Individual foreign investors who want to buy shares of listed Indian companies often search for “Form LEC (IFI)”. The forms that actually exist under the Reserve Bank of India (RBI) reporting framework are Form LEC (FII) and Form LEC (NRI). Both report purchases and sales of listed Indian shares on stock exchanges by non-residents. The most important point for individual foreign investors is that these forms are filed by banks, not by the investors themselves.
These forms are prescribed under the Foreign Exchange Management Act (FEMA) 1999, the FEMA (Non-Debt Instruments) Rules 2019, and RBI’s Master Direction on Reporting under FEMA. Form LEC (FII) covers investment by Foreign Portfolio Investors (FPIs), which can include individuals registered under SEBI’s FPI Regulations 2019. Form LEC (NRI) covers investment by Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) under the Portfolio Investment Scheme (PIS).
This guide explains who can invest, the limits, the forms, who files them, and the rules individual foreign investors must follow.
What Is Form LEC Under FEMA?
Form LEC is RBI’s reporting format for purchase and transfer of listed equity instruments by non-residents on stock exchanges. There are two versions. Form LEC (FII) reports FPI transactions. Form LEC (NRI) reports NRI and OCI transactions under the Portfolio Investment Scheme. Both are filed by Authorised Dealer Category-I Banks, not by the investor.
LEC stands for Limit for Equity Capital monitoring. The forms help RBI and the depositories track total foreign holding in each listed company so that sectoral caps and investment limits are not breached.
| Form | Investor Type | Filed By |
|---|---|---|
| LEC (FII) | Foreign Portfolio Investors, including individual FPIs | AD Category-I Bank / custodian |
| LEC (NRI) | NRIs and OCIs under PIS | Link office of the designated AD bank |
Who Is an Individual Foreign Investor Under Indian Law?
Under FEMA, an individual foreign investor can buy listed Indian shares in two main ways: as an NRI or OCI under Schedule 3 of the NDI Rules, or as a registered Foreign Portfolio Investor under Schedule 2. Foreign nationals who are neither NRIs nor OCIs generally need FPI registration for portfolio investment.
What are the investor categories?
- NRI: an individual resident outside India who is a citizen of India
- OCI: an individual registered as an Overseas Citizen of India cardholder
- Individual FPI: an individual registered with SEBI as a Foreign Portfolio Investor through a designated depository participant
What Investment Limits Apply to Individual Foreign Investors?
NRIs and OCIs can each hold up to 5% of a listed company’s paid-up equity. All NRIs and OCIs together can hold up to 10%, which the company can raise to 24% by a special resolution. An individual FPI must hold less than 10% of the company’s total paid-up equity on a fully diluted basis.
| Investor | Individual Limit | Aggregate Limit |
|---|---|---|
| NRI or OCI (repatriation basis) | 5% of paid-up equity | 10%, raisable to 24% by special resolution |
| FPI (including individual FPI) | Less than 10% of total paid-up equity on fully diluted basis | Up to sectoral cap |
| NRI on non-repatriation basis | Treated as domestic investment | Not counted in foreign limits |
If an FPI’s holding reaches 10% or more, the investment is reclassified as FDI. The FPI must then follow FDI rules, and the company must report it accordingly.
How Do NRIs and OCIs Invest Under the Portfolio Investment Scheme?
NRIs and OCIs invest through a designated branch of an Authorised Dealer Category-I Bank under the Portfolio Investment Scheme. They use a Non-Resident External (NRE) account for repatriable investment or a Non-Resident Ordinary (NRO) account for non-repatriable investment. They trade through a SEBI-registered broker, and the bank reports the trades to RBI in Form LEC (NRI).
What accounts does an NRI or OCI need?
- NRE or NRO savings account with an Indian AD bank
- PIS designation for the account, where the bank requires it
- Demat account linked to the investor’s NRE or NRO status
- Trading account with a registered stockbroker
- Permanent Account Number (PAN) for tax compliance
How Do Individual FPIs Invest and Report?
Individual foreign investors who are not NRIs or OCIs register with SEBI as FPIs through a designated depository participant. They appoint a custodian, open a foreign currency account and a special non-resident rupee account with an AD bank, and trade through a broker. The custodian or AD bank reports their trades in Form LEC (FII).
How Are Form LEC Filings Made?
The AD Category-I Bank or its link office files Form LEC (FII) and Form LEC (NRI) with RBI at the frequency RBI specifies. Holding limits are monitored with depositories. The investor does not file these forms directly, but must provide accurate information to the bank and broker.
Step 1: Choose Investment Route
Decide whether to invest as an NRI/OCI under the Portfolio Investment Scheme or as a registered FPI, based on your residency, citizenship, and investment goals.
Step 2: Complete KYC and Registration
Complete bank KYC, obtain a PAN, and register as an FPI with SEBI through a designated depository participant if you are not an NRI or OCI.
Step 3: Open Bank and Demat Accounts
Open NRE/NRO or foreign currency accounts with the AD Category-I Bank. Also open demat and trading accounts linked to your non-resident status.
