# OCI Investment in India and OCI Directors in Indian Companies (2026)

> Source: https://krystal7.com/insights/oci-cardholder-director-investor-india
> Publisher: Krystal7 Consultants (Krystal7 Innovations Private Limited), Gurugram, India
> Author: CA Nandini
> Published: 25 Mar 2026; updated 24 Oct 2026
> Summary: OCI cardholders invest in Indian companies on a repatriation basis under Schedules I and III or as deemed domestic investment under Schedule IV.

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

## AI Overview Summary

- An OCI cardholder resident outside India can invest in an Indian company on a repatriation basis as FDI under Schedule I of the NDI Rules, reported in Form FC-GPR within 30 days.
- Under Schedule IV, an OCI can invest on a non repatriation basis without limit, paid from NRE, FCNR(B) or NRO accounts, and the investment counts as domestic.
- FEMA residence looks at more than 182 days in the preceding financial year and the purpose of stay, while income tax residence counts days in the current tax year.
- An OCI cardholder can be a director with a DIN obtained on a foreign passport, and counts as the resident director only after staying 182 days or more in India as section 149(3) requires.
- Press Note 3 tests citizenship, so an OCI who is a citizen of a land border country needs government approval for FDI, while one who only lives there does not since the 2026 amendment.

**OCI investment in India runs on two tracks under the NDI Rules. An OCI cardholder living abroad can invest on a repatriation basis as FDI under Schedule I, reported in Form FC-GPR within 30 days. Listed shares bought on an exchange use Schedule III. The OCI can also invest on a non repatriation basis under Schedule IV, without limit, and that investment counts as domestic. An OCI can be a director with a DIN obtained on a foreign passport.**

This page covers both investment tracks, FEMA and income tax residence, directorships, Press Note 3, property and bank accounts. It ends with a comparison of OCI, NRI and foreign national rules.

## Can an OCI cardholder invest in an Indian company?

Yes. An OCI cardholder resident outside India can invest on a repatriation basis as FDI under Schedule I of the NDI Rules, like any foreign investor. The OCI can also invest on a non repatriation basis under Schedule IV, which only NRIs, OCIs and entities they own can use. Listed shares bought on a stock exchange fall under Schedule III.

Rule 12 of the [Foreign Exchange Management (Non Debt Instruments) Rules, 2019](https://rbi.org.in/scripts/bs_viewcontent.aspx?Id=5083) (the NDI Rules) covers individual investors. It opens with "An individual person resident outside India including a NRI or an OCI may make investments as under". Rule 12(1) points to Schedule III for listed shares on a repatriation basis. Rule 12(2) points to Schedule IV for non repatriation investment, including capital of an LLP, a firm or a proprietary concern.

Rule 6(a) is the general FDI rule. It lets "a person resident outside India" subscribe for, buy or sell equity instruments of an Indian company under Schedule I. An OCI living abroad is a person resident outside India, so Schedule I applies to the OCI too.

| Route | Who can use it | Basis | Typical use | Reporting |
|---|---|---|---|---|
| Schedule I (FDI) | Any person resident outside India, including OCIs | Repatriation | Founding or funding a private company | Form FC-GPR within 30 days of allotment |
| Schedule III (listed shares on an exchange) | All individuals resident outside India since 12 Jun 2026; earlier NRIs and OCIs only | Repatriation | Buying listed shares through a designated bank | AD bank reports in Form LEC (IFI) |
| Schedule IV | NRIs and OCIs, and foreign companies, trusts and firms they own and control | Non repatriation | Family company shares, LLP capital, firm capital | No FC-GPR, on our reading, because it is deemed domestic |
| Schedule VI (LLP) | Any person resident outside India | Repatriation | LLP capital in 100% automatic sectors | Form LLP(I) within 30 days of receipt of the consideration |

The choice between Schedule I and Schedule IV decides what happens on exit. Schedule I proceeds can go abroad, net of tax. Schedule IV proceeds stay in India in an NRO account, subject to the separate NRO repatriation facility.

## How does FEMA define an OCI cardholder?

Rule 2(ak) of the NDI Rules defines an OCI as "an individual resident outside India who is registered as an Overseas Citizen of India Cardholder". The registration is under section 7A of the Citizenship Act, 1955. Residence outside India is part of the definition. An OCI cardholder who becomes resident in India is no longer an "OCI" for the NDI Rules.

The OCI card does not make the holder an Indian citizen. The [High Commission of India in London](https://www.hcilondon.gov.in/page/benefits-of-oci-cards/) says an OCI cardholder "is a foreign national holding passport of a foreign country". It adds that the holder "is not a citizen of India". The [MHA OCI FAQs](https://www.mha.gov.in/sites/default/files/2022-07/oci-faq.pdf) confirm that OCIs cannot vote (FAQ 35) or hold constitutional posts (FAQ 36).

The [OCI services portal](https://ociservices.gov.in/onlineOCI/) sets out who can register under section 7A. Eligible groups include former Indian citizens, their children, grandchildren and great grandchildren, and minor children of Indian citizens. A foreign spouse of an Indian citizen or OCI can register after a registered marriage of at least two years. A person is ineligible if the person or any parent, grandparent or great grandparent is or was a citizen of Pakistan or Bangladesh. The same bar applies to any other country the government notifies.

