Schedule III explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Schedule III to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 lets a non-resident individual buy and sell listed Indian shares on a stock exchange on repatriation basis, through a designated bank branch and inside a holding limit. Since June 2026 it speaks of "an individual person resident outside India including a Non-Resident Indian (NRI) or Overseas Citizen of India (OCI)", not only of NRIs and OCIs. This article reads the Schedule as it stands now, with paragraph (1) in its substituted form.
This article states the position as per the Rules notified on 17 October 2019 (S.O. 3732(E)) as amended by the notifications named in this article; the latest amendment consulted is S.O. 4870(E) dated 2 September 2026. The Schedule is headed "(See rule 12(1))" and rests on the Central Government's rule-making power in section 46 of the Act; see our article on section 46 of the Foreign Exchange Management Act, 1999. Amendments after 2 September 2026 should be checked in the Gazette. If you are an NRI or OCI weighing a portfolio position against the limit, our NRI tax filing service sits beside the FEMA position on the tax side.
Under S.O. 3030(E) of 12 June 2026, Schedule III now covers an individual person resident outside India including an NRI or OCI. Purchases and sales of listed equity instruments are on a recognised stock exchange through a branch designated by an Authorised Dealer. The holding of any one individual must be less than ten per cent; all such individuals together may not exceed twenty four per cent. A breach of the ten per cent limit must be divested within five trading days or the whole holding becomes FDI, with no further portfolio investment in that company.
What changed and what did not
| Part of Schedule III | Text applied |
|---|---|
| Heading | Words substituted by S.O. 3030(E), the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2026, dated 12 June 2026 |
| Paragraph (1) | Substituted as a whole by S.O. 3030(E); clauses (a), (b) with its proviso, and (c) |
| Paragraphs (2) to (5) | As notified on 17 October 2019; none of the later notifications changes them |
The 2019 text of paragraph (1) set a limit of 5 percent for any individual NRI or OCI and ten percent for all NRIs and OCIs put together, with a proviso allowing the aggregate ceiling to go to 24 percent by special resolution. That is now history; the substituted paragraph is the current one.
The heading as substituted by the notification reads: for the words "Non-Resident Indian (NRI) or Overseas Citizen of India (OCI)" the words "an individual person resident outside India including a Non-Resident Indian (NRI) or Overseas Citizen of India (OCI)". The closing quotation mark of the substituted words is missing in the Gazette text; the meaning is clear.
Paragraph (1): purchase or sale of equity instruments of a listed Indian company
An individual person resident outside India may purchase or sell equity instruments of a listed Indian company on repatriation basis, on a recognised stock exchange in India, subject to three conditions.
Clause (a): designated branch
The individual may purchase and sell equity instruments through a branch designated by an Authorized Dealer for the purpose.
Clause (b): ten per cent and twenty four per cent
The total holding by any individual person resident outside India shall be less than ten per cent of the total paid-up equity capital on a fully diluted basis, or less than ten per cent of the paid-up value of each series of debentures or preference shares or share warrants issued by an Indian company. The total holdings of all such individuals put together in the Indian company under this Schedule shall not exceed twenty four per cent of the paid-up equity capital on a fully diluted basis, or twenty four per cent of the paid-up value of each series of debentures, preference shares or share warrants.
The proviso says that the total holding of an individual person resident outside India in a listed Indian company under Schedule II, III or any other schedule of the Rules shall be less than the individual limit of less than ten per cent, and that for investment of ten per cent or more, "the provisions of clause (c) of sub-paragraph (a) of paragraph 1 of this schedule shall apply".
A drafting slip to note. Paragraph 1 of this Schedule has clauses (a), (b) and (c) but no sub-paragraph (a). Read in context, the reference is to clause (c) of paragraph (1), the breach rule below. The text is quoted as printed; confirm against the official text.
Clause (c): breach of the ten per cent limit
Investment made under the Rules in breach of the prescribed limit of less than ten per cent shall be divested within five trading days from the date of settlement of the trades causing the breach. If the individual chooses not to divest:
- the entire investment in that company by the individual is considered foreign direct investment (FDI);
- the individual shall not make further portfolio investment in the company;
- the individual, through the designated branch of the Authorized Dealer, shall bring the matter to the notice of the depositories and the company within seven trading days from the date of settlement of the trades causing the breach;
- divestment and the reclassification of portfolio investment as FDI are subject to the same conditions as specified by the Securities and Exchange Board of India and the Reserve Bank for a foreign portfolio investor (FPI); and
- the breach of the aggregate or sectoral limit between the acquisition and the sale or conversion to FDI within the prescribed time is not reckoned as a contravention under the Rules.
The parallel for FPIs is in our article on Schedule II, paragraph 1(a)(i) to (iv).
