Doing business in Nepal from India is an attractive opportunity for Indian entrepreneurs, companies, and investors who wish to expand into one of South Asia's fastest-growing economies. The deep cultural, linguistic, and historical ties between India and Nepal create a natural advantage for Indian businesses entering the Nepali market. Additionally, the bilateral Treaty of Trade, the South Asian Free Trade Area (SAFTA) agreement, and the Foreign Investment and Technology Transfer Act (FITTA) 2019 provide a structured legal framework for Indian investment in Nepal.
India is the largest foreign investor in Nepal, with cumulative investments exceeding Indian Rupees 6 billion (approximately USD 152 million). Indian companies operate across sectors including manufacturing, banking, telecommunications, energy, and tourism. The Indian Embassy in Kathmandu publishes a dedicated Handbook for Indian Investors to facilitate this cross-border business relationship. This guide has been prepared to explain every aspect of doing business in Nepal from India, including legal structures, registration procedures, visa requirements, tax obligations, and sector-specific opportunities.
The India-Nepal business relationship is distinguished by several unique factors that are not available to investors from other countries. These advantages create a favorable environment for Indian entrepreneurs seeking to establish operations in Nepal.
| Advantage | Description | Legal Basis |
|---|---|---|
| Open border | Free movement of people and goods across 1,800 km border | Treaty of Peace and Friendship 1950 |
| No visa requirement for Indian nationals | Indians can live and work in Nepal without visa | Nepal-India bilateral agreement |
| Indian currency acceptance | Indian Rupee widely accepted in Nepal border areas | Informal bilateral arrangement |
| SAFTA preferential tariff | Reduced or zero customs duties on qualifying goods | SAFTA Agreement |
| Treaty of Trade | Bilateral trade facilitation and transit rights | India-Nepal Treaty of Trade |
| Treaty of Transit | Access to Indian ports for Nepal's third-country trade | India-Nepal Treaty of Transit |
| Cultural and linguistic affinity | Shared language, religion, and business practices | Historical ties |
| Indian banks in Nepal | ICICI, SBI, PNB, Axis Bank operate in Nepal | NRB banking licenses |
The open border between India and Nepal allows Indian nationals to enter Nepal without passport or visa requirements. This facilitates business travel, market exploration, and operational oversight without immigration bureaucracy. Indian entrepreneurs can physically visit Nepal, inspect premises, meet partners, and supervise operations with minimal formalities.
Indian companies and entrepreneurs can establish business presence in Nepal through several legal structures. The choice of structure depends on the nature of business, investment size, risk tolerance, and long-term objectives.
| Structure | Description | Best For | Foreign Ownership |
|---|---|---|---|
| Private Limited Company | Separate legal entity with limited liability | Manufacturing, services, trading | Up to 100% in permitted sectors |
| Branch Office | Extension of Indian parent company | Project-specific operations, government contracts | 100% (Indian parent) |
| Liaison Office | Communication and coordination only; no business activities | Market research, liaison | 100% (Indian parent) |
| Joint Venture | Partnership with Nepali company | Sectors requiring local expertise | As per agreement and FITTA |
| Sole Proprietorship | Not available to foreigners | — | Not permitted for Indians |
| Public Limited Company | Listed company with broad shareholding | Large infrastructure projects | Up to 100% in permitted sectors |
The Private Limited Company is the most common and recommended structure for Indian investors. It offers limited liability protection, separate legal personality, and operational flexibility. The Branch Office is suitable for Indian companies executing specific government contracts or projects where a local incorporation is not required.
The registration process for Indian businesses in Nepal involves multiple sequential steps under FITTA 2019 and the Companies Act 2063. Each step must be completed correctly to avoid delays.
The first step is obtaining foreign investment approval from the Department of Industry (DOI) or the Investment Board of Nepal (IBN) for projects above NPR 6 billion. The application must include a detailed project report or business plan, corporate documents of the Indian parent company (Certificate of Incorporation, MOA/AOA), board resolution authorizing the Nepal investment, investor profile and financial credibility certificate from a bank, power of attorney for local representation, and passport copies of individual investors.
FITTA mandates that DOI issue a decision within 7 working days if the application is complete. In practice, the process takes 1-2 weeks. The approved investment amount, business scope, and conditions are specified in the FDI Approval Letter.
After obtaining FDI approval, the company must be incorporated at the Office of Company Registrar under the Companies Act 2063. The incorporation process involves name reservation, drafting of Memorandum and Articles of Association, submission of incorporation documents, and issuance of Certificate of Incorporation. This typically takes 7-15 working days.
The newly incorporated company must obtain a Permanent Account Number (PAN) from the Inland Revenue Department. VAT registration is required if the annual turnover exceeds the prescribed threshold (NPR 5 million for goods, NPR 2 million for services).