The NDI Rules treat NRIs and OCIs the same way for Schedules III and IV. Rule 2(aj) defines an NRI as "an individual resident outside India who is a citizen of India". The difference that matters is citizenship. It affects Press Note 3, sector rules that require an Indian citizen, and the "resident Indian citizen" test for downstream investment.

## What is the difference between repatriation and non repatriation investment?

A repatriation basis investment lets the OCI send the sale or maturity proceeds out of India, net of tax. A non repatriation investment keeps the proceeds in India, credited only to the OCI's NRO account. Rule 2(ad) of the NDI Rules defines the first, and the second is its opposite. The choice also decides whether the investment counts as foreign investment.

Schedule IV investment "will be deemed to be domestic investment at par with the investment made by residents". Annex 4 of the [RBI Master Direction on Foreign Investment in India](https://www.rbi.org.in/scripts/bs_viewmasdirections.aspx?id=11200) says so in paragraph 1.2. So a Schedule IV investment does not count towards a sector cap. It also does not make the investee a foreign owned company.

Schedule I investment is FDI. It counts towards the sector cap and needs pricing at or above fair value on issue. Our page on [FEMA pricing guidelines](/insights/fema-pricing-guidelines-share-valuation) explains the valuation. It also triggers Form FC-GPR, covered in our [FC-GPR filing guide](/insights/fc-gpr-filing-timeline-and-process-for-foreign-founders).

Exit rules follow the basis:

1. **Schedule I.** Sale proceeds, net of tax, can be remitted abroad. A sale to a resident needs Form FC-TRS within 60 days.
2. **Schedule IV.** Under Part B of Schedule IV to [FEMA 395/2019-RB](https://rbi.org.in/scripts/BS_FemaNotifications.aspx?Id=11723), proceeds "shall be credited only to the NRO account of the investor". The amount invested and the capital appreciation cannot be repatriated under Schedule IV itself.
3. **Schedule IV transfers.** A sale by a non repatriation holder to a resident "is not required to be reported in Form FC-TRS".

## What can an OCI invest in on a non repatriation basis?

Under Schedule IV, an OCI can invest without limit in company shares, units of an investment vehicle and LLP capital. Convertible notes of a start up are also allowed. Rule 12(2) adds capital of a firm or a proprietary concern. Payment can come from NRE, FCNR(B) or NRO accounts. A Nidhi company, agriculture, plantation, real estate business, farm houses and TDR dealing are barred.

Annex 4 of the Master Direction sets out Schedule IV in plain terms:

| Item | Schedule IV rule | Source |
|---|---|---|
| Who can invest | NRIs or OCIs, and a company, trust or partnership firm incorporated outside India and owned and controlled by NRIs or OCIs | Annex 4, para 1.1 |
| Capital instruments of a company | "Without any limit" | Para 1.1(1) |
| Units of an investment vehicle | "Without any limit" | Para 1.1(2) |
| Capital of an LLP | "Without any limit" | Para 1.1(3) |
| Convertible notes of a start up | As per the NDI Rules | Para 1.1(4) |
| Capital of a firm or proprietary concern | Permitted | Rule 12(2) of the NDI Rules |
| Barred investments | Nidhi company; agricultural or plantation activities; real estate business; construction of farm houses; dealing in TDR | Para 1.3 |
| Payment | From NRE, FCNR(B) or NRO accounts | Para 2.1 |
| Status | Deemed domestic investment, at par with residents | Para 1.2 |
| Sale proceeds | Credited only to the NRO account | Schedule IV, Part B of FEMA 395/2019-RB |

The "without any limit" rule makes Schedule IV the usual route for family businesses. On our reading, an OCI can hold 100 percent of an Indian company in a sector that caps FDI, because the holding is domestic. The sector's other conditions, such as licensing, still apply to the company.

Schedule IV also covers foreign holding vehicles. A Delaware company owned and controlled by OCIs can invest under Schedule IV. The investment then stays domestic. This is useful where a family already holds assets through a foreign company.

Downstream investment follows the same logic. Explanation 2 to paragraph 9.1.15 of the Master Direction covers Indian entities owned and controlled by NRIs or OCIs on a non repatriation basis. Their investments are not counted as indirect foreign investment. We cover the wider rules in our batch guide on [downstream investment and Form DI](/insights/downstream-investment-focc-form-di).

## How do Schedule I and Schedule III investments by OCIs work?

Under Schedule I, an OCI invests in an unlisted or listed company as a foreign direct investor. The money comes by inward remittance or from an NRE or FCNR(B) account. The company issues shares within 60 days and files Form FC-GPR within 30 days of allotment. Under Schedule III, an OCI buys listed shares on an Indian stock exchange through a designated bank.

Schedule I follows the general FDI rules. Sector caps, entry routes and pricing apply. The OCI's holding counts as foreign investment. If the OCI and other non residents own more than 50 percent, the company becomes foreign owned for downstream investment.

Schedule III changed on 12 Jun 2026. The Foreign Exchange Management (Non Debt Instruments) (Third Amendment) Rules, 2026 (S.O. 3030(E)) opened it to all individuals resident outside India. [A.P. (DIR Series) Circular No. 14 of 15 Jun 2026](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=13483&Mode=0) told banks to apply the change "with immediate effect".

