ESOP for NRI and Non-Resident Employees in Pune

A Rajiv Gandhi Infotech Park SaaS company promotes its lead architect, who has just relocated to Austin on an L-1; a Magarpatta IT-services firm wants its founding back-end engineer in Berlin to stay vested; a Chakan MIDC manufacturer adds a non-resident technical director to its scheme. In each case the equity decision is easy - the compliance is not. The instant the cap table shows shares moving to a person resident outside India, the grant stops being a pure Companies Act matter and becomes a FEMA-reported foreign investment that your authorised dealer bank and the RBI both need to see.

Patron Accounting runs that employer-side workload for Pune companies: we read the residency status of each grantee, structure the grant so it sits inside the NDI Rules, secure the certified fair-value number before allotment, and lodge Form ESOP through your AD bank within the 30-day window - while the Section 62 special resolution and scheme records continue to flow to RoC Pune on MCA21 in parallel.

Note the boundary of this page. It is written for the company secretary, founder or finance lead doing the granting and reporting, not for the employee receiving the option. The perquisite at exercise, the capital-gains treatment on sale and any DTAA relief sit on the employee's tax return; for that workstream, see our dedicated ESOP tax page for NRIs and non-residents.

Pune founders sometimes assume a non-resident grant is the mirror image of an Indian engineer holding options in a US parent - it is not. Here the equity flows the other way: an Indian company in Baner or Viman Nagar is issuing its own shares outward to someone abroad, which is the inbound foreign-investment direction RBI watches. Three rulebooks stack on a single grant, and a Pune SaaS or manufacturing employer has to satisfy all three at once:

• FEMA (the cross-border layer): issuing ESOPs to a person resident outside India is foreign investment under Schedule I of the FEMA (Non-debt Instruments) Rules, 2019, read with the Mode of Payment and Reporting Regulations - this is the layer that the national-scheme paperwork alone never covers.
• Companies Act (the grant itself): Section 62(1)(b) with Rule 12 and your board-approved ESOP scheme still govern eligibility, the special resolution and the option terms, with those records filed at RoC Pune.
• SEBI (only if listed): a listed Pune company layers the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations on top; most Hinjewadi-belt startups are private and skip this rung.

For a Pune company the FEMA reporting never goes anywhere near RoC Pune - it is filed entirely through the RBI's FIRMS portal, routed via the authorised dealer branch your company banks with, typically one of the AD branches clustered along Baner Road, in Hinjewadi Phase 1 or in the city's central business district. Here is what actually has to reach the RBI, and when:

Three FEMA-specific numbers decide whether a Pune grant stands up later: the price floor, the volume ceiling and the exit route. Take them in order.

• Price floor (fair value): shares issued to a non-resident cannot go out below fair value computed on an internationally accepted method, typically a discounted-cash-flow valuation certified by a CA or merchant banker. An early-stage Hinjewadi SaaS firm cannot simply use the resident-employee exercise price; it needs the certified number in hand before the grant. A DPIIT-recognised startup - which many Pune product companies are - gets some pricing latitude, but the certificate still has to exist.
• Volume ceiling (the 5 percent route): under general permission a company may issue ESOPs to its non-resident employees, or to staff of its overseas JV or wholly owned subsidiary, directly or through a trust, up to 5 percent of paid-up capital. A Magarpatta firm spreading a thin option pool across a few overseas engineers sits comfortably inside this; a larger non-resident allocation is still doable but pulls in extra conditions we structure for.
• Exit route (repatriation): on sale, proceeds run through the employee's NRE or NRO account. The Pune reality is that most grantees - the engineer who got options while still in Kharadi and only later moved to the US - hold on a non-repatriation basis, so proceeds land in the NRO account and remit out under the NRO limit. Someone already non-resident at grant may sit on an NRE, repatriable footing. Either way the basis is effectively fixed at grant, so it is a decision to make now, not at exit.

The cases that reach us from Hinjewadi, Kharadi and the Chakan belt tend to repeat the same four slip-ups - usually spotted late, when a funding round or an employee's exit forces the cap table open. Here is what goes wrong and how we close it off:

All fees and charges listed are indicative only and do not constitute a binding offer. Final amounts may vary depending on the volume of work and the complexity involved.

Professional service charges for drafting, filing, and representation are separate from the statutory fees. The exact fee depends on the complexity of the case, disputed amount, and number of hearings required. Contact us for a detailed quote.

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Patron Accounting LLP is a CA and CS firm with 15+ years on FEMA, NDI Rules, RBI reporting and ESOPs for Indian companies with global teams.

With offices in Pune, Mumbai, Delhi and Gurugram, Patron Accounting serves businesses across India, both in-person and remotely.

A non-resident ESOP is not one filing - it is a sequence stretched across the option's life, from the day a Viman Nagar startup grants to the day the employee finally sells. This is the full thread a Pune company has to keep intact:

A Pune company running a non-resident grant is standing on two statutes at once - the Companies Act for the option and FEMA for the cross-border issuance - with the RoC Pune track and the RBI track each carrying their own deadlines. These are the exact provisions that govern it:

The cross-border classification: issuing ESOPs to a person resident outside India is treated as foreign investment under Schedule I of the FEMA (Non-debt Instruments) Rules, 2019, read with the FEMA (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 - this is the leg the RBI, not RoC Pune, oversees.

The eligibility basis: the option is granted under Section 62(1)(b) of the Companies Act with Rule 12 of the Companies (Share Capital and Debentures) Rules, which lets a non-resident employee or director qualify, save for the promoter and over-10-percent-director exclusion; this is where your MGT-14 and PAS-3 filings reach RoC Pune.

The reporting and price rules: Form ESOP must reach the RBI within 30 days via the FIRMS portal and your AD bank, with a Late Submission Fee if it slips, and the issue price cannot fall below fair value certified by a CA or merchant banker.

The exit rule: sale proceeds move through the employee's NRE or NRO account, and whether they can be sent abroad turns on whether the shares are held on a repatriation or non-repatriation basis under FEMA.

Authoritative sources: the Reserve Bank of India (NDI Rules, FIRMS, Form ESOP reporting), the RBI FIRMS portal, the Ministry of Corporate Affairs (Section 62, Rule 12), and the FEMA, 1999 and NDI Rules bare text.

The Form ESOP deadline is just 30 days from the grant, and it is the step employers most often miss, building up late submission fees and a FEMA exposure that surfaces in the next audit or fundraise. The fair-value certificate and the repatriation basis also need to be in place at the grant, not retrofitted later. Set the FEMA workflow up before you grant to your NRI team, so the equity is compliant from day one.

Giving your NRI and non-resident employees equity is straightforward in principle, they qualify like any employee, but the moment shares cross to a non-resident, FEMA and RBI reporting apply, with a 30-day Form ESOP deadline, fair-value pricing and repatriation to manage.

Patron Accounting LLP, a CA and CS firm with 15+ years of FEMA and ESOP experience, runs the employer side end to end and coordinates with the tax workstream, so your global team gets its equity cleanly and compliantly.

Start with the national ESOP for NRI and Non Resident Employees service, then explore complementary ESOP services across India.

• ESOP for NRI and Non Resident Employees in India - the national parent service
• ESOP Services Hub - the full ESOP advisory hub - route by stage, scenario or tax
• ESOP Scheme Design - design the option pool, vesting schedule and leaver terms
• ESOP Valuation Services - Rule 11UA fair-market-value reports for grants and exercises
• ESOP Corporate Filings - MGT-14, PAS-3 and Form SH-6 register filings
• ESOP Perquisite Tax (Sec 17(2)(vi)) - perquisite tax and TDS computation at exercise

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