The company must return to DOI for final industry registration. The industry registration certificate authorizes the company to commence business operations. This step verifies that the company has been properly incorporated and that the committed investment is being brought into Nepal.
The approved foreign investment must be injected into Nepal through formal banking channels. Indian investors have a unique advantage: capital can be brought in Indian Rupees (INR), not just convertible foreign currency. This is a significant facilitation not available to investors from other countries. After capital injection, the company must notify Nepal Rastra Bank (NRB) that the investment has been brought from its legal source.
The December 2025 Fifth Amendment to NRB's Foreign Loan and Investment Management Bylaws removed the prior NRB approval requirement for equity inflows. Now, only post-inflow recording with NRB is required, significantly streamlining the process.
Depending on the business sector, additional licenses may be required from municipal authorities, sector regulators, or environmental agencies. These include ward office business registration, municipal trade license, environmental clearance (if applicable), and sector-specific operating licenses.
| Step | Action | Timeline | Authority |
|---|---|---|---|
| 1 | FDI application to DOI/IBN | 7-14 days | Department of Industry |
| 2 | Company incorporation at OCR | 7-15 days | Office of Company Registrar |
| 3 | PAN registration | 1-3 days | Inland Revenue Department |
| 4 | Industry registration at DOI | 7-14 days | Department of Industry |
| 5 | Capital injection and NRB notification | 1-3 months | Nepal Rastra Bank |
| 6 | Local licenses and operational permits | 7-30 days | Various local authorities |
| Total estimated time | 2-4 months |
The minimum investment threshold for foreign direct investment in Nepal varies by sector. For standard manufacturing and service industries, the minimum is NPR 20 million (approximately INR 12.5 million or USD 153,000). This was reduced from NPR 50 million in recent years to make Nepal more accessible to mid-sized investors.
| Sector | Minimum Investment | Notes |
|---|---|---|
| Standard manufacturing and services | NPR 20 million | Applies to most sectors under FITTA |
| IT and technology-based industries | No minimum | Exempted under automatic route |
| Tourism and consulting services | USD 50,000 | Specific threshold for service sectors |
| Large projects (above NPR 6 billion) | IBN jurisdiction | Investment Board of Nepal approval |
| Joint venture with Nepali partner | Proportional to foreign share | Minimum applies to foreign portion only |
The capital injection schedule typically requires 25% of the approved investment within the first year, with the remainder brought in according to the project timeline. Extensions can be requested if justified.
Indian companies have the option to establish a Branch Office or Liaison Office in Nepal without incorporating a separate legal entity. However, this route has specific limitations and requirements.
A Branch Office can be established by obtaining government endorsement from the concerned regulatory authority or by entering into an agreement with a Government of Nepal authority. The Branch Office can undertake activities covered under the agreement that forms the basis of its registration. This is particularly suitable for Indian companies executing government contracts, infrastructure projects, or supply agreements.
The process involves obtaining recommendation or approval from the concerned line ministry or regulatory authority, submitting application to the Office of Company Registrar with endorsement documents, and registering the branch with local authorities for operational permits.
A Liaison Office is established when an Indian company appoints a person in Nepal for regular contact and coordination. The Liaison Office is not permitted to undertake any business activities, including marketing, advertising, or promotion. It can only carry out correspondence, act as a point of contact, and provide assistance without charging any cost to persons willing to use or import the Indian company's products and services.
| Aspect | Branch Office | Liaison Office |
|---|---|---|
| Business activities | Allowed (as per agreement) | Not permitted |
| Revenue generation | Yes (from approved activities) | No |
| Marketing and sales | Yes (within scope) | No |
| Staff hiring | Yes | Limited |
| Tax obligations | Yes, on Nepal-sourced income | Minimal (no business income) |
| Best suited for | Government contracts, projects | Market research, coordination |
A significant advantage for Indian nationals doing business in Nepal is that they are not required to obtain a business visa. The open border arrangement and bilateral agreements allow Indian citizens to enter, reside, and work in Nepal without visa formalities.