The limits now read:

1. Each individual must hold less than 10 percent of the paid up equity capital, on a fully diluted basis (Annex 3, para 1.1(2)).
2. The combined holding of all such individuals "shall not exceed twenty four percent".
3. Holdings under other annexes count towards the individual's limit.
4. An investment that transfers ownership or control of a listed company to land border entities or citizens needs government approval.

Before 12 Jun 2026, Schedule III was open only to NRIs and OCIs. The limits followed the long standing portfolio investment scheme: 5 percent for each investor and 10 percent in aggregate, which a company could raise to 24 percent by board and special resolution. RBI's [Master Circular of 2 Jul 2012](https://www.rbi.org.in/commonperson/English/Scripts/Notification.aspx?Id=1006) sets out that earlier scheme. [FEMA 395(4)/2026-RB of 13 Jun 2026](https://rbi.org.in/ScriptS/BS_FemaNotifications.aspx?Id=13484) now requires each investor to designate a repatriable rupee account for Schedule III. The AD bank reports purchases in Form LEC (IFI).

An OCI who crosses 10 percent of a listed company leaves the portfolio route. Our page on the [FDI and FPI line](/insights/fdi-vs-fpi-difference-india) explains how reclassification works.

## How is FEMA residential status different from income tax residency?

FEMA and income tax use different tests. Section 2(v) of FEMA looks at more than 182 days in India in the preceding financial year, plus the purpose of stay. Under section 6 of the Income Tax Act, 2025, residence depends on days spent in India in the current tax year. An OCI can be resident under one law and non resident under the other.

[RBI's A.P. (DIR Series) Circular No. 45 of 8 Dec 2003](https://www.rbi.org.in/SCRIPTs/BS_FemaNotifications.aspx?Id=2763) quotes section 2(v)(i). It covers a person residing in India for more than 182 days during the preceding financial year. Clause (A) excludes a person who has gone out of India, or stays outside India, for employment, business or vocation abroad. It also excludes one who leaves for "any other purpose" showing an "intention to stay outside India for an uncertain period".

The circular does not quote the clause on people who come to India, so read section 2(v)(i)(B) in the Act itself. RBI treats the status change as immediate for people who return to work. Paragraph 4.9 of its Deposits Master Direction requires NRE accounts to be redesignated "immediately upon the return of the account holder to India for taking up employment". On our reading, an OCI who comes to India for employment is resident from arrival.

[Section 6 of the Income Tax Act, 2025](https://www.incometaxindia.gov.in/w/section-6-1) sets the tax tests:

1. **Section 6(2)(a).** An individual is resident after 182 days or more in India in the tax year.
2. **Section 6(2)(b).** An individual is also resident after 60 days in the tax year plus 365 days in the four preceding years.
3. **Section 6(4).** The 60 day test does not apply to a citizen of India or a person of Indian origin who visits India.
4. **Section 6(5).** If such a person's total income, other than income from foreign sources, exceeds INR 15 lakh, 120 days replaces 60 days.
5. **Section 6(7).** An Indian citizen with that income who is not liable to tax elsewhere is deemed resident. This rule needs Indian citizenship, so it does not reach OCIs.
6. **Section 6(13)(b).** A person caught only by the 120 day rule is "not ordinarily resident".

Section 2(78) of the [Income Tax Act, 2025](https://www.incometaxindia.gov.in/w/section-2-1) defines a "person of Indian origin". It covers an individual who, or either of whose parents or any of whose grandparents, was born in undivided India. OCIs of Indian descent usually meet it. A foreign spouse who holds an OCI card through marriage often does not, and then gets no visitor relaxation.

| Point | FEMA, section 2(v) | Income Tax Act, 2025, section 6 |
|---|---|---|
| Period tested | Preceding financial year | Current tax year (1 April to 31 March) |
| Day count | More than 182 days | 182 days or more, or 60 (or 120) plus 365 |
| Purpose of stay | Decides status for people who leave or arrive for work or business | Not relevant to the count |
| Status from arrival | Possible, for someone who comes for employment or business | No, days are counted |
| Visitor relaxation for persons of Indian origin | None | Section 6(4) and 6(5) |
| Deemed residence | None | Section 6(7), Indian citizens only |
| What it decides | Which FEMA rules apply to investments, accounts and property | Which income India taxes |

For the tax side of a move, see our batch guide on the [182 day rule for foreign employees](/insights/tax-residency-foreign-employees-india-182-day-rule).

## Can an OCI cardholder be a director of an Indian company?

Yes. An OCI cardholder can be a director of an Indian Private Limited company. The OCI applies for a Director Identification Number (DIN) in Form DIR-3 as a foreign national, using the foreign passport as proof of identity. After 182 days or more in India, counted as section 149(3) provides, the OCI also counts as the resident director.

