Schedule IV 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 IV to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 allows a Non-Resident Indian (NRI) or an Overseas Citizen of India (OCI), and companies, trusts and partnership firms incorporated outside India that NRIs or OCIs own and control, to invest in India on non-repatriation basis. The investment is treated as domestic investment, subject to a short list of barred businesses. This article reads the Schedule, the rules that send the reader to it (rule 12(2) and rule 13(2) to (4)) and the Explanation to rule 23 that keeps such investment out of indirect foreign investment.
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(2))". None of the nineteen amending notifications changes Schedule IV or rule 12(2); rule 13 was changed only in its heading, opening words and sub-rule (1) by S.O. 3030(E) of 12 June 2026, and rule 23's Explanation was changed as set out below. Amendments after 2 September 2026 should be checked in the Gazette. The Rules rest on section 46 of the Act; see our article on section 46 of the Foreign Exchange Management Act, 1999. Questions on the tax side of such investment go to our NRI tax filing service.
An NRI or OCI, including a company, trust or partnership firm incorporated outside India and owned and controlled by NRIs or OCIs, may buy equity instruments, units, LLP capital and startup convertible notes without any limit on non-repatriation basis. The investment is deemed domestic investment at par with residents. It is barred in a Nidhi company and in companies in agriculture or plantation, real estate business, farm house construction or dealing in transfer of development rights. The Reserve Bank specifies the mode of payment and the conditions for proceeds.
Who may invest and in what: paragraph A(1)
Under paragraph A(1)(a), an NRI or OCI, including a company, a trust and a partnership firm incorporated outside India and owned and controlled by NRIs or OCIs, may purchase or contribute, as the case may be, on non-repatriation basis:
| Item | What may be bought or contributed |
|---|---|
| (i) | An equity instrument issued by a company, without any limit, either on the stock exchange or outside it |
| (ii) | Units issued by an investment vehicle, without any limit, either on the stock exchange or outside it |
| (iii) | The capital of a Limited Liability Partnership, without any limit |
| (iv) | Convertible notes issued by a startup company in accordance with the Rules |
Paragraph A(1)(b) adds that the investment in sub-paragraph (a) "shall be deemed to be domestic investment at par with the investment made by residents".
Paragraph A(2) lets the NRI or OCI, "without limit", purchase or sell units of domestic mutual funds on non-repatriation basis which invest more than 50% in equity.
Rule 12(2), as notified and unchanged, is the gateway: an NRI or OCI may, on non-repatriation basis, purchase or sell equity instruments of an Indian company or other securities or contribute to the capital of an LLP or a firm or proprietary concern, in the manner and subject to the terms and conditions in Schedule IV. For the full rules see our article on investment by NRI, OCI and other individuals under rules 12 and 13.
The bar in paragraph A(3)
"Notwithstanding anything contained in paragraph 1", an NRI or OCI, including such a company, trust or partnership firm, shall not make any investment under this Schedule in equity instruments or units of:
- a Nidhi company; or
- a company engaged in agricultural or plantation activities, real estate business, construction of farm houses, or dealing in transfer of development rights.
An Explanation says that "real estate business" has the meaning in "sub-paragraph (b) of paragraph (3) of Schedule 1". A cross-reference slip to note. Sub-paragraph (b) of paragraph 3 of Schedule I deals with sectoral caps. The Explanation that defines "real estate business" stands under paragraph 2(f) of Schedule I (the list of prohibited sectors), substituted by S.O. 1802(E) of 12 April 2022. Read it as the 2(f) meaning, which says real estate business means dealing in land and immovable property with a view to earning profit from there, and does not include development of townships, construction of residential or commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, real estate broking services, REITs registered and regulated under the SEBI (REITs) Regulations 2014, and earning of rent or income on lease of the property not amounting to transfer. The Rules print the reference as given above; confirm against the official text. Our article on sectors prohibited for foreign investment goes through paragraph 2.
Paragraph A(4) and part B
Paragraph A(4) says the mode of payment and attendant conditions for remittance of sale or maturity proceeds shall be specified by the Reserve Bank. Part B, "Investment in a firm or a proprietary concern", lets an NRI or OCI invest on non-repatriation basis by contribution to the capital of a firm or proprietary concern in India, provided it is not engaged in any agricultural or plantation activity or print media or real estate business. Its Explanation again points to "sub paragraph (b) of paragraph (3) of Schedule I", the same slip; and B(2) leaves payment and proceeds to the Reserve Bank.
The Reserve Bank's Mode of Payment and Reporting Regulations carry the row for Schedule IV; the Master Direction - Foreign Investment in India, updated up to June 15, 2026, restates it in Annex 4. The Master Direction says, as its own statement, that consideration is received from abroad through banking channels or paid out of NRE, FCNR(B) or NRO accounts, that sale or maturity proceeds are credited only to the NRO account, irrespective of the account used for payment, and that the amount invested and the capital appreciation cannot be repatriated abroad. See our article on payments for NRIs, LLPs, FVCIs and convertible notes. For the tax side of those proceeds, see our income-tax guides.