Step 4: Trade Through a Registered Broker
Place buy or sell orders through a SEBI-registered broker on a recognised stock exchange. Make sure your holdings stay within the applicable individual and aggregate limits.
Step 5: Bank Reports in Form LEC
The AD bank’s link office or custodian reports your trades to RBI in Form LEC (NRI) or Form LEC (FII). Limits are also monitored by the depositories.
Step 6: Pay Taxes and Repatriate
Taxes on gains and dividends are deducted at source or paid as required. Repatriate eligible funds through the AD bank using Form 15CA and Form 15CB where needed.
What Tax Rules Apply to Individual Foreign Investors?
Capital gains on listed shares are taxed under the Income Tax Act 1961, and from 1 April 2026 under the Income-tax Act 2025. Gains are classed as short-term or long-term based on the holding period. Tax is usually deducted at source for NRIs. FPIs pay tax through their custodians. Treaty relief may apply with a Tax Residency Certificate.
Long-term capital gains on listed equity above an exempt threshold of ₹1,25,000 [approx. USD 1,488] per year are taxed at the applicable concessional rate. Dividends are taxed in the investor’s hands and are subject to withholding. Rates and thresholds change through Finance Acts, so check them every year.
What Are the Key Insights and Information on Form LEC?
- Form LEC (FII) and Form LEC (NRI) are filed by banks, not by individual investors.
- NRIs and OCIs invest under the Portfolio Investment Scheme with a 5% individual limit.
- The aggregate NRI/OCI limit is 10%, which can be raised to 24% by special resolution.
- Individual foreign nationals who are not NRIs or OCIs generally invest as FPIs.
- An FPI holding of 10% or more is reclassified as FDI.
- PAN is required for tax and investment compliance.
- Non-repatriable NRI investment is treated as domestic investment.
How Does an Individual Foreign Investor Use Form LEC in Practice?
An individual foreign investor should pick the correct route first, because the route decides the account type, limits, and the Form LEC that applies.
General Example: A US citizen holding an OCI card wants to invest in listed Indian shares. She opens an NRE account with an AD Category-I Bank, designates it under the Portfolio Investment Scheme, and opens a linked demat and trading account. She also obtains a PAN. She buys shares through a registered broker and keeps her holding below 5% of the company’s paid-up equity. The bank’s link office reports her trades to RBI in Form LEC (NRI), and tax is deducted at source when she sells.
Frequently Asked Questions on Form LEC and Individual Foreign Investors
These answers address difficult questions for individual foreign investors, NRIs, OCIs, and individual FPIs investing in listed Indian shares. They are based on FEMA, the NDI Rules, and RBI reporting directions, and focus on limits, accounts, routes, and reporting duties.
1. Does an individual investor file Form LEC?
No. The AD Category-I Bank or its link office files Form LEC (NRI) or Form LEC (FII) with RBI.
2. Can a foreign national without an OCI card buy listed Indian shares?
Generally, by registering as a Foreign Portfolio Investor with SEBI and investing through a custodian.
3. What happens if an NRI crosses the 5% limit?
The excess breaches FEMA limits. The bank and depository systems are designed to flag this, and corrective action is required.
4. Is investment on non-repatriation basis reported in Form LEC (NRI)?
Non-repatriable NRI investment is treated as domestic investment and is not counted in foreign limits.
5. Can an OCI hold shares from an earlier period of residence in India?
Yes. Shares acquired while resident can be held after becoming non-resident, subject to FEMA account rules.
6. Can an individual FPI hold more than 10%?
If the holding reaches 10% or more, it is reclassified as FDI, and FDI rules and reporting then apply.
7. Does an NRI need a PIS account for all trades?
Banks follow RBI and their own operational rules on PIS designation. Check with your AD bank.
8. How are sale proceeds repatriated?
Through the NRE or foreign currency account, after taxes, with Form 15CA and Form 15CB where needed.
9. Are futures and options covered by Form LEC?
Form LEC reports equity holdings. Derivatives trading by non-residents follows SEBI and RBI rules separately.
10. Can an NRI invest in IPOs?
Yes, subject to individual and aggregate limits and the applicable account type.
11. What tax applies to dividends for individual foreign investors?
Dividends are taxable in the investor’s hands, with tax deducted at source. Treaty relief may apply.
12. Can a foreign individual invest in unlisted Indian companies?
Yes, but through the FDI route with Form FC-GPR or Form FC-TRS reporting, not through Form LEC.
Non-resident individuals and corporations seeking structured support with Form LEC-linked portfolio investment, AD Category-I Bank liaison, ROC registration, and Form FNC filing for branch or liaison offices may contact CompanyIN for end-to-end assistance.
Disclaimer: The information provided in this article is solely for general informational and educational purposes regarding Indian corporate and foreign exchange regulations and does not constitute formal legal, tax, or regulatory advice. Foreign entities should consult qualified professionals at CompanyIN before initiating any statutory filings or commercial commitments in India.