The steps and rules:

| Point | Rule for an OCI director | Source |
|---|---|---|
| DIN | Form DIR-3, with the foreign passport as identity proof; check the MCA instruction kit for how foreign documents must be attested | Section 153, Companies Act, 2013 |
| Consent to act | Consent in Form DIR-2 | Section 152(5) |
| Resident director | At least one director must stay in India 182 days or more; confirm the year counted in the current text | Section 149(3) |
| Director KYC | KYC intimation once every three years instead of annually, from 31 Mar 2026; next KYC due by 30 Jun 2028 for directors who had completed KYC; check the MCA fee table for current fees | G.S.R. 943(E) of 31 Dec 2025; PIB release of 1 Jan 2026 |
| Land border nationality | MHA security clearance for a national of a land border country; check the current rule text and MCA forms | Companies (Appointment and Qualification of Directors) Rules, 2014, as amended by MCA |
| Managing director or whole time director | Schedule V sets conditions for appointing one without central government approval, and one condition concerns residence in India; read Part I of Schedule V before you appoint an OCI | Section 196(4) and Schedule V |

The OCI card helps with the practical side. The High Commission of India in London lists a multiple entry, lifelong visa for any purpose. Special permission is needed only for research, missionary, mountaineering, journalism and some other activities. OCIs are also exempt from registering with the FRRO for any length of stay. So an OCI director can attend board meetings in India without a business visa.

The resident director test counts physical days. An OCI who lives abroad and visits for board meetings rarely reaches 182 days. So a foreign owned company usually needs a separate resident director. Our batch guide on the [resident director requirement](/insights/resident-director-requirement-indian-company) and our page on [DIN for foreign directors](/insights/foreign-national-director-indian-company-din) cover the detail.

## Does Press Note 3 apply to OCI cardholders?

Press Note 3 tests citizenship. If an OCI cardholder is a citizen of China, Nepal, Bhutan, Myanmar or Afghanistan, FDI needs government approval under rule 6(a) of the NDI Rules. An OCI who is a citizen of the US, the UK or another non land border country does not, wherever the OCI lives. Citizens of Pakistan and Bangladesh cannot register as OCIs at all.

The 2026 change matters here. The 2020 text caught a beneficial owner who was "situated in or is a citizen of" a land border country. [Press Note 2 (2026 Series)](https://www.dpiit.gov.in/static/uploads/2026/03/b9da5830b052c2f2d788593e97d07c63.pdf) of 15 Mar 2026 and the amended rule 6(a) speak only of citizenship. On our reading, a British OCI living in Hong Kong no longer falls under Press Note 3 because of residence.

Three edge cases come up:

1. **OCI investing through a Hong Kong company.** On our reading, the company is an entity of a land border country. The FDI needs approval whatever the OCI's passport.
2. **Schedule IV investment by a land border citizen holding an OCI card.** The land border proviso sits in rule 6(a), the Schedule I rule. Rule 12(2) for Schedule IV has no such proviso. On our reading, Press Note 3 does not reach a Schedule IV investment, but we would ask DPIIT before relying on that.
3. **Listed shares.** The proviso to rule 12(1), inserted by [S.O. 3030(E) of 12 Jun 2026](https://egazette.gov.in/WriteReadData/2026/273406.pdf), covers Schedule III investment that transfers ownership or control of a listed company to land border entities or citizens. That needs government approval.

Our batch guide on [Press Note 3 and land border FDI](/insights/press-note-3-fdi-land-border-countries) covers the beneficial owner tests in full.

## Can OCI cardholders buy property in India?

Yes. Under rule 24 of the NDI Rules, an OCI cardholder can buy any immovable property in India except agricultural land, farm houses and plantation property. The OCI can also receive such property as a gift from a relative, or inherit it. Payment must come by inward remittance through banking channels or from a non resident account, never in traveller's cheques or foreign currency notes.

The rule 24 permissions, in short:

1. **Purchase (24(a)).** Any immovable property other than agricultural land, farm houses and plantation property.
2. **Gift (24(b)).** From a resident, an NRI or an OCI who is a relative under section 2(77) of the Companies Act, 2013.
3. **Inheritance (24(c)).** From a person resident outside India who acquired the property under the foreign exchange law then in force or under the NDI Rules, or who got it from a person resident in India.
4. **Sale to a resident (24(d)).** Any immovable property.
5. **Sale to an NRI or OCI (24(e)).** Any property other than agricultural land, farm houses and plantation property.

Rule 25 lets a foreign spouse of an NRI or OCI, who is not an NRI or OCI, buy one property jointly with the spouse. The marriage must be registered and have lasted at least two years. Rule 31 requires RBI permission for property purchases by citizens of eleven listed countries and territories, including China, Nepal and Bhutan. Its proviso says the rule does not apply to an OCI.

We keep this section brief because property is outside our usual corporate work. Repatriation of sale proceeds has its own limits under the Remittance of Assets Regulations, 2016.

## Which bank accounts can an OCI cardholder hold?

An OCI cardholder can hold NRE, FCNR(B) and NRO accounts. RBI's Master Direction on Deposits and Accounts lets NRIs and persons of Indian origin (PIOs) open NRE and FCNR(B) accounts. Its definition of PIO "will include an 'Overseas Citizen of India' cardholder". Any person resident outside India can open an NRO account.

| Account | Who can open it | Currency | Repatriation | Use for investment |
|---|---|---|---|---|
| NRE | NRIs and PIOs, including OCIs (para 4.1) | INR | Freely repatriable | Schedules I, III and IV |
| FCNR(B) | NRIs and PIOs, including OCIs (para 5.1) | Permitted foreign currencies, fixed deposits only | Freely repatriable | Schedules I and IV |
| NRO | Any person resident outside India (para 6.1) | INR | Current income; other balances up to USD 1 million for NRIs and PIOs, under the Remittance of Assets Regulations (para 6.8) | Schedule IV, and receives Schedule IV sale proceeds |

The [Master Direction on Deposits and Accounts](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10198) (updated to 2 Sep 2026) sets the rules. An NRE account can be held jointly with a resident relative on a "former or survivor" basis. NRO accounts can be held jointly with residents.

