Many US companies with Indian operations are led by founders who were born in India or who hold Overseas Citizen of India cards. Their status affects the plan. For foreign exchange purposes, an NRI is an Indian citizen resident outside India, and an OCI cardholder is generally treated like an NRI for investment. Investments made by an NRI or OCI personally can go into an Indian company on a non-repatriable basis, treated as a domestic investment and free of foreign investment sector conditions, or on a repatriable basis under the foreign direct investment route. A US company is a non-resident entity, and an investment by it follows the foreign direct investment route, even if the founders are of Indian origin. Tax residency is separate: a founder who spends 182 days or more in India in a year, or meets the multi-year test, can become an Indian tax resident, and the India-US treaty decides which country keeps the primary right to tax if both claim. This page maps the questions and does not replace advice on your own status.
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Key facts
| NRI | Indian citizen who is resident outside India for foreign exchange purposes |
|---|---|
| OCI | Cardholder of foreign nationality with Indian origin; treated like an NRI for most investment purposes; not a citizen |
| Personal investment | May be on a non-repatriable basis, treated as domestic, or repatriable under the FDI route |
| US company owned by NRIs | Investment by the company is foreign investment under the FDI route; special rules for non-repatriation by NRI-owned entities should be checked |
| Tax residency | Indian resident if 182 days or more in the year, or the multi-year test; special thresholds for NRIs visiting India |
| Treaty | Tie-breaker rules in the India-US treaty decide treaty residence for individuals; US citizens are taxed on worldwide income |
| Directorship | An NRI or OCI can be a director; the Resident Director rule needs 182 days in India |
| Reporting | US reporting of foreign accounts and entities; Indian reporting of foreign assets for residents |
Who is an NRI, an OCI and a resident
| Status | Meaning for foreign exchange | Typical treatment of investment |
|---|---|---|
| Resident of India | Lives in India for the period and purpose set by the foreign exchange law | Overseas investment rules apply to money sent abroad |
| NRI | Indian citizen resident outside India | May invest in India on a repatriable or non-repatriable basis |
| OCI cardholder | Foreign citizen of Indian origin with an OCI card; not an Indian citizen | Treated like an NRI for most investment routes |
| Foreign citizen without OCI | Non-resident foreign investor | Foreign direct investment route |
| US company | Non-resident entity | Foreign direct investment route, even if owned by NRIs or OCIs |
The status is a question of fact and of the law's definitions at the date of investment. Citizenship, passport, OCI card, days of stay and purpose of stay all matter. Founders who have moved between countries should write down the dates of each move, because the answer for foreign exchange and the answer for tax can differ.
Choosing how the money goes in
An NRI or OCI founder who invests personally in an Indian company has a choice. Non-repatriable investment is treated as a domestic investment, so the sector caps and pricing rules for foreign investment do not apply in the same way, but the money and its income stay in India in a way that limits sending funds abroad, with allowances for limited remittance. Repatriable investment follows the foreign direct investment route, with pricing at or above fair value, reporting on FC-GPR and freedom to remit proceeds. A US company that is owned by the same founders invests under the foreign direct investment route, and it is the company, not the founders, that is the investor.
The choice should follow the plan. A founder who intends to return and run the business in India may prefer to hold shares personally on a non-repatriable basis, while a founder who wants the cap table, ownership and exit to sit in the US company will invest through the company. Mixing the two is possible, but the cap table and reporting become more complex. Take advice before the first remittance. See funding and FC-GPR and share valuation.
Tax residency and the treaty
India taxes residents on worldwide income and non-residents on Indian-source income. An individual is resident if present for 182 days or more in the financial year, or for 60 days in the year and 365 days in the four preceding years, with a higher 182-day threshold for Indian citizens and persons of Indian origin who visit from abroad, and a deemed residence rule for high-income Indian citizens with no tax residence elsewhere. A resident who has been abroad most of the previous years may be 'not ordinarily resident', which limits the tax on foreign income for a time. The US taxes its citizens and residents on worldwide income wherever they live. If both countries treat the founder as a resident, the treaty's tie-breaker looks at permanent home, centre of vital interests, habitual abode and nationality. Keep a day-count diary and take advice before a long stay in India.
