How To Set Up A Business As An OCI Cardholder

Under the Indian law, the OCI cardholders enjoy the same economic rights as NRIs. These rights include starting a business or professional practice in India, investing in Indian companies, and serving as a shareholder and director of an Indian corporation. 

With respect to the Reserve Bank of India and the Ministry of Home Affairs, an OCI cardholder may engage in business activities in India, provided they comply with FEMA and other applicable regulations. 

In this blog, we will explore the OCI business setup in India, including the legal procedures, required documents, and more. 

Legal Process For OCI Business Setup

For OCI cardholders, setting up a business in India is a streamlined digital process that is governed by the Ministry of Corporate Affairs (MCA). Generally, OCI cardholders prefer to set up a private limited company, as it offers limited liability and is highly respected by investors. 

The legal process for setting up a business in India as an OCI cardholder typically begins with obtaining a Digital Signature Certificate (DSC), as filings with the Ministry of Corporate Affairs require digital authentication. If the OCI intends to act as a director, a Director Identification Number (DIN) is required, which is usually applied for during the company incorporation process.

A DIN is a unique number and a non-negotiable requirement for every person intending to serve as a director of an Indian company. 

Once you have DSC handy, you must apply for your company name reservation in the next step. To do so, you must do it through the SPICe+ (Simplified Proforma For Incorporating Company Electronically Plus) portal.

After the name is approved by the authorities, you shall file the incorporation documents, including the Articles of Association (AOA) and Memorandum of Association (MoA). The MOA and AOA establish the company's regulatory framework and the goals the company must adhere to. 

Upon completing the setup process, the Registrar of Companies issues a certificate of Incorporation, thereby establishing the OCI cardholder's business as a legal entity in India. 

It is advisable for an OCI Cardholder seeking to establish a business in India to take a CA's assistance in the legal process for the OCI business setup. A qualified expert can lead you through the entire process seamlessly, ensuring everything is in compliance. 

Documents Required For OCI Business Setup

One of the fundamental requirements for a business's proper functioning is accurate documentation. Since you are an OCI cardholder establishing a business in India, your Documents executed outside India must be notarized or apostilled as applicable and may be submitted through an authorized representative in India.

The Documents Required for Directors & Shareholders

• Valid Passport: A passport is mandatory proof of identity for all foreign nationals and NRIs. 
• OCI Card: A copy of your OCI card.
• Proof of Address: You require a recent bank statement, a utility bill (no more than 2 months old), or a driving license from your country of residence. 
• PAN Card: A mandatory document in India for financial transactions, dealings, and tax compliance. 
• Passport-size photographs: Recent passport-size photographs of the company director and shareholders. 
• Digital Signature Certificate: A DSC is required for government filing to sign electronic forms. 
• Director Identification Number (DIN): A unique identifier for directors serving in Indian companies. 

Documents Required For Registered Office In India

• Proof of Address: Recent utility bills, such as water, gas, or electricity bills, for the premises. 
• NOC (No Objection Certificate): NOC is a letter from the property owner permitting the use of the property as the company's registered office. 
• Rental/Lease Agreement: If the property is on rent, a rental or lease agreement is required. 
• Ownership Proof: If the property for the company's registered office is owned by you, a copy of the sale deed and the property tax receipt. 

Types Of Businesses An OCI Cardholder Can Start In India

The following are the types of business an OCI cardholder can own in India. 

Sole Proprietorship

An OCI cardholder can set up a sole proprietorship business in India on a non-repatriation basis. However, as the OCI cardholder business owner in India, you shall comply with

• The local laws, taxation, regulations, and licensing. 
• The profits from the business are retained in India and not repatriable abroad without prior RBI approval. 
• The funds for the business are sourced from an Indian bank account in INR.

For instance, an OCI cardholder setting up a trading firm in Mumbai that will operate under their own name as a proprietorship. 

Limited Liability Partnership (LLP) and Partnership 

In association with Indian residency, OCI cardholders can form LLPs and partnership firms, provided: 

• The business shall operate in an industry that permits foreign investment. 
• All foreign contributions shall comply with FDI and FEMA policy. 

This type of business structure allows the OCI cardholders to co-own a business with their spouses or even family members in India. 

Private Limited Company

This type of business structure is the most preferred among OCI entrepreneurs. With respect to the Companies Act 2013, an OCI cardholder can. 

• Incorporate a private limited company in India. 
• Own 100% of the equity (this is subject to sectoral caps under the Foreign Direct Investment (FDI) policy). 
• One director on the board has to be a resident of India. 

For instance, OCI entrepreneurs start a consultancy firm in Delhi, appoint an Indian director to the board to satisfy residency requirements, and own 100% equity.

Restrictions & Limitations on OCI Cardholder Business

While most business sectors in India permit investment by OCI cardholders, the following sectors remain prohibited.

Taxation & Compliance For OCI Business Setup

As an OCI cardholder business owner in India, you are subject to:

• Indian Income tax on your business income as per the applicable slab rates. 
• Goods and Services Tax (GST) is applicable if the business's total turnover exceeds the prescribed limits. 
• Annual filing requirements with the ROC (Registrar of Companies). 

Example On OCI Business Setup In India

The following are three scenarios related to OCI business in India for better understanding. 

Scenario 1: OCI Cardholder Entrepreneur in the Tech Domain

Assume an OCI cardholder based in Berlin wishes to start a fintech company in Delhi. 

• The OCI entrepreneur will incorporate a private limited company under the Companies Act. 
• Will onboard one resident Indian director. 
• Since the technology sector allows foreign direct investment, the OCI cardholder business owner can bring in foreign investment via the automatic route, meaning no prior approval is required. 
• Register for GST and start the business operation. 

Scenario 2: OCI Entrepreneur Owning Real Estate Business

An OCI cardholder living in the USA wants to buy farmland in Haryana to set up his agricultural and farming business. 

• Under Indian law, OCI cardholders are not permitted to purchase agricultural land in India. 
• However, this OCI entrepreneur goes ahead and buys residential or commercial property instead. 

Scenario 3: OCI Cardholder running a consultancy firm

An OCI cardholder from Dubai sets up a sole proprietorship consultancy in Noida on a non-repatriation basis. 

• Business transactions will be conducted via an Indian bank account in INR. 
• The profits will be retained in India and reinvested in local operations. 

The Bottom Line

Yes, OCI cardholders can set up a business in India, provided they comply with the Companies Act, FEMA, and FDI policy regulations. The legal procedure for setting up a business in India for an OCI entrepreneur is a streamlined digital process, whether for sole proprietorship, LLP, partnership, or private limited company incorporation. 

However, the OCI entrepreneurs must be aware of the restrictions and limitations on agricultural and plantation land ownership, as well as on other regulated industries. 

As an OCI cardholder, if you are thinking of setting up a business in India and seeking professional guidance, Savetaxs is the name to trust. Our experts provide end-to-end consultation on managing the company incorporation process via the MCA SPICe+ portal, including assistance with obtaining a DSC (Digital Signature Certificate) and a DIN (Director Identification Number). 

The experts will ensure 100% compliance with FDI regulations, FEMA, and RBI guidelines, specifically for automatic route investments. In addition to this documentation support, banking and taxation setup consultation is also provided. 

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