An OCI who moves to India must update the accounts. Paragraph 4.9 says NRE accounts "should be designated as resident accounts" or moved to RFC accounts. The change is due immediately on return. Paragraph 6.10 says an NRO account can be redesignated as a resident account on return.

## What changes when an OCI cardholder moves to India?

When an OCI moves to India for employment or business, FEMA treats the OCI as resident from arrival, on our reading. The OCI then stops being an "OCI" under rule 2(ak) of the NDI Rules, which needs residence outside India. New investments are made as a resident. Bank accounts must be redesignated, and income tax residence follows the day count for the tax year.

Four practical effects follow:

1. **New investments.** The OCI invests as a person resident in India. Schedules I, III and IV no longer apply to new money.
2. **Existing Indian holdings.** On our reading, shares already held simply become a resident's holdings. No FEMA form is needed for the change of status alone.
3. **Bank accounts.** NRE accounts become resident accounts or move to RFC accounts. NRO accounts become resident accounts.
4. **Downstream investment.** Paragraph 2.25 of the Master Direction needs Indian citizenship for a "resident Indian citizen". So a company controlled by an OCI living in India is not controlled by resident Indian citizens. If that company has any foreign investment, its own investments can count as indirect foreign investment.

The fourth point surprises families. An Indian company run by an OCI who has moved back is not "owned and controlled by resident Indian citizens". We check that test before such a company invests in another Indian company.

## How do OCI rules compare with NRI and foreign national rules?

OCIs and NRIs share most FEMA investment routes, including Schedule IV and the NRE and FCNR(B) accounts. Foreign nationals who are not of Indian origin share only Schedule I, Schedule III (since 12 Jun 2026) and the NRO account. Citizenship separates OCIs from NRIs on Press Note 3, voting, sector rules that need an Indian citizen and deemed tax residence.

| Rule | NRI (Indian citizen abroad) | OCI cardholder abroad | Foreign national abroad, not of Indian origin |
|---|---|---|---|
| FDI under Schedule I | Yes | Yes | Yes |
| Listed shares under Schedule III | Yes | Yes | Yes, since 12 Jun 2026 |
| Non repatriation investment under Schedule IV | Yes | Yes | No |
| Investment deemed domestic | Yes, under Schedule IV | Yes, under Schedule IV | No |
| Press Note 3 | Not a land border citizen | Depends on passport | Depends on passport |
| NRE and FCNR(B) accounts | Yes | Yes, as a PIO | No |
| NRO account | Yes | Yes | Yes |
| NRO repatriation up to USD 1 million | Yes | Yes, as a PIO | Not under paragraph 6.8 |
| Buy residential or commercial property | Yes, rule 24 | Yes, rule 24 | Generally no; inheritance and a joint purchase with an NRI or OCI spouse under rule 25 are the main exceptions |
| Agricultural land, farm house, plantation | No | No | No |
| Director with a DIN | Yes, with PAN as an Indian citizen | Yes, foreign passport | Yes, foreign passport |
| Counts as a "resident Indian citizen" after moving to India | Yes | No | No |
| Visitor relaxation, section 6(4) and 6(5) | Yes | Yes, if a person of Indian origin | No |
| Deemed resident, section 6(7) | Possible | No | No |
| Visa needed to visit India | No | No, the OCI card is a lifelong visa | Yes |

For corridor guides, see our pages on company registration for [US citizens](/insights/company-registration-in-india-for-us-citizens) and [British citizens](/insights/company-registration-in-india-for-british-citizens).

## What changed in 2026

Several 2026 instruments changed the rules OCIs use. The biggest is the opening of Schedule III to all individuals resident outside India. When this page first went up on 25 Mar 2026, Schedule III was open only to NRIs and OCIs, and the Income Tax Act, 1961 still applied.

| Date | Instrument | Old rule | New rule |
|---|---|---|---|
| 15 Mar 2026 | Press Note 2 (2026 Series), DPIIT | Beneficial owner "situated in or is a citizen of" a land border country | Citizenship test only, from the FEMA notification |
| 1 Apr 2026 | Income Tax Act, 2025 in force | Section 6 of the Income Tax Act, 1961 | Section 6 of the Income Tax Act, 2025, with "tax year" in place of "previous year" |
| 31 Mar 2026 | G.S.R. 943(E) of 31 Dec 2025, director KYC | Annual DIR-3 KYC | KYC intimation once every three years; next due by 30 Jun 2028 for directors who had completed KYC |
| 12 Jun 2026 | NDI (Third Amendment) Rules, 2026, S.O. 3030(E) | Schedule III for NRIs and OCIs only, 5% individual and 10% aggregate limits | Schedule III for all individuals resident outside India, under 10% individual and 24% aggregate |
| 13 Jun 2026 | FEMA 395(4)/2026-RB | Earlier Schedule III payment rules | Designated repatriable rupee account; Form LEC (IFI) reporting by AD banks |
| 15 Jun 2026 | A.P. (DIR Series) Circular No. 14 | Not applicable | Banks to apply the Schedule III change with immediate effect |

The Schedule III change helps foreign spouses who are not OCIs. They can now buy listed Indian shares in their own name.

