Starting a Business in India as an NRI or OCI (2026): Company Setup, the Resident-Director Rule, GST & PAN

Raj runs a successful SaaS consultancy in Reading. Last spring he decided to spin up an Indian arm — a small development team in Pune, billed through an Indian entity, with profits flowing back to the UK. He assumed the hard part would be hiring. It wasn't. The hard part was the cluster of rules he'd never heard of: that as an OCI his money counted as foreign investment, that his company legally needed a director who actually lived in India, and that he couldn't even open a bank account or register for tax without a PAN he didn't yet have.

None of it was a wall. All of it was navigable. But every one of those rules has a myth attached, and the myths are what cost people weeks. This guide walks through how an NRI or OCI actually sets up and runs a business in India in 2026 — the structure, the FDI nuance, the infamous resident-director rule, GST, and the PAN that quietly underpins the whole thing.

A quick honesty note up front: company formation, FDI compliance and tax structuring are firmly chartered-accountant and company-secretary territory, and you should retain one. What we do at NriDirect is the unglamorous foundation underneath — making sure your PAN and supporting paperwork are correct so the rest of the machine can actually start.

Yes, you can — but the route matters#

The first thing to settle is that this is allowed. NRIs and OCIs can incorporate in India. The usual vehicles are:

• A Private Limited company (the default for anything fundable or scalable).
• An LLP (lighter compliance, popular for professional services).
• A wholly-owned subsidiary of an existing foreign company.

Where it gets subtle is how the law sees your money. This is the single most misunderstood point, so it's worth slowing down.

• An OCI is, for foreign-exchange purposes, a person resident outside India. So when an OCI puts money into an Indian company, that investment is foreign direct investment (FDI) — it sits under the FDI framework (broadly Schedule I of the relevant FEMA rules).
• An NRI who still holds an Indian passport can also use a separate non-repatriable NRI investment route (broadly Schedule IV) — investment made on a non-repatriation basis, which is treated almost like domestic investment.

These are not the same route, and which one applies to you changes your repatriation rights and some of your compliance. Get this classified correctly at the start with your CA — it's the kind of thing that's painful to unwind later.

FDI: the automatic route and the prohibited list#

The good news for most founders: in the majority of sectors, 100% FDI is permitted under the automatic route, meaning no prior government approval is needed before you invest. You incorporate, you bring the money in through proper banking channels, you file the reporting — but you don't queue for an approval.

The catch is a list of prohibited sectors where foreign investment simply isn't allowed. At the time of writing this includes:

• Lottery, gambling and betting
• Chit funds and Nidhi companies
• Trading in transferable development rights (TDR)
• Real-estate business and farmhouses (note: this is the business of trading in land, not the same as buying a property to hold)
• Manufacturing of cigars, cigarettes and tobacco products
• Atomic energy
• Railway operations

If your idea touches any of those, stop and take advice before spending anything — the structure may not be viable as foreign investment at all. For everyone else, the automatic route keeps things refreshingly clean.

For the property point specifically — because it confuses people constantly — our companion guide on buying property in India as an OCI or NRI explains the difference between holding property and the prohibited "real-estate business".

The resident-director rule — and the myth that wastes weeks#

Here is the rule that catches almost every overseas founder off guard.

Under the Companies Act (section 149(3)), every Indian company must have at least one director who stayed in India for 182 days or more during the financial year. A company of foreign directors only is not compliant.

Now the myth-busting, because there are three:

• It is about residence, not citizenship. A director of any nationality qualifies as long as they meet the day count. Your resident director does not have to be an Indian citizen — they just have to actually live there enough.
• The figure is 182 days. Not 183. And not the 120-day income-tax test you may have read about elsewhere — that's a different rule in a different statute for a different purpose. For the resident-director requirement, the number is 182.
• You, the overseas founder, can still be a director. You simply also need at least one co-director who satisfies the residence test.

In practice, UK-based founders solve this one of three ways: a trusted family member already living in India, a co-founder on the ground, or a professional resident-director arrangement through their CA or company secretary. Whichever you choose, line it up before incorporation, because the company can't be properly formed without it.

	OCI (FDI route)	NRI (non-repat route)
Treated as	Foreign investment (Schedule I)	Non-repatriable NRI (Schedule IV)
Prior approval	Automatic in most sectors	Generally none
Repatriation of profits	Allowed, with paperwork	Restricted (non-repatriable basis)
Resident director needed	Yes	Yes

(Both routes still need that resident director — the requirement is about the company, not about who invested.)

Incorporation: DIN, DSC and the SPICe+ machinery#

Once structure and directors are settled, the mechanical part is reasonably standardised through the Ministry of Corporate Affairs portal. Each director needs:

• A DIN (Director Identification Number), and
• A Class-3 DSC (Digital Signature Certificate) to sign filings electronically.

Foreign or overseas directors additionally need a notarised and apostilled passport plus address proof — the apostille step is the one that adds days when you're sitting in the UK, so start it early. If you need orientation on apostille generally, our note on apostille and attestation of UK documents for India covers the mechanics.

How company setup actually flows

1. Pick the structure and route — Pvt Ltd, LLP or subsidiary; OCI/FDI or Indian-passport NRI route. Decide with your CA first.
2. Line up the resident director — secure the person who will meet the 182-day residence test before you file anything.
3. Get DINs and Class-3 DSCs — each director needs both; foreign directors also need a notarised, apostilled passport and address proof.
4. File through SPICe+ — the integrated incorporation form; the company's PAN and TAN are auto-generated as part of this.
5. Open the bank account and bring capital in — through your authorised dealer (AD) bank, with the FDI reporting that follows.

