Can you invest in a US startup from your personal savings without RBI approval?
Most individual overseas investments are permitted under the Liberalised Remittance Scheme — but there are limits, conditions and reporting.
- Published
- Reading time
- 6 min
- Level
- Intermediate
01 The question
A resident Indian individual wants to invest USD 50,000 in a Delaware startup founded by a former colleague. What framework applies?
02 Short answer
Generally yes, within the Liberalised Remittance Scheme (LRS) limit of USD 250,000 per financial year, and subject to the Overseas Investment Rules and Regulations, 2022. Whether it is an Overseas Portfolio Investment or Overseas Direct Investment depends on the shareholding and control acquired.
03 The rule
The Foreign Exchange Management (Overseas Investment) Rules, 2022 and the related Regulations govern investments by Indian residents abroad. For individuals, the investment must fall within the overall LRS limit.
Broadly, a stake of less than 10% in a listed foreign entity without control is Overseas Portfolio Investment (OPI). Investment in unlisted equity, a stake of 10% or more, or one that confers control, is Overseas Direct Investment (ODI), with different conditions — including that individuals may make ODI only in operating entities not engaged in financial services.
04 Simple example
Scenario
Meera, a resident individual, invests USD 50,000 for a 2% stake in an unlisted US startup.
For an unlisted entity, investment by an individual is treated as ODI under the 2022 framework regardless of the percentage, which brings specific conditions and reporting into play.
The remittance will also attract Tax Collected at Source (TCS) under the Income-tax Act above the specified threshold, which can be claimed as credit in her return.
05 Why it matters
Overseas investment structures that look simple can trigger restrictions such as the prohibition on round-tripping.
Delayed or missed filings can lead to late submission fees and complications when exiting the investment.
06 Practical takeaway
- 01Classify the investment as OPI or ODI before remitting.
- 02Keep the authorised dealer bank informed and complete reporting within timelines.
- 03Factor TCS into cash-flow planning for the remittance.
07 Source / reference
- FEMA, 1999 — Sections 4 and 6
- Foreign Exchange Management (Overseas Investment) Rules and Regulations, 2022
- RBI Master Direction — Liberalised Remittance Scheme
References are to the provisions as generally understood at the time of writing. Provisions may since have been amended, renumbered (including under the Income-tax Act, 2025) or interpreted differently.
8. Educational disclaimer
Keep reading
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