## Worked example

**Scenario 1: an OCI in Dubai who is tax resident but FEMA non resident.**

Priya is a British citizen with an OCI card. Her parents were born in Pune. She lives and works in Dubai and spent 110 days in India in 2025-26. In tax year 2026-27 she spends 130 days in India. Her Indian income from rent and interest is INR 18 lakh. She spent 400 days in India across the four preceding tax years.

| Test | Working | Result |
|---|---|---|
| Section 6(2)(a), 182 days | 130 days is below 182 | Not met |
| Section 6(4), visitor of Indian origin | She is a person of Indian origin under section 2(78) | 60 day test switched off |
| Section 6(5), income above INR 15 lakh | INR 18 lakh is above INR 15 lakh, so 120 days applies | 130 days meets 120 |
| Four preceding years | 400 days meets 365 | Met |
| Tax result | Resident under section 6(2)(b) as modified | Resident |
| Section 6(13)(b) | Caught only by the 120 day rule | Not ordinarily resident |
| FEMA result | 110 days in 2025-26 is not more than 182 | Person resident outside India |

Priya stays an "OCI" under the NDI Rules and keeps her NRE account. For income tax she is resident but not ordinarily resident. Her Dubai salary stays outside Indian tax unless it comes from a business controlled in India.

**Scenario 2: an OCI who moves to Bengaluru to run the subsidiary.**

Rahul is a US citizen with an OCI card who has lived in the US for the last ten years. He moves to Bengaluru on 1 Oct 2026 to become a director of his US employer's Indian subsidiary. He made no earlier visits that tax year.

1. **FEMA.** He came to India for employment, so on our reading he is a person resident in India from 1 Oct 2026. He is no longer an "OCI" under rule 2(ak).
2. **Days in tax year 2026-27.** October 31 + November 30 + December 31 + January 31 + February 28 + March 31 = 182 days.
3. **Tax result.** 182 days meets the "182 days or more" test in section 6(2)(a), so he is resident.
4. **Not ordinarily resident.** He was non resident in all ten preceding years, which meets the nine out of ten test in section 6(13)(a), so he is not ordinarily resident.
5. **Resident director.** Between 1 Oct 2026 and 31 Mar 2027 he is in India for 182 days. That meets the 182 day count in section 149(3) if the section counts the financial year, so check the current text.
6. **Bank accounts.** He redesignates his NRE account as a resident account or moves the funds to an RFC account.

**Scenario 3: Schedule III limits on a listed company.**

A listed company has 5,00,00,000 equity shares on a fully diluted basis. Since 12 Jun 2026, each individual resident outside India must hold less than 10 percent. So one OCI can hold at most 49,99,999 shares. All such individuals together can hold up to 24 percent, or 1,20,00,000 shares. Before 12 Jun 2026, an OCI could hold only 5 percent, or 25,00,000 shares.

## Common mistakes

1. **Choosing the basis by accident.** Money paid from an NRO account cannot fund a repatriation basis investment. Fix: decide between Schedule I and Schedule IV first, and pay from the matching account.
2. **Filing FC-GPR for a Schedule IV issue.** The investment is deemed domestic. Fix: record the Schedule IV basis in the board resolution and the share certificate, and keep the bank proof.
3. **Expecting Schedule IV proceeds to go abroad directly.** They go only to the NRO account. Fix: plan the exit through the NRO repatriation facility, or use Schedule I from the start.
4. **Assuming an OCI is a resident Indian citizen.** An OCI living in India is a resident but not a citizen. Fix: test downstream investment and sector rules on citizenship as well as residence.
5. **Mixing the FEMA and tax residence tests.** The two laws use different years and tests. Fix: test FEMA status on the preceding year and purpose, and tax status on days in the current year.
6. **Forgetting the accounts after a move.** An NRE account left unchanged after return breaches the Deposit rules. Fix: redesignate NRE and NRO accounts when FEMA status changes.
7. **Buying agricultural land.** Rule 24 bars it for OCIs. Fix: check land records and the use classification before signing.
8. **Relying on residence for Press Note 3.** Since 2026 the test is citizenship. Fix: check the OCI's passport, and any Hong Kong or Chinese holding company in the chain.

## Checklist

1. Confirm the investor holds a valid OCI card and lives outside India under FEMA section 2(v).
2. Choose the route: Schedule I for repatriation, Schedule IV for non repatriation, Schedule III for listed shares.
3. Check the sector rules, caps and any land border citizenship issue for a Schedule I investment.
4. Pay from the matching account: inward remittance, NRE or FCNR(B) for Schedule I; NRE, FCNR(B) or NRO for Schedule IV.
5. Obtain a valuation certificate for a Schedule I issue and price at or above fair value.
6. Allot within 60 days of receipt and file Form FC-GPR within 30 days of allotment for Schedule I.
7. Record the Schedule IV basis in board papers and the register of members.
8. Apply for a DIN in Form DIR-3 before an OCI joins the board, and file DIR-2 consent.
9. Count the OCI director's days in India each year for section 149(3), using the year the section specifies.
10. Retest FEMA and tax residence when the OCI moves to or from India, and redesignate bank accounts.

