A director who lives abroad is a director in every sense the Companies Act cares about. They need the same identification number, owe the same duties and can be held liable as an officer in default. What changes is everything around the seat: whether the board still has a director in India for long enough, how tax is deducted when the company pays them, whether they now have an Indian tax return to file, and which FEMA rules apply when they also hold shares. This guide is written for two readers: the NRI or foreign national who has been asked to join an Indian board, and the Indian founder or finance head who has to keep that appointment compliant.
An NRI or foreign national can be a director of an Indian company with a DIN and a digital signature, but cannot by themselves meet the rule in section 149(3) of the Companies Act that one director must stay in India for 182 days a year. Unpaid, the seat has no Indian tax consequence. Paid, the company deducts tax under section 393(2) of the Income-tax Act, 2025 at the rates in force, or the lower treaty rate against a tax residency certificate and Form 10F; the director needs a PAN and will usually have to file an Indian return.
DIN, digital signature and director KYC
The appointment starts with the same two identifiers every director needs: a Class 3 digital signature to sign MCA forms and a Director Identification Number. An NRI who holds an Indian passport and an Aadhaar can often use the resident route. A foreign national, or an OCI cardholder without Aadhaar, applies on the passport, with documents notarised and apostilled or consularised in the country where they sign. The document pack and timeline are in our guide to DSC and DIN for a foreign national director; if the company is being formed now, the whole sequence is on our Pvt Ltd incorporation with a foreign director page.
Once allotted, the DIN must be kept active. Under the Companies (Appointment and Qualification of Directors) Amendment Rules, 2025, in force from 31 March 2026, director KYC is filed in DIR-3 KYC once every three financial years, by 30 June after the third year, and any change in the director's mobile number, email or residential address is reported within 30 days. The OTPs go to the contact details registered against the DIN, so for a director abroad these must be their own foreign number and personal email, not the company's. A deactivated DIN costs ₹5,000 to reactivate and blocks the company's own filings in the meantime.
At appointment the director also signs the consent in DIR-2 and the non-disqualification declaration in DIR-8, and discloses their other interests in MBP-1, including any overseas company they own or direct. The company files DIR-12 within 30 days.
The resident-director rule, and why the NRI does not satisfy it
Section 149(3) of the Companies Act, 2013 requires every company to have at least one director who stays in India for 182 days or more in the financial year, applied proportionately in the year of incorporation. The test is physical presence. Nationality does not matter: an Indian citizen living in Dubai fails it, and a foreign national working from the Mumbai office for ten months passes it.
So a board made up of an NRI promoter and a foreign co-founder, both living abroad, is in default from the first financial year, and the default continues under section 172 at ₹50,000 plus ₹500 a day until a resident director is appointed. The fixes and the penalty arithmetic are in our post on the resident director rule and foreign directors' obligations.
A non-resident also cannot ordinarily be the managing director or a whole-time director without Central Government approval, because Schedule V Part I requires a managerial appointee to have been resident in India for a continuous twelve months immediately before the appointment. An ordinary or non-executive directorship carries no such condition.
Tax residence: the other 182-day test
The Income-tax Act, 2025 has its own residence rule in section 6, and it is the one that decides how the director's Indian income is taxed. An individual is resident in a tax year if they are in India for 182 days or more, or for 60 days in the year and 365 days in the four years before it. For an Indian citizen or person of Indian origin who lives abroad and comes on a visit, the 60-day limb does not apply, unless their Indian income other than foreign-source income exceeds ₹15 lakh, in which case it applies as 120 days. And an Indian citizen with Indian income above ₹15 lakh who is not liable to tax in any other country is deemed resident.
The practical point is the one founders miss: a foreign director who moves to India and spends 182 days here to become the company's resident director has, by the same days, become an Indian tax resident, taxed on worldwide income subject to the not-ordinarily-resident relief and the treaty tie-breaker. Plan which director carries the company-law requirement with the tax consequence in view.
PAN and TDS on sitting fees, commission and remuneration
A director who is never paid can serve on a passport alone. The first payment changes that.
| Payment | Resident director | Non-resident director |
|---|---|---|
| Sitting fees, commission, other fees | 10%, no threshold, under section 393(1), Table Sl. No. 6(iii)(c) (the provision formerly section 194J(1)(ba)) | Section 393(2), Table Sl. No. 17, at the rates in force for the year, or the treaty rate if lower and the director provides a tax residency certificate and Form 10F |
| Salary as a whole-time director or employee | Section 392, at the average rate on estimated salary | Section 392 on salary for services rendered in India; the treaty's employment article decides where it is taxed |
| PAN | Already held | Needed before the first payment; without it, tax is deducted at a higher rate |
| Remittance paperwork | Not applicable | Form 145 (formerly 15CA) online, with a chartered accountant's certificate in Form 146 (formerly 15CB) where required, before the bank remits |
The "rates in force" are those set by the Finance Act for the year, plus surcharge and cess; check the year's rate before each payment. Our TDS rate chart carries the resident and non-resident tables.
The treaty position. Most of India's tax treaties contain a directors' fees article, modelled on Article 16 of the OECD Model Convention, which lets the country where the company is resident tax fees a director receives in that capacity. So a US or UK director's sitting fees from an Indian company are generally taxable in India, and the director claims credit at home. The treaty matters less for whether India taxes the fees than for the rate: where the treaty limits it, the company applies the lower rate only against a tax residency certificate from the director's home country, as section 159(8) of the Act requires, and Form 10F.
Fees are a deductible expense for the company only if the tax is deducted and paid; a missed deduction on a non-resident payment exposes the whole expense to disallowance. Treat the first payment to a new director as a checklist item, not a routine bank transfer.
Does the director have to file an Indian tax return?
Usually, yes. Section 263(1) requires an individual to file a return if their total income exceeds the amount not chargeable to tax, which under the default regime in section 202 is ₹4 lakh. Non-residents do not get the section 156 rebate, which is available only to resident individuals, so tax is payable on income above that limit.
There is an exemption from filing for non-residents, in section 207(8), but it covers only income such as dividends, interest, royalties and fees for technical services on which tax has been deducted at the specified rates. Directors' fees are not in that list. A non-resident director with Indian sitting fees above the basic limit therefore files, and even below the limit, filing is how excess TDS is refunded. Where the director also holds shares, dividends from the company form part of the same return.
FEMA: fees, shares and loans
- Directorship itself needs no FEMA approval. Appointing a non-resident to the board is a Companies Act matter.
- Fees and remuneration are current-account payments. They are remitted through the AD bank on the strength of the tax paperwork, with no RBI approval.
- If the director holds shares, the holding is foreign investment. A foreign national's shares, and an NRI's shares paid from an NRE or FCNR account, are FDI on repatriation basis: FC-GPR within 30 days of allotment, the FLA return every July, and a valuation for any allotment after incorporation. Our FC-GPR filing guide covers the reporting.
- NRI money on non-repatriation basis is different. Investment by an NRI or OCI from an NRO account on a non-repatriation basis under Schedule IV of the Non-debt Instruments Rules is treated as domestic investment, with no FC-GPR. The choice is made at the time of investment and decides whether the money can later go back abroad.
- ESOPs and sweat equity to a non-resident director are reported in Form ESOP within 30 days of issue.
- Loans from the director to the company are borrowing under FEMA and follow their own route; check the borrowing rules before the money is sent, not after.
Where a foreign company rather than an individual will own the Indian company, the board usually consists of the parent's nominees plus a resident director; our wholly owned subsidiary in India page covers that structure.
The one-page checklist
| Item | When | Reference |
|---|---|---|
| DSC and DIN; DIR-2, DIR-8, MBP-1; DIR-12 by the company | At appointment; DIR-12 within 30 days | Companies Act ss.152, 164, 184 |
| One director in India for 182 days | Every financial year | s.149(3), s.172 |
| DIR-3 KYC | Once every three financial years, by 30 June; contact changes within 30 days | Rule 12A, Directors Rules (from 31 March 2026) |
| PAN | Before the first payment | Income-tax Act, 2025 |
| TDS on fees; TRC and Form 10F for treaty rate; Forms 145 and 146 | Every payment | s.393(2), s.159(8) |
| Indian income-tax return | By the due date for the tax year | s.263(1) |
| FC-GPR, FLA, Form ESOP if the director holds equity | 30 days from allotment; 15 July each year | FEMA reporting directions |
| Days-in-India log | Continuous | s.149(3) Companies Act; s.6 Income-tax Act, 2025 |
Frequently Asked Questions
Yes. There is no citizenship or residence condition for an ordinary directorship. The NRI needs a DIN and a digital signature, and the company must separately have at least one director who stays in India for 182 days in the financial year under section 149(3).
Under section 393(2) of the Income-tax Act, 2025, the successor to section 195, at the rates in force for the year, or the lower rate in the applicable tax treaty if the director provides a tax residency certificate and Form 10F. The director needs a PAN, and the remittance is supported by Forms 145 and 146, formerly 15CA and 15CB.
Usually yes. A return is required under section 263(1) if total income exceeds the basic exemption limit, which is ₹4 lakh under the default regime. The filing exemption for non-residents in section 207(8) covers dividends, interest, royalties and technical fees, not directors' fees. Filing is also how excess TDS is refunded.
From 31 March 2026, once every three financial years, by 30 June, under the amended Rule 12A of the Companies (Appointment and Qualification of Directors) Rules, 2014. Changes in mobile number, email or residential address are reported within 30 days of the change.
Generally in India. Most of India's tax treaties have a directors' fees article that lets the country where the company is resident tax fees paid to a director in that capacity. The director then claims credit for the Indian tax in their home country under its domestic rules.
It depends on how it is held. Shares bought on a repatriation basis, from abroad or from an NRE or FCNR account, are foreign investment reported in FC-GPR within 30 days and in the annual FLA return. Investment on a non-repatriation basis from an NRO account under Schedule IV of the Non-debt Instruments Rules is treated as domestic investment.
Sources
- Authority: Government of India. Title: Income-tax Act, 2025 as amended by the Finance Act, 2026, sections 6, 156, 159, 202, 207, 263, 392 and 393. View Source. Accessed: October 2026.
- Authority: Ministry of Corporate Affairs. Title: Companies Act, 2013, sections 149(3), 152, 172 and Schedule V; Companies (Appointment and Qualification of Directors) Amendment Rules, 2025 (G.S.R. 943(E), 31 December 2025, in force from 31 March 2026). View Source. Accessed: October 2026.
- Authority: Reserve Bank of India and Ministry of Finance. Title: Foreign Exchange Management (Non-debt Instruments) Rules, 2019, Schedule IV; Master Direction on Reporting under FEMA. View Source. Accessed: October 2026.
Board members in two countries?
We run the director KYC calendar, the days-in-India log, TDS on director fees and the Indian returns for non-resident directors, alongside the company's FEMA filings. Start with our foreign director incorporation and compliance service.
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Written by CA Karan Shah
Founder of KC Shah & Associates. Incorporates and advises startups with foreign founders and investors, handles their FEMA reporting in-house, and provides outsourced accounting, Zoho Books implementation and Virtual CFO services to startups and SMEs across India.