Yes. A Non-Resident Indian can hold shares in an Indian unlisted or pre-IPO company, and Overseas Citizen of India cardholders are generally treated the same way for this purpose. The investment sits under India's foreign exchange rules rather than the ordinary rules that apply to a resident buyer, which means the route you choose — repatriable or non-repatriable — decides your paperwork, your bank account, your reporting duties and whether the sale proceeds can leave India later.
This guide explains the mechanics. It does not tell you whether to invest, and nothing here is investment or tax advice.
The two routes an NRI can use
Every NRI investment in an Indian unlisted company runs down one of two routes: repatriation basis or non-repatriation basis. The choice is made at the moment you buy, by which bank account funds the purchase, and it is not casually reversible afterwards.
Non-repatriation basis is the simpler and far more common route for unlisted shares. The investment is funded from an NRO account (or by inward remittance credited there), and under India's non-debt instrument rules it is treated broadly as domestic investment. Sectoral foreign-investment caps and entry-route conditions generally do not bite. The trade-off is in the name: the shares, and the proceeds when you sell, sit in the rupee system. Money can still be sent abroad out of an NRO balance under the general remittance facility available to NRIs each financial year, but that is a separate banking process with its own certification, not an automatic right attaching to the shares.
Repatriation basis is funded from an NRE account or fresh inward remittance, and the sale proceeds can be sent abroad without relying on the NRO remittance facility. This route is treated as genuine foreign direct investment. That brings sectoral caps, entry-route conditions, pricing rules and company-level reporting into play. Many Indian unlisted companies and many intermediaries simply will not process a repatriable transfer for a small secondary trade, because the compliance load falls partly on the company and the resident seller.
Most NRI purchases of pre-IPO shares in the secondary market therefore happen on a non-repatriation basis through an NRO demat account. It is worth deciding this before you ask anyone for a price.
What you need in place before you can hold the shares
You need an Indian PAN, completed KYC, and a demat account of the correct type. Repatriable and non-repatriable holdings must sit in separate demat accounts — one linked to an NRE bank account, one linked to an NRO bank account. You cannot mix them, and you cannot move a holding from one to the other simply because it would be convenient.
KYC for a non-resident is heavier than for a resident. Depository participants typically ask for the passport, visa or residence permit or OCI card, proof of overseas address, proof of Indian address where one exists, PAN, and in many cases attestation of documents by an Indian embassy, consulate, notary or an overseas bank branch. Not every depository participant opens NRI accounts, and among those that do, turnaround varies widely. Build this in before you commit to a trade rather than after. The account-opening requirements are set out in more detail on our demat page.
How the purchase actually happens
An unlisted share purchase by an NRI is an off-market transfer: the seller instructs their depository participant to move the shares to your demat account, and you pay the consideration through banking channels. There is no exchange, no order book and no clearing corporation standing between the two sides.
In practice the sequence is: the price and quantity are agreed, your KYC and demat details are verified, funds move from your NRE or NRO account to the seller through the banking system, the seller submits the delivery instruction, and the shares credit to your demat account — usually within a working day or two of the instruction being accepted, though it can take longer.
Two things differ from a resident purchase. First, the seller is almost always a resident, so the transaction is a transfer from a resident to a non-resident, which is a regulated event under the foreign exchange rules rather than an ordinary private sale. Second, the payment must be traceable through banking channels from the correct account type. Cash, third-party payment or funding from an account of the wrong category can invalidate the treatment of the whole holding.
Pricing and valuation rules that do not apply to a resident buyer
When shares move between a resident and a non-resident, India's foreign exchange rules impose a valuation discipline that does not exist in a purely domestic trade. Broadly, the price has to be supported by a valuation of the unlisted shares carried out on an arm's-length basis using an internationally accepted methodology and certified by an eligible professional, and the permitted direction of deviation depends on who is buying and who is selling — a resident selling to a non-resident may not sell below the certified value, and the reverse direction is capped rather than floored.