The Master Direction's Annex 4 words the permitted holdings slightly differently from the Rules: it speaks of "any capital instrument issued by a company" where the Rules say "a equity instrument issued by a company". The Gazette wording is followed here.
Rule 13(2) to (4): transfers of non-repatriable holdings
The sub-rules that bear on Schedule IV holdings are these, all as notified (S.O. 3030(E) of 12 June 2026 changed only the heading, the opening words and sub-rule (1)):
| Sub-rule | What it says |
|---|---|
| 13(2) | An NRI, OCI or an eligible investor under Schedule IV holding equity instruments or units on a non-repatriation basis may transfer them to a person resident outside India by way of sale, subject to entry routes, sectoral caps or investment limits, pricing guidelines and other attendant conditions as apply to investment by a person resident outside India, and to documentation and reporting requirements specified by the Reserve Bank in consultation with the Central Government. The proviso says those conditions do not apply if the transfer is to an NRI, OCI or an eligible investor under Schedule IV acquiring such investment |
| 13(3) | Transfer by way of gift to a person resident outside India needs the prior approval of the Reserve Bank, in the manner prescribed, and the donee must be eligible to hold the security; the gift must not exceed five percent of the paid up capital of the Indian company or each mutual fund scheme (cumulative, by a single person to another single person); the sectoral cap must not be breached; donor and donee must be "relatives" under clause (77) of section 2 of the Companies Act, 2013; the value transferred in the financial year, with other gifts to persons outside India, must not exceed the rupee equivalent of USD 50000; and other conditions the Central Government considers necessary in public interest apply |
| 13(4) | Gift to an NRI, OCI or an eligible investor under Schedule IV who will hold it on a non-repatriable basis is permitted; the sub-rule prints no approval, limit or other condition |
Sub-rule (4) in the Rules says only that such a holder may transfer "by way of gift" to another such person who shall hold it on a non-repatriable basis; no approval or limit is printed in that sub-rule. For gift conditions in the sale-and-gift setting see our article on gift, optionality, deferred payment and escrow under rule 9.
The Explanation to rule 23: indirect foreign investment
Rule 23 on downstream investment carries an Explanation with clauses (a) to (k). Two amendments touch the part that matters here. S.O. 3206(E) of 6 August 2021 (cited in later notifications as dated 9 August 2021) inserted an Explanation under clause (i) on indirect foreign investment, saying that investment by an Indian entity owned and controlled by NRIs on non-repatriation basis is not considered in calculating indirect foreign investment. S.O. 3492(E) of 16 August 2024 (the fourth amendment of 2024) substituted that Explanation with the current one: an investment made by an Indian entity which is owned and controlled by an NRI or an OCI, including a company, a trust and a partnership firm incorporated outside India and owned and controlled by an NRI or an OCI, on a non-repatriation basis in compliance with Schedule IV, "shall not be considered for calculation of indirect foreign investment". The same notification omitted clause (d) of the Explanation, which had defined "control" (the term now has its own definition in rule 2). Rule 23 is explained in our article on indirect foreign investment and ownership tests.
A worked example
Anita Kapoor, an OCI living abroad, owns and controls Brindle Holdings, a company incorporated outside India. Brindle subscribes to equity shares of Westmark Tools Private Limited, an Indian company that makes tools, on non-repatriation basis with money from an NRO account. This is domestic investment at par with residents, and under the Explanation to rule 23 it is not counted when Westmark's own downstream investment is tested for indirect foreign investment. If Westmark were a Nidhi company, paragraph A(3) would bar the investment. All names are invented.
Need help with NRI investments in India?
Where an NRI, an OCI or a company they control wants to invest or gift Indian shares, the first question is the basis: repatriation or non-repatriation. Our NRI tax filing team can walk through the account and tax consequences with the FEMA position above.
Key takeaways
- Non-repatriation investment under Schedule IV has no limit and is treated as domestic investment.
- Eligible: NRIs, OCIs and companies, trusts and partnership firms outside India owned and controlled by them.
- Barred: Nidhi companies; agriculture, plantation, real estate business, farm houses, transfer of development rights; for firms and proprietary concerns, print media as well.
- Transfers and gifts follow rule 13(2) to (4); the gift conditions in rule 13(3) are tied to the five percent and USD 50000 figures printed there.
- Schedule IV investment is kept out of indirect foreign investment under the Explanation to rule 23, as substituted in 2024.
Read next
- Listed share purchases on repatriation basis: Schedule III
- Investment by NRI, OCI and other individuals: rules 12 and 13
- Indirect foreign investment and ownership tests: rule 23
- 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.