NRIs hold a card no other foreign investor gets: Schedule IV. Invest in an Indian startup on a non-repatriation basis and the law treats the money as domestic – no pricing certificates, no FC-GPR, no sectoral caps, and the investment does not even count as foreign for the startup’s own downstream calculations. The trade-off is that exits land in your NRO account, repatriable at USD 1 million a year. This guide maps all the NRI routes – Schedule IV, repatriable FDI, angel funds (with the accreditation deadline), and AIF LP positions – with the tax positions for each.
The Schedule IV trump card, in full
Under Schedule IV of the NDI Rules, an NRI or OCI (and entities they own and control) may invest on a non-repatriation basis in: equity instruments of Indian companies, units of AIFs and other investment vehicles, capital of LLPs and firms – and, expressly under Rule 18(4), convertible notes of startups. The investment is “deemed to be domestic investment at par with the investment made by residents”: no FEMA pricing floor or cap, no entry reporting, and – the structurally decisive point – the Explanation to Rule 23 excludes Schedule IV holdings from the startup’s indirect-foreign-investment computation (a position DPIIT has confirmed). Your cheque does not push the company toward sectoral caps or Press Note approvals, which founders quietly value. Mechanics: fund from an inward remittance or your NRE/FCNR(B)/NRO account; sale and maturity proceeds credit only to NRO; current income (dividends) remains freely repatriable; and NRO balances repatriate through the USD 1 million per financial year window with the usual CA certificates. Prohibited territory: Nidhi companies, agricultural/plantation activity, real-estate business and farmhouses, and TDR trading. The full repatriable-vs-non-repatriable decision framework – including when the repatriation trade-off is worth it – is in our dedicated comparison in the NRI hub.
Route two: repatriable FDI
Invest under Schedule I like any foreign investor and the exit door stays fully open – at the cost of the full overlay: entry at or above certified FMV, FC-GPR within 30 days (the company files, but your paperwork feeds it), exit to residents capped at FMV, and convertible notes at the ₹25 lakh minimum with Form CN reporting. Broadly: use repatriable FDI for large cheques you expect to bring home from a big exit; use Schedule IV for angel-sized cheques where India-side redeployment is likely anyway. Mixing is legal – the same NRI can hold some investments each way – but each holding keeps its basis for life unless formally shifted (which triggers FC-TRS and pricing).
Route three: angel funds – and the accreditation clock
NRIs invest in SEBI angel funds on either basis – and from 8 September 2026 the funds may only accept accredited investors. NRIs qualify for accreditation on the same thresholds (₹2 crore income, ₹7.5 crore net worth with half financial, or the combination route) through CVL or NDML; Indian ITRs and a CA net-worth certificate make the file smoother, and overseas income/assets need consistent documentation – start earlier than a resident would. Once accredited, the new angel-fund framework opens ₹10 lakh minimum tickets. Direct angel investing outside funds needs no accreditation at all – the angel round guide covers both paths, and the instruments (CCPS, notes, iSAFE) all work on Schedule IV.
Route four: LP in an AIF (and the GIFT option)
An NRI can subscribe to Category I/II AIF units on a non-repatriation basis (domestic treatment, Schedule IV) or repatriably (Schedule VIII). Pass-through taxation applies either way – gains keep their character and the 12.5% unlisted LTCG rate reaches you directly. NRIs investing through GIFT City funds sit on the foreign-investor side of that structure with its own tax package. One caution for NRIs who manage money: NRI-controlled offshore vehicles face the 25%/50% participation caps in FPI/FVCI structures – a fund-formation question worth specific advice, distinct from passive LP positions.
Tax for the NRI startup investor
| Event | Position (FY 2026-27) |
|---|---|
| Unlisted exit, held > 24 months | 12.5% LTCG, no indexation – and for non-residents no currency-fluctuation adjustment (the rupee-depreciation trap: dollar-flat exits can still produce rupee gains – worked numbers in the capital gains map) |
| Held ≤ 24 months | Slab-rate STCG |
| Dividends | Taxable; treaty rates (10–15% for most NRI jurisdictions) via TRC + Form 10F; run the repatriation calculator |
| Buyback exits | From 1 April 2026: capital gains again (Finance Act 2026); promoter-level surcharge only if you cross the promoter tests |
| Residence interplay | Returning NRIs: RNOR status shelters foreign income only – Indian startup gains are taxable regardless; US/UAE-resident NRIs should check treaty tie-breakers before large exits |
Schedule IV does not change tax – it is a FEMA classification, not a tax one. What it changes is friction: no pricing certificates on entry, no FEMA cap on your exit price to a resident buyer, and no reporting cycle.
Structuring your India startup portfolio?
My Cloud Accountant sets up the basis election, accreditation file, documentation and exit-tax planning – for NRI angels and family offices end to end.
Talk to an expertFrequently Asked Questions
Can I convert a Schedule IV investment to repatriable later?
Yes, by transfer/reclassification – but the shift to a repatriation basis triggers the FEMA machinery you avoided: pricing compliance and FC-TRS reporting. Plan the basis at entry against realistic exit intentions rather than defaulting and converting.
Is USD 1 million a year a real constraint?
For most angel portfolios, no – it is per financial year, per NRI, from NRO balances, and covers all remittances (not just startup exits). A single very large exit can need multi-year planning or a repatriable-basis holding; that is exactly the case for choosing Schedule I at entry.
Do I need Indian tax filings for Schedule IV investments?
Yes – domestic FEMA treatment does not remove income-tax obligations. Exits and dividends are taxable in India with TDS mechanics, and a return is generally due where tax is payable or treaty relief is claimed. Loss carry-forward (8 years) also requires on-time filing – which matters for angel portfolios.
Can my Singapore/Dubai investment company use Schedule IV?
Schedule IV extends to companies, trusts and firms incorporated outside India that are owned and controlled by NRIs/OCIs – so an NRI-owned family investment vehicle can qualify. Ownership/control documentation is the load-bearing element; structure it with advice before the first cheque.
Last reviewed: August 2026. FEM (NDI) Rules 2019 (Schedules I, IV; Rules 18(4), 21, 23 + Explanation); SEBI angel-fund framework (accredited-only from 8 September 2026); Income-tax Act 2025 rates; Finance Act 2026 buyback regime.