However, for long-term business operations and formal company roles, the following documentation is recommended:
| Document | Purpose | Where to Obtain |
|---|---|---|
| Indian passport or voter ID | Identity verification | India |
| Company registration certificate | Proof of business entity | OCR, Nepal |
| FDI approval letter | Proof of authorized investment | DOI, Nepal |
| PAN certificate | Tax identification | IRD, Nepal |
| Industry registration certificate | Operational authorization | DOI, Nepal |
| Residential proof in Nepal | Local address verification | Ward office, Nepal |
For Indian nationals who are directors or shareholders of FITTA-approved companies, the Non-Residential Business (NRB) Visa can be obtained if desired. This visa is issued for 1-5 years and provides formal documentation of business status. The fees are structured based on investment amount:
| Investment Amount | 1-Month Visa | 1-Year Visa | 5-Year Visa |
|---|---|---|---|
| Less than NPR 10 million | USD 35 | USD 400 | USD 1,000 |
| More than NPR 10 million | USD 20 | USD 200 | USD 500 |
| More than NPR 100 million | No charge | No charge | No charge |
Indian companies operating in Nepal are subject to the following tax framework under the Income Tax Act 2058:
| Tax Type | Rate | Applicability |
|---|---|---|
| Corporate income tax | 25% standard | All companies registered in Nepal |
| Corporate income tax (banks, telecom, alcohol) | 30% | Specified sectors |
| Capital gains tax | 25% | On sale of shares/property |
| Dividend withholding tax | 5% | Distributed to shareholders |
| VAT | 13% | On goods and services |
| Advance tax (installment) | 40%/30%/30% | Paid in Poush, Chaitra, Ashad |
| Double Taxation Avoidance Agreement (DTAA) | As per India-Nepal treaty | Prevents double taxation on same income |
India and Nepal have a Double Taxation Avoidance Agreement (DTAA) that prevents Indian companies from being taxed twice on the same income. Under the DTAA, tax paid in Nepal can be credited against Indian tax liability, and vice versa. This is a significant advantage for Indian investors compared to investors from countries without DTAA with Nepal.
The India-Nepal business relationship is supported by several bilateral agreements that facilitate trade, investment, and economic cooperation.
| Agreement | Year | Key Provisions |
|---|---|---|
| Treaty of Peace and Friendship | 1950 | Open border, free movement of people, reciprocal business rights |
| Treaty of Trade | Multiple renewals | Preferential market access, duty concessions |
| Treaty of Transit | 1999 (renewed) | Access to Indian ports for Nepal's third-country trade |
| SAFTA Agreement | 2004 | South Asian Free Trade Area preferential tariffs |
| Bilateral Investment Promotion and Protection Agreement (BIPPA) | 2011 | Investment protection, dispute resolution, repatriation rights |
| Double Taxation Avoidance Agreement (DTAA) | 2011 | Prevention of double taxation, tax credit mechanisms |
| Power Trade Agreement | 2014 | Cross-border electricity trading framework |
The Treaty of Transit is particularly important for Nepal as a landlocked country. It provides Nepal access to Indian ports (Kolkata, Haldia, Visakhapatnam) for trade with third countries, significantly reducing logistics costs for Nepali businesses with Indian supply chains.
While Nepal allows 100% foreign ownership in most sectors, certain sectors are restricted or prohibited under FITTA 2019. Indian investors must verify sector eligibility before making investment decisions.
| Sector | FITTA Schedule | Status |
|---|---|---|
| Real estate business (excluding construction) | Schedule A | Prohibited |
| Primary agriculture (fish farming, animal husbandry) | Schedule A | Prohibited |
| Cottage and small industries | Schedule A | Prohibited |
| Personal services (hair cutting, tailoring, driving) | Schedule A | Prohibited |
| Arms and ammunition | Schedule A | Prohibited |
| Motion pictures in national languages | Schedule A | Prohibited |
| Retail business (non-chain) | Schedule B | Prohibited |
| Travel agencies, trekking, guides | Schedule B | Prohibited |
| Local catering services | Schedule B | Prohibited |
| Rural tourism | Schedule B | Prohibited |
| Consultancy services | Schedule B | Restricted to 51% foreign ownership |
| Domestic airlines | Schedule B | Restricted to 49% foreign ownership |
Sectors with high potential for Indian investment include hydropower and energy, manufacturing and processing, information technology and software, telecommunications infrastructure, tourism and hospitality, financial services and banking, education and healthcare, and infrastructure and construction.
Indian investors are entitled to repatriate investment returns from Nepal under FITTA and the BIPPA. The repatriation process was significantly simplified by the December 2025 NRB reforms.
Repatriable amounts include capital from sale of shares or property, dividends and profits, interest on loans, technology transfer royalties (subject to sector caps), lease rentals, and compensation from legal disputes or arbitration.
The Fifth Amendment to the Foreign Loan and Investment Management Bylaws (December 30, 2025) introduced major changes. Prior NRB approval for foreign equity inflows was removed. Repatriation approval authority was delegated to Head Offices of A-Class Commercial Banks, which must process applications within 15 days. NRB approval is now required only if repatriation is sought to a country other than the original source country of investment.
For Indian investors, this means that repatriation to India can be processed directly by commercial banks without NRB central approval, significantly reducing processing time and administrative burden.