The practical consequence is that the quoted market price for an unlisted share and the price that can lawfully be documented for an NRI transfer are not automatically the same number. Ask early whether a valuation certificate exists or will be obtained, and who is paying for it. This is one of the most common reasons an NRI deal that looked agreed does not complete.
Reporting: who files what
Reporting obligations depend entirely on the route. Investments made on a non-repatriation basis are treated as domestic investment and generally do not attract the transfer-reporting filing that applies to foreign investment. Investments on a repatriation basis do: the transfer between a resident and a non-resident has to be reported to the Reserve Bank of India through the designated online portal within the prescribed period, and where the company issues fresh shares to a non-resident rather than an existing holder selling, the company itself has a separate filing to make.
The filing duty for a transfer usually falls on the resident party or the company, not on the NRI, but the person who suffers when it is missed is often the shareholder whose holding is later found to be irregular. Confirm in writing who is filing before money moves.
Tax, and the deduction that surprises most NRI sellers
The tax rules on the gain are broadly the same for an NRI as for a resident, but the collection mechanism is not. Unlisted shares are treated as long-term after a holding period of twenty-four months; below that the gain is short term. Long-term gains on unlisted shares are taxed at a flat rate without indexation following the changes made in 2024, and short-term gains are added to total income and taxed at applicable slab rates. Rates and surcharge change with each Finance Act, so confirm the current position for your assessment year — the general framework is set out on our taxation page.
The mechanism that catches people out is withholding. When a buyer pays a non-resident seller for Indian shares, the buyer is required to deduct tax at source on that payment, and the deduction is made against the gross consideration unless a lower-deduction determination has been obtained in advance. An NRI selling unlisted shares can therefore receive materially less than the headline sale price on settlement day and recover the excess only by filing an Indian tax return. Remitting the net proceeds abroad also requires accountant certification through the prescribed forms. Where a double taxation avoidance agreement applies, relief usually depends on holding a valid tax residency certificate. This is specialist territory; use a chartered accountant who handles non-resident matters.
Where an NRI cannot invest
A short list of business activities is closed to NRI investment even on the non-repatriation route — among them agricultural and plantation activity, farm houses, real estate business as distinct from construction and development, trading in transferable development rights, chit funds and nidhi companies. Separately, citizens of a small number of specified countries face additional government approval requirements regardless of the sector.
Before committing, check what the company actually does rather than what its name suggests. You can review the business description and sector for each company we track on the unlisted shares screener.
What happens when the company lists
Listing does not change your holding; it changes where it can be sold. Pre-IPO shareholders are ordinarily subject to a lock-in period after listing, during which the shares cannot be sold on the exchange, and the length of that lock-in depends on the category of shareholder. Once the lock-in ends, the shares are ordinary listed shares and are sold through a broker in the normal way — but the tax treatment of listed and unlisted shares differs, including the holding period that makes a gain long term, so the calculation you did at purchase may not be the one that applies at exit.
There is also no guarantee that any given company lists at all, or lists within the timeframe anyone expects.
Frequently asked questions
Can an NRI invest in unlisted shares in India?
Yes. NRIs and OCI cardholders can hold shares in Indian unlisted and pre-IPO companies, subject to India's foreign exchange rules. The investment must be made on either a repatriation basis, funded from an NRE account, or a non-repatriation basis, funded from an NRO account, with a matching demat account for each. A small list of business activities is closed to NRI investment, and transfers between residents and non-residents carry valuation and reporting requirements that domestic trades do not.
If you want to check whether a specific company can be transferred to an NRI demat account, and on which basis, our enquiry desk can tell you what is involved before you commit to anything — contact us here.
This guide is published for information only. It is not investment advice, tax advice or a recommendation to buy or sell any security, and buyunlistedshares.com is not a registered investment adviser or research analyst. Any prices shown on this site are indicative over-the-counter reference levels, not exchange quotes and not an offer to deal. Regulatory and tax rules described here change; verify the current position with a qualified professional before acting. Execution and settlement of any transaction take place through separately registered intermediaries.