Our [FEMA compliance team](/services/fema-compliances.html) structures OCI investments, files FC-GPR and sets up OCI directors.

## Key terms

- **Overseas Citizen of India (OCI) cardholder**: A foreign citizen of Indian origin, or the spouse of an Indian citizen, who holds an OCI card under section 7A of the Citizenship Act, 1955, giving a lifelong, multiple entry, multi purpose visa. An OCI founder needs no business visa. Tax residence still follows the day count in section 6 of the Income Tax Act, 2025. (https://krystal7.com/glossary#overseas-citizen-of-india-cardholder)
- **Non Resident Indian (NRI)**: An individual resident outside India who is a citizen of India, as defined in rule 2(aj) of the Foreign Exchange Management (Non Debt Instruments) Rules, 2019. NRIs and OCIs share the same investment routes, including Schedule IV, which only they and entities they own and control can use. NRIs remain Indian citizens. (https://krystal7.com/glossary#non-resident-indian)
- **Investment on non repatriation basis**: An investment whose sale or maturity proceeds cannot be sent out of India, under rule 2(ad) of the NDI Rules. NRIs and OCIs make such investments under Schedule IV. The investment counts as domestic, and proceeds go only to the investor's NRO account. (https://krystal7.com/glossary#investment-on-non-repatriation-basis)
- **Person resident in India**: Section 2(v) of the Foreign Exchange Management Act, 1999 defines a person resident in India. It includes any company or body corporate registered or incorporated in India, whoever owns it, and an office, branch or agency in India owned or controlled by a person resident outside India. A foreign owned Indian subsidiary is therefore resident for FEMA purposes. (https://krystal7.com/glossary#person-resident-in-india)
- **Person of Indian origin (income tax)**: An individual who, or either of whose parents or any of whose grandparents, was born in undivided India, under section 2(78) of the Income Tax Act, 2025. Such a person visiting India gets the relaxed residence tests in section 6(4) and 6(5). (https://krystal7.com/glossary#person-of-indian-origin-income-tax)
- **Director Identification Number (DIN)**: A DIN is the unique number the Ministry of Corporate Affairs allots to an individual who will act as a director of an Indian company, under sections 152 to 154 of the Companies Act, 2013. A first time director usually gets it through SPICe+ at incorporation. A foreign director applies with a passport and authenticated proof of address. (https://krystal7.com/glossary#director-identification-number)
- **NRE account**: A Non Resident (External) rupee account that NRIs and persons of Indian origin, including OCI cardholders, may hold under RBI's Master Direction on Deposits and Accounts. Balances are freely repatriable, and the account can fund investments under Schedules I, III and IV of the NDI Rules. (https://krystal7.com/glossary#nre-account)

## Frequently Asked Questions

### Can an OCI cardholder invest in an Indian private company?

Yes. An OCI resident outside India can invest as FDI under Schedule I of the NDI Rules, on a repatriation basis. The company files Form FC-GPR within 30 days of allotment. The OCI can also invest under Schedule IV on a non repatriation basis, without limit. Schedule IV investment is deemed domestic and does not count towards sector caps.

### Is OCI investment treated as foreign investment?

It depends on the route. A Schedule I or Schedule III investment by an OCI is foreign investment and counts towards sector caps. A Schedule IV investment is different. Annex 4 of RBI's Master Direction on Foreign Investment says it "will be deemed to be domestic investment at par with the investment made by residents".

### Can an OCI repatriate profits from an Indian company?

Dividends are current income and can be remitted abroad after tax under either route. Sale proceeds of a Schedule I investment can be repatriated net of tax. Sale proceeds of a Schedule IV investment go only to the NRO account. NRIs and PIOs, including OCIs, can then remit NRO balances up to USD 1 million under the Remittance of Assets Regulations, 2016.

### Can an OCI cardholder be a director of an Indian company?

Yes. An OCI applies for a DIN in Form DIR-3 as a foreign national, with the foreign passport as identity proof. The OCI then gives consent in Form DIR-2. Under section 149(3) of the Companies Act, 2013, the OCI is the resident director only after staying 182 days or more in India, counted as the section provides.

### Does an OCI need a business visa to attend board meetings in India?

No. The OCI card is a multiple entry, lifelong visa for visiting India for any purpose, according to the High Commission of India in London. Special permission is needed only for research, missionary, mountaineering, journalism and a few other activities. OCIs are also exempt from FRRO registration for any length of stay.

### Is an OCI cardholder a person resident in India under FEMA?

Not while living abroad. Section 2(v) of FEMA looks at more than 182 days in India in the preceding financial year, plus the purpose of stay. On our reading, an OCI who comes to India for employment or business is resident from arrival. The OCI then stops being an "OCI" under rule 2(ak) of the NDI Rules.

### How is an OCI taxed on Indian income?

Section 6 of the Income Tax Act, 2025 decides residence by days in the tax year. An OCI of Indian origin who visits India is resident only after 182 days. If Indian income exceeds INR 15 lakh, 120 days plus 365 days in four years also makes the OCI resident, but not ordinarily resident. The section 6(7) deemed residence rule applies only to Indian citizens.

