resident must be at or below fair price. A Chartered Accountant, practising Cost Accountant or Central Government panel valuer certifies it, under paragraph 8.8 of RBI's Master Direction.

Can FPIs or FVCIs invest in an LLP?+

Not safely. RBI's earlier regulation on LLP investment, Notification FEMA 385/2017-RB of 3 Mar 2017, excluded Foreign Portfolio Investors, Foreign Institutional Investors and Foreign Venture Capital Investors. Read Schedule VI of the NDI Rules for the current wording. A fund with such a registration should plan on a company, or use a separate foreign entity that invests as FDI.

Can an LLP with foreign investment convert into a company?+

Yes, under the automatic route, if it operates in a sector with 100 percent automatic FDI and no conditions. Paragraph 3.2.4(iii) of the FDI Policy permits it. The LLP registers as a company under section 366 of the Companies Act, 2013. A company can likewise convert into an LLP under the conversion provisions of the LLP Act.

Can an LLP with FDI make downstream investment?+

Yes, but only in sectors with 100 percent automatic FDI and no FDI linked performance conditions. Paragraph 3.2.4(ii) of the FDI Policy allows investment in another company or LLP. Paragraph 9.3.2 of RBI's Master Direction speaks of Indian companies. Rule 23(7) of the NDI Rules applies the downstream compliance rules to LLPs. Form DI is the report.

Can an LLP with foreign partners borrow ECB?+

Yes, under the 2026 ECB framework. Schedule I of FEMA 3(R)(5)/2026-RB of 9 Feb 2026 sets the eligible borrower test. It covers any person resident in India, other than an individual, registered under a Central or State Act and permitted to borrow under its own Act. An LLP under the LLP Act, 2008 meets the first test. The cost, maturity and reporting rules still apply.

How is an LLP taxed in India?+

An LLP pays 30 percent tax under the First Schedule to the Finance Act, 2026. A 12 percent surcharge applies where income exceeds INR 1 crore, plus 4 percent cess. A partner's share of profit is exempt under Schedule III of the Income Tax Act, 2025. Interest and remuneration to partners are taxable in their hands.

Is an LLP or a Private Limited company better for a foreign investor?+

A company usually suits a business that raises equity, issues ESOPs or reinvests profits. Its 25.168 percent rate under section 200 beats the LLP's 34.944 percent on retained profit. An LLP can win when all profit is paid out each year and the dividend treaty rate is 15 percent or more.

Can a Chinese company invest in an Indian LLP?+

Not safely, on our reading. Paragraph 3.1.1 of the FDI Policy sends investors from land border countries to the government route, and paragraph 3.2.4 gives an LLP only the automatic route. Rule 6(b) of the NDI Rules bars only Pakistan and Bangladesh from LLPs. Use a company unless your AD bank and DPIIT confirm otherwise in writing.

Sources

• Ministry of Finance, Foreign Exchange Management (Non Debt Instruments) Rules, 2019, rule 6(b) and Schedule VI, as hosted by RBI and updated up to 2 Sep 2026, https://rbi.org.in/scripts/bs_viewcontent.aspx?Id=5083
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