Response

With reference to the issue stated above by you, i would like to draw to your attention that Yes, an NRI can become a partner in Indian partnership firm and he further can contribute to the capital of the firm subject to certain conditions.
For any NRI to become a partner in a partnership firm there is no restriction, however, the law restricts the foreign investment by NRI by way of capital to the firm.

There are two ways to invest into a partnership firm by the NRI.

All the two ways are described below:

A Non-Resident India17(NRI) or a Person of Indian Origin18 (PIO) resident outside India can invest by way of contribution to the capital of a firm or a proprietary concern in India on non-repatriation basis Investment on Nonrepatriation basis:

The NRI may invest into the partnership firm on non-repatriation basis, i.e. capital invested once cannot be taken back by the NRI to any country outside India subject to the following conditions:

The amount must be invested by inward remittance or out of NRE/FCNR/NRO account.

The business of the firm or proprietary concern is not engaged in any agricultural/plantation or real estate business or print media sector.

Investment on repatriation basis: If the NRI makes any investment on repatriation basis, then he shall first have to take prior approval of the government before investing.