A genuinely helpful detail: when the company is incorporated via SPICe+, its PAN and TAN are issued automatically — you don't file separately for them. PAN and TAN are both mandatory for the company: PAN as its tax identity, TAN for deducting tax at source on salaries and payments.

GST: the thresholds — and the four-state myth#

Once you're trading, GST is the next gate. Registration broadly becomes compulsory when your PAN-India aggregate turnover crosses these approximate thresholds (at the time of writing):

• Goods: around ₹40 lakh (about ₹20 lakh in special-category states).
• Services: around ₹20 lakh (about ₹10 lakh in special-category states).

Now the myth-bust people get wrong constantly: for the lower registration threshold, only four states apply the reduced figure — Manipur, Mizoram, Nagaland and Tripura. It's tempting to assume "special category" means the whole north-east or some long list. For the GST registration threshold specifically, it's those four. Don't over-apply the lower number.

Note also that the threshold is on aggregate turnover across India on a single PAN — yet another reason PAN sits at the centre of the whole system. You register state by state where you have a presence, but the turnover test looks at the PAN as a whole.

The Non-Resident Taxable Person (NRTP) — a different animal#

If you're not setting up a permanent Indian entity but want to make an occasional supply in India — think a one-off exhibition stall, a short consulting engagement, a pop-up — there's a special category: the Non-Resident Taxable Person (NRTP).

Its rules are deliberately stricter, because the tax authorities want their money up front from someone with no fixed Indian base:

• No turnover threshold — registration is compulsory regardless of how small the supply is.
• You must apply at least 5 days before you start making the supply.
• You pay an advance deposit of estimated tax at registration.
• The registration is valid for 90 days, extendable once.

And the standout feature for an overseas person: an NRTP can register without an Indian PAN, using a passport or a home-country tax identification number instead. This is the one major GST path that doesn't require PAN. For everything else — including a company you incorporate — normal GST registration is keyed to PAN, so PAN comes first.

	Normal GST	NRTP
Turnover threshold	Yes (₹40L goods / ₹20L services approx)	None — always required
Indian PAN needed	Yes	No (passport / home TIN ok)
When to apply	On crossing threshold	At least 5 days before supply
Advance tax deposit	No	Yes
Typical validity	Ongoing	90 days, extendable once

Getting your profits back to the UK#

You built it to earn — so repatriation matters. The headline: profits and dividends from automatic-route FDI are generally freely repatriable to the UK through your AD (authorised dealer) bank. "Freely repatriable" is the phrase that makes the OCI/FDI route attractive over the non-repatriable NRI route.

But freely repatriable is not tax-free. In practice:

• A domestic withholding tax of roughly 20% typically applies to dividends paid to a non-resident.
• That rate is often reduced under the UK-India Double Taxation Avoidance Agreement — but you have to claim it properly, with a Tax Residency Certificate and the supporting forms.
• Each remittance generally needs Form 15CA from you and Form 15CB certified by a chartered accountant.

This is where the UK-India double-taxation treaty does real work, and where skipping the CA is a false economy — the treaty relief and the 15CA/15CB mechanics are exactly what they're for.

PAN: the foundation under all of it#

Step back and look at what every section above quietly depends on. Incorporation auto-generates the company's PAN. Normal GST registration is keyed to PAN. Your repatriation paperwork, your treaty relief, your own personal tax filing as a director — all of it hangs off PAN.

If you're an NRI or OCI without a current, correctly-tagged PAN, you can't really begin. And a PAN that's wrongly tagged or has fallen inoperative is worse than none, because it actively blocks banking and tax steps you'll need. Our NRI PAN card 2026 guide walks through applications, corrections and status updates end to end.

This is the precise layer where we're useful. We're not your company secretary and we won't pretend to structure your FDI — but getting your NRI PAN sorted correctly, first time, is the foundation the whole build stands on. Get it wrong and every later step inherits the problem.

DIY versus getting help — an honest breakdown#

• DIY / your own reading is fine for: understanding the structures, grasping the FDI-versus-NRI route distinction, and knowing the resident-director rule exists so you can plan around it.
• Pay a CA / company secretary for: the actual incorporation, FDI reporting, GST registration and returns, the resident-director arrangement, and all repatriation paperwork. This is regulated, technical work and worth every rupee.
• Where we fit: the PAN layer underneath. We make sure your personal and (where relevant) supporting PAN paperwork is correct and live, so your CA isn't blocked on day one waiting for a PAN that's missing, mismatched or inoperative.

That boundary is deliberate. We'd rather do the one foundational thing brilliantly than overpromise on a structuring job that belongs with a qualified professional.

Ready to lay the foundation?#

Raj's Pune arm is up and running now. The structuring went to his CA, the resident director was his cousin in Pune, and the part that had quietly stalled everything for two weeks — his missing PAN — was the first thing we sorted. If your Indian business idea is real, start where the system starts: get your NRI PAN correct and current, and let the specialists build on top of it.

---

This guide reflects company-setup, FDI, GST and PAN practice for NRIs and OCIs as observed by NriDirect in 2026. Rules, thresholds, sector lists, fees and tax rates change without notice and depend on your individual circumstances — always verify the current position on the official Ministry of Corporate Affairs↗ and GST↗ portals, and engage a qualified chartered accountant or company secretary before acting. NriDirect is an independent UK agent assisting with Indian paperwork and PAN services; we are not a tax, legal or financial adviser and are not affiliated with VFS Global or the Indian High Commission.