Indian businesses operating in Nepal face several practical challenges that can be managed with proper preparation and local expertise.
| Challenge | Description | Solution |
|---|---|---|
| Bureaucratic delays | Multiple approvals from different agencies | Engage experienced local legal and consulting partners |
| Infrastructure gaps | Power shortages, poor road connectivity | Invest in backup power, plan logistics carefully |
| Labor issues | Trade union activism, labor disputes | Comply with labor laws, maintain good industrial relations |
| Contract enforcement | Slow court system, case backlogs | Use arbitration clauses, consider alternative dispute resolution |
| Currency fluctuation | NPR pegged to INR but volatile against USD | Hedge currency risk, maintain INR-denominated accounts |
| Regulatory changes | Frequent policy and regulatory updates | Maintain ongoing compliance advisory relationship |
| Local partner disputes | Misalignment of expectations in JVs | Draft comprehensive shareholder agreements, define exit mechanisms |
| Tax compliance complexity | Multiple taxes, frequent filing requirements | Engage qualified chartered accountants, use automated systems |
Do Indian nationals need a visa to do business in Nepal?
No, Indian nationals are not required to obtain a visa to enter or reside in Nepal for business purposes. The open border arrangement allows free movement. However, for formal company roles, documentation such as company registration and FDI approval is recommended.
Can an Indian company own 100% of a Nepali company?
Yes, Indian investors can establish wholly-owned subsidiaries in Nepal with 100% foreign equity in sectors not on the FITTA negative list. No local partner is required for most permitted sectors.
What is the minimum investment for Indian companies in Nepal?
The standard minimum FDI is NPR 20 million (approximately INR 12.5 million). IT and technology sectors have no minimum requirement. The investment can be brought in Indian Rupees, which is a unique advantage for Indian investors.
How long does it take to register a company in Nepal from India?
The complete process from FDI application to operational readiness typically takes 2-4 months. FDI approval takes 7-14 days, company incorporation 7-15 days, and capital injection 1-3 months depending on banking procedures.
Can Indian companies open a branch office in Nepal?
Yes, Indian companies can open Branch Offices or Liaison Offices in Nepal. Branch Offices require government endorsement or a contract with a Government of Nepal authority. Liaison Offices are restricted to coordination activities only.
What taxes do Indian companies pay in Nepal?
Indian companies pay corporate income tax at 25% (30% for banks, telecom, and alcohol), VAT at 13%, and withholding taxes on dividends at 5%. The India-Nepal DTAA prevents double taxation.
Is profit repatriation allowed for Indian investors?
Yes, Indian investors can repatriate capital, profits, dividends, and interest through formal banking channels. The December 2025 NRB reforms decentralized repatriation approvals to commercial banks, processing within 15 days.
What sectors are best for Indian investment in Nepal?
High-potential sectors include hydropower, manufacturing, IT and software, telecommunications, tourism, financial services, education, healthcare, and infrastructure. Sectors on the FITTA negative list should be avoided.
Do Indian banks operate in Nepal?
Yes, several Indian banks operate in Nepal including State Bank of India (SBI), ICICI Bank, Punjab National Bank (PNB), and Axis Bank. These banks facilitate trade finance, remittances, and banking services for Indian businesses.
What is SAFTA and how does it benefit Indian businesses in Nepal?
SAFTA (South Asian Free Trade Area) is a regional trade agreement that provides preferential tariff treatment for goods traded between India and Nepal. Indian exports to Nepal and Nepali exports to India benefit from reduced or zero customs duties on qualifying products.
Attorney Nepal PVT LTD is recognized as a leading provider of cross-border business and legal services for Indian investors in Nepal. With extensive experience in FITTA compliance, company registration, tax structuring, and India-Nepal bilateral trade matters, the firm has successfully assisted numerous Indian companies and entrepreneurs in establishing and growing their Nepali operations.
The legal team at Attorney Nepal PVT LTD specializes in structuring Indian investments to maximize bilateral advantages while ensuring full compliance with Nepali law. Services include FDI application and DOI/IBN liaison, company incorporation and structuring, branch and liaison office registration, PAN, VAT, and tax registration, repatriation strategy and documentation, India-Nepal DTAA advisory, labor law and employment compliance, ongoing corporate governance and regulatory compliance, and dispute resolution and arbitration support.
For a confidential consultation on doing business in Nepal from India, contact Attorney Nepal PVT LTD today. Your cross-border venture deserves expert legal foundation, and your success deserves trusted guidance.
The information provided in this guide is for general informational and educational purposes only. It does not constitute legal, financial, or investment advice, and no attorney-client relationship is created by reading this content. Laws, regulations, and bilateral agreements may change, and individual circumstances vary. For advice specific to your situation, consult a qualified legal and financial professional. Attorney Nepal PVT LTD disclaims all liability for actions taken or not taken based on this content.
For further reading and authoritative sources on doing business in Nepal from India, the following resources are recommended:
June 14, 2026 - BY Admin