### Does Press Note 3 apply to OCI cardholders?

Only where the OCI is a citizen of a land border country, such as China, Nepal or Bhutan. Rule 6(a) of the NDI Rules, as amended in 2026, tests citizenship, not residence. A US or British OCI living in Hong Kong does not need approval on that ground. An OCI investing through a Hong Kong company does, on our reading.

### Can an OCI buy property in India?

Yes. Rule 24 of the NDI Rules lets an OCI buy any immovable property other than agricultural land, farm houses and plantation property. Payment must come by inward remittance or from a non resident account, such as an NRE, FCNR(B) or NRO account. The rule 31 restriction on citizens of China, Nepal and other listed countries does not apply to an OCI.

### Can an OCI open an NRE account?

Yes. RBI's Master Direction on Deposits and Accounts lets NRIs and persons of Indian origin open NRE and FCNR(B) accounts. Its definition of a person of Indian origin expressly includes an OCI cardholder. Any person resident outside India, including an OCI, can also open an NRO account.

### Can a foreign spouse with an OCI card invest under Schedule IV?

Yes. Schedule IV is open to OCIs, and the NDI Rules do not separate OCIs by the basis on which they got the card. A foreign spouse registered as an OCI under section 7A can invest on a non repatriation basis. For income tax, the spouse may not be a person of Indian origin, so the visitor relaxation may not apply.

### What happens to an OCI's NRE account after moving to India?

Paragraph 4.9 of RBI's Master Direction on Deposits and Accounts covers this. NRE accounts "should be designated as resident accounts", or the funds moved to RFC accounts, at the holder's option. The change is due immediately on return for employment or on a change in residential status. NRO accounts can be redesignated as resident accounts under paragraph 6.10.

### Can an OCI hold 100 percent of an Indian company in a capped sector?

Under Schedule IV, yes, on our reading, because the investment counts as domestic and Schedule IV has no limit for capital instruments. The sector's licensing and other conditions still apply to the company. Schedule IV bars a Nidhi company, agriculture, plantation, real estate business, farm houses and TDR dealing.

## Sources

- Reserve Bank of India, Foreign Exchange Management (Non Debt Instruments) Rules, 2019, updated to 2 Sep 2026, https://rbi.org.in/scripts/bs_viewcontent.aspx?Id=5083
- Reserve Bank of India, Master Direction on Foreign Investment in India, updated to 15 Jun 2026, https://www.rbi.org.in/scripts/bs_viewmasdirections.aspx?id=11200
- Reserve Bank of India, FEMA 395/2019-RB, Mode of Payment and Reporting of Non Debt Instruments Regulations, as amended to 13 Jun 2026, https://rbi.org.in/scripts/BS_FemaNotifications.aspx?Id=11723
- Reserve Bank of India, FEMA 395(4)/2026-RB, amendment regulations, 13 Jun 2026, https://rbi.org.in/ScriptS/BS_FemaNotifications.aspx?Id=13484
- Reserve Bank of India, A.P. (DIR Series) Circular No. 14, Liberalisation of Foreign Portfolio Investment under Schedule III, 15 Jun 2026, https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=13483&Mode=0
- Reserve Bank of India, Master Direction on Deposits and Accounts, updated to 2 Sep 2026, https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10198
- Reserve Bank of India, A.P. (DIR Series) Circular No. 45, quoting section 2(v) of FEMA, 8 Dec 2003, https://www.rbi.org.in/SCRIPTs/BS_FemaNotifications.aspx?Id=2763
- Income Tax Department, Section 6 of the Income Tax Act, 2025, https://www.incometaxindia.gov.in/w/section-6-1
- Income Tax Department, Section 2 of the Income Tax Act, 2025, https://www.incometaxindia.gov.in/w/section-2-1
- Ministry of Home Affairs, OCI services portal, https://ociservices.gov.in/onlineOCI/
- Ministry of Home Affairs, OCI FAQs, https://www.mha.gov.in/sites/default/files/2022-07/oci-faq.pdf
- High Commission of India, London, Benefits of OCI cards, https://www.hcilondon.gov.in/page/benefits-of-oci-cards/
- Ministry of Finance, Foreign Exchange Management (Non Debt Instruments) (Third Amendment) Rules, 2026, S.O. 3030(E), 12 Jun 2026, https://egazette.gov.in/WriteReadData/2026/273406.pdf
- Press Information Bureau, MCA replaces annual KYC with abridged KYC once in three years (G.S.R. 943(E) of 31 Dec 2025), 1 Jan 2026, https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2210552&reg=1&lang=1
- Reserve Bank of India, Master Circular on Foreign Investment in India, 2 Jul 2012 (earlier portfolio investment limits), https://www.rbi.org.in/commonperson/English/Scripts/Notification.aspx?Id=1006
- Ministry of Corporate Affairs, Companies Act, 2013 (sections 149, 152, 153, 196 and Schedule V) and the Companies (Appointment and Qualification of Directors) Rules, 2014, see the Acts and Rules section, https://www.mca.gov.in/
- DPIIT, Press Note No. 2 (2026 Series), 15 Mar 2026, https://www.dpiit.gov.in/static/uploads/2026/03/b9da5830b052c2f2d788593e97d07c63.pdf

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