Directorship and the Resident Director rule
A founder who is an NRI or OCI can be a director of the Indian company like any other. The Resident Director rule requires at least one director who has stayed in India for 182 days in the year, so a founder who divides the year between the US and India may or may not qualify. Decide whether the founder or a local leader will fill the seat. See the resident director guide. An OCI or NRI who is a director also needs a Director Identification Number and Digital Signature Certificate and, if employed by the Indian company, an appropriate visa for an OCI, which is simpler than for other foreigners but still needs registration steps.
US reporting for founders
- US citizens and residents with an interest in a foreign corporation file Form 5471 and, where applicable, other information returns. See the US tax guide.
- Foreign bank and financial accounts above the threshold are reported on the FBAR and on Form 8938 where the asset thresholds are met.
- Gifts and inheritances from relatives in India can need US reporting above thresholds.
- Indian residents must report foreign assets in their Indian return; a founder moving to India should plan that before the move.
- A change of residence can trigger exit or entry tax events in both countries.
Family and property
Founders of Indian origin often have family property, accounts and shares in India. These affect the plan in three ways. Money received from the sale of Indian property by an NRI is subject to repatriation limits and tax rules. Accounts held as resident accounts must be converted when the person becomes an NRI. And a founder who inherits shares in an Indian company has to follow the foreign exchange rules for the holding. Keep these separate from the company's investment so that the filings for each are clean.
Founder checklist
- Write down citizenship, passport, OCI status, residence and day counts for the last five years.
- Decide whether the investment is personal or through the US company, and whether it is repatriable.
- Ask the US adviser about the Indian company's classification and the reporting that follows.
- Choose the Resident Director with the 182-day rule in mind.
- Keep a day-count diary for India and the US.
- Separate personal Indian assets from company investment records.
- Review before any move of residence.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, Internal Revenue Service (US), Bureau of Industry and Security (US) and the Ministry of External Affairs (India).
Frequently asked questions
Is an OCI cardholder treated as an NRI?
For most investment purposes, yes. An OCI cardholder is a foreign citizen of Indian origin and is generally treated like an NRI for foreign exchange investment rules.
Can an NRI invest in India without foreign direct investment conditions?
On a non-repatriable basis, an NRI's investment is treated as a domestic investment. The repatriable basis follows the foreign direct investment route.
If my US company is owned by Indian-origin founders, is it an NRI investor?
The company is a non-resident entity and invests under the foreign direct investment route. Special rules for NRI-owned entities should be checked.
When does a founder become an Indian tax resident?
At 182 days or more in a financial year, or the multi-year test, with higher thresholds for some visitors of Indian origin. Confirm your own case.
What if both India and the US treat me as a resident?
The India-US treaty's tie-breaker looks at permanent home, vital interests, habitual abode and nationality.
Can an OCI be a director of an Indian company?
Yes, with a Director Identification Number and Digital Signature Certificate. The Resident Director rule needs 182 days in India.
Do US citizens report Indian holdings?
Yes. Form 5471, the FBAR and Form 8938 may apply, depending on the holding and the thresholds.
Can I send the sale proceeds of Indian property abroad?
Subject to limits and tax conditions for NRIs. Take advice before the sale.
Should the founder hold the shares or the US company?
It depends on the plan for ownership, exit and return to India. Decide before the first remittance.
Related guides
Funding and FC-GPR
How to bring in capital and report it to the Reserve Bank.
Read the guide →Resident director
The 182-day rule and who can fill it.
Read the guide →Share valuation
FEMA valuation for share issues and transfers.
Read the guide →How the US Taxes Profits of an Indian Subsidiary: Net CFC Tested Income, Subpart F, the Participation Deduction, the High-Tax Exclusion and Foreign Tax Credits
The US side of an Indian subsidiary for a US C corporation or pass-through owner: how profits are taxed when earned or when distributed, what changed after the July 2025 tax act, the role of Indian tax as a credit, check-the-box choices and the forms (5471, 926, 1118, 8992 and 8993).
Read the guide →Sources
Last updated 2 November 2026. General information only, not legal or tax advice. Indian and US rules change often; confirm current requirements before acting.