Paragraphs (2) to (5) as notified
These four paragraphs were not touched by any of the nineteen amending notifications and still speak of NRIs and OCIs:
| Paragraph | What the text says |
|---|---|
| (2) Units of domestic mutual funds | A NRI or OCI may "without limit" purchase or sell units of domestic mutual funds which invest more than 50 percent in equity |
| (3) Shares in public sector enterprises | A NRI or OCI may, "without limit", purchase or sell shares in public sector enterprises being disinvested by the Central Government, provided the purchase is in accordance with the terms and conditions in the notice inviting bids |
| (4) National Pension System | A NRI or OCI may subscribe to the National Pension System governed and administered by the Pension Fund Regulatory and Development Authority, provided the person is eligible to invest under the Pension Fund Regulatory and Development Authority Act; the annuity or accumulated saving will be repatriable |
| (5) Mode of payment | The mode of payment and attendant conditions for remittance of sale or maturity proceeds shall be specified by the Reserve Bank |
The proviso to paragraph (4) adds that NRIs or OCIs may offer such instruments as permitted by the Reserve Bank from time to time as collateral to the recognised stock exchanges for their transactions in exchange traded derivative contracts "as prescribed in sub-clause (2) of clause 12 of these Rules". The Rules have rule 12, not a clause 12, and the reference to sub-clause (2) is to rule 12 as printed; confirm against the official text. Rule 12 is explained in our article on investment by NRI, OCI and other individuals under rules 12 and 13.
Because paragraphs (2) to (5) were not re-worded, the Gazette does not say whether an individual who is neither an NRI nor an OCI may use them. The text should be read as printed.
What the Master Direction adds
The Master Direction - Foreign Investment in India, updated up to June 15, 2026, restates paragraph (1) in its Annex 3 (paragraph 1.1). It lists the designated Authorised Dealer branch, the ten per cent and twenty four per cent limits and the combined-schedule holding test, and it adds a land-border condition: investment by an individual person resident outside India that results in transfer of ownership or control of the listed company to entities or citizens of a country sharing a land border with India, or where the beneficial owner is a citizen of such a country, needs the prior approval of the Government. In the Rules that condition sits in the proviso to rule 12(1) as substituted by S.O. 3030(E).
Where the Rules send an investment of ten per cent or more to "clause (c)", the Master Direction sends it to its paragraph 7.3.3. That paragraph is the Master Direction's own statement: it requires the sale of the excess within five trading days after settlement and records re-classification as FDI under a framework the Reserve Bank issued by an A.P. (DIR Series) Circular dated November 11, 2024. That circular is not in the texts consulted.
Annex 3 also describes a designated rupee account, with permitted credits (inward remittances, transfers from other repatriable accounts, net sale proceeds, dividend or income) and debits, and says sale proceeds (net of taxes) can be remitted outside India or credited to the designated rupee account. These are the Master Direction's own statements; the Rules leave mode of payment to the Reserve Bank (paragraph (5)). The Mode of Payment and Reporting Regulations carry the matching row for Schedule III; see our article on payment for NRIs, LLPs, FVCIs and convertible notes. Annex 3 does not reproduce paragraphs (2) to (4) of the Schedule. For tax questions on gains from listed shares, see our income-tax guides.
A worked example
Ritu Sandhu, an individual resident in a foreign country and an OCI, buys shares of Calder Instruments Limited, a listed Indian company, through the designated branch of an Authorized Dealer, and her holding reaches 10.5 per cent of the fully diluted paid-up equity capital. Under clause (c) she must divest within five trading days from the settlement of the trades that caused the breach. If she keeps the shares, her whole holding in Calder Instruments is treated as FDI and she cannot add further portfolio investment. The names are invented.
Need help with an NRI investment in Indian shares?
A non-resident who holds listed shares across more than one schedule needs the holdings added together before the next purchase. Our NRI tax filing team can look at the tax side of such holdings, and the FEMA side is the Schedule above.
Key takeaways
- Schedule III now speaks of an individual person resident outside India including an NRI or OCI, from 12 June 2026.
- Individual limit: less than ten per cent; aggregate: not more than twenty four per cent.
- Holdings under Schedules II, III and any other schedule are counted together; ten per cent or more goes to the breach rule.
- Breach: divest within five trading days or the whole holding becomes FDI; depositories and the company are told within seven trading days.
- Paragraphs (2) to (5) stand as notified; the Reserve Bank specifies mode of payment and remittance of proceeds.
Read next
- Investment by NRI and OCI on non-repatriation basis: Schedule IV
- Investment by NRI, OCI and other individuals: rules 12 and 13
- FPI individual and aggregate limits: Schedule II
- NRI accounts: NRE, NRO and FCNR
Disclaimer: Based on the Gazette text of the instrument this article names, as notified and as amended by the notifications named in the article (for the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 the latest amendment consulted is S.O. 4870(E) dated 2 September 2026), as consulted on 2 October 2026. There is no official consolidated text; the provisions were read with each amendment applied. Sectoral caps, entry routes, conditions, forms and time limits change by notification, press note and circular; later changes should be checked on the Gazette, DPIIT and Reserve Bank sites. This article is general information, not legal advice; check the official text before acting.