Regulation 3 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.
After the rows for ordinary equity and foreign portfolio investors, the table in regulation 3.1 gives the same two instructions for each other Schedule of the Rules: how the investor pays, and where sale or maturity proceeds go. Regulation 3.2 does the same for convertible notes issued by start-ups.
These are the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 (Notification No. FEMA. 395/2019-RB, October 17, 2019), as per the text on the Reserve Bank's site, amended up to June 13, 2026. An NRI or OCI investing on a non-repatriation basis pays from NRE, FCNR(B) or NRO funds, and sale proceeds go only to the NRO account. Schedule III (investment on a repatriation basis) and Schedule XI (international exchanges) were substituted by the Amendment Regulations of June 13, 2026. The table has no row for Schedule IX.
Authority and the Rules not in the sources
The Regulations are made "in exercise of the powers conferred by section 47 of the Foreign Exchange Management Act, 1999 ... and consequent to the Foreign Exchange Management (Non-Debt Instrument) Rules, 2019". See the Act articles on sections 47 and 48 and section 6. The Rules are not in the sources consulted, so who may invest under each Schedule, and in what, is not explained here. The first two rows are in the previous article. For help with the filing that follows an investment, see our FDI reporting service.
The table's numbering has a slip: the rows run I to X, but the ninth and tenth rows are headed "IX. Schedule X" and "X. Schedule XI". No row is printed for Schedule IX.
The table
| Schedule of the Rules | Who invests | How the investor pays | Where proceeds go |
|---|---|---|---|
| III (substituted June 13, 2026) | An individual resident outside India, including an NRI or OCI, on repatriation basis | Inward remittance through banking channels or out of funds in any repatriable deposit account under the Deposit Regulations, 2016; a repatriable rupee account must be designated and used exclusively for these investments; National Pension System subscription may also be paid from an NRO account | Equity sale proceeds, net of taxes, may be remitted outside India or credited to the designated rupee account; mutual fund units and National Pension System proceeds may be remitted or credited to any account under the Deposit Regulations, at the investor's option |
| IV, item 1 | NRI or OCI, non-repatriation basis: equity of an Indian company, units, or LLP capital | Inward remittance through banking channels or out of NRE, FCNR(B) or NRO account | Sale or maturity proceeds, net of taxes, credited only to the NRO account whatever the paying account; the amount invested and capital appreciation cannot be repatriated abroad |
| IV, item 2 | NRI or OCI investing in a firm or proprietary concern | Same as item 1 | Disinvestment proceeds credited only to the NRO account; the amount and appreciation cannot be repatriated abroad |
| V | Other non-resident investors | Out of inward remittances through banking channels | May be remitted abroad |
| VI | Investment in a Limited Liability Partnership | Capital contribution by inward remittance or out of any repatriable foreign currency or rupee account | Disinvestment proceeds may be remitted outside India or credited to any repatriable foreign currency or rupee account |
| VII | Foreign Venture Capital Investor (FVCI) | Inward remittance or funds in a foreign currency account or SNRR account | Sale or maturity proceeds, net of taxes, remitted outside India or credited to the foreign currency or SNRR account |
| VIII | A person resident outside India investing in an Investment Vehicle | Inward remittance, swap of shares of a Special Purpose Vehicle, or any repatriable foreign currency or rupee account | Unit proceeds, net of taxes, remitted outside India or credited to any repatriable account |
| "IX. Schedule X" | Indian Depository Receipts | NRIs or OCIs from NRE or FCNR(B); an FPI from a foreign currency or SNRR account | Redemption or conversion into underlying shares in compliance with the Overseas Investment Rules, 2022 as named in the row |
| "X. Schedule XI" (substituted June 13, 2026) | Permissible holder buying or subscribing to shares of an Indian company on international exchanges | Through banking channels to a foreign currency account of the Indian company, or by inward remittance or from a repatriable account | Sale proceeds, net of taxes, remitted outside India or credited to the permissible holder's bank account under the Deposit Regulations |
Reading the table
Repatriation and non-repatriation. The sharpest line in regulation 3 is between Schedule III and Schedule IV. Under Schedule III, sale proceeds can go abroad or into the designated rupee account. Under Schedule IV, they can go only to the NRO account, "irrespective of the type of account from which the consideration was paid", and the Schedule says the amount invested and the capital appreciation "shall not be allowed to be repatriated abroad".
Schedule III's designated account. The individual designates one repatriable rupee account, used exclusively for investments permitted under the Schedule. The Schedule's text was substituted by Notification No. FEMA 395(4)/2026-RB dated June 13, 2026, as the footnote on the page states. FPI and FVCI. The FVCI row carries the same foreign currency and SNRR account route as the FPI row in the previous article. The page records that the exclusive-use sentence in the FVCI row was modified by the 2020 Amendment and a word deleted by the 2025 Third Amendment.
Convertible notes (regulation 3.2). A start-up company issuing convertible notes to a person resident outside India receives the consideration by inward remittance through banking channels or by debit to any repatriable foreign currency or rupee account of the person under the Deposit Regulations. Repayment or sale proceeds may be remitted outside India or credited to any repatriable account. Regulation 3.2 was modified by the Third Amendment of 2025.
Banking channels. An Explanation says "banking channels" includes any rupee vostro account, including Special Rupee Vostro Accounts, permitted to a person resident outside India under regulation 7(1) of the Deposit Regulations, 2016.
Example
Meera Iyer, an NRI living abroad, invests in the equity of an unlisted Indian company on a non-repatriation basis (Schedule IV, item 1) by paying from her NRE account. When she later sells, the sale proceeds, net of taxes, are credited only to her NRO account, although she paid from NRE. A fellow NRI who instead invested on repatriation basis under Schedule III would see equity sale proceeds remitted abroad or credited to the designated rupee account. The Rules decide which Schedule applies to which investment; the Regulations decide the payment and proceeds mechanics. For NRI investing in practice, see our guide on NRI investment in shares, mutual funds, bonds and property and, for the accounts themselves, NRI accounts: NRE, NRO and FCNR.
Amendments and circulars after June 13, 2026 should be checked.
Need help with non-resident investment?
If your company is receiving money from an NRI, a fund or an LLP investor, the payment route and the reporting after it should be consistent. Our FDI reporting team reviews the mode of payment and files the return.
Key takeaways
- Schedule IV (non-repatriation) proceeds go only to the NRO account and cannot be repatriated abroad.
- Schedule III (repatriation) uses a designated repatriable rupee account used exclusively for these investments.
- FPIs and FVCIs pay from and receive into foreign currency or SNRR accounts.
- Convertible notes issued by start-ups follow regulation 3.2.
- The table has no row for Schedule IX, and Schedules III and XI were substituted on June 13, 2026.
Read next
- FDI payment, issue of shares and refund: regulation 3, Schedules I and II
- Form FC-GPR, ESOP, DRR and LLP returns: regulation 4
- NRI investment in India: shares, mutual funds, bonds and property
- NRO account features, TDS and repatriation
Disclaimer: Based on the rules, regulations and Reserve Bank Master Directions under the Foreign Exchange Management Act, 1999 that this article names, each in the version and up to the date stated in the article, as consulted on 2 October 2026. Some texts are third-party copies or older prints and are identified as such. Limits, forms and time limits change by amendment and circular; later changes should be checked on the Reserve Bank and Gazette sites. This article is general information, not legal advice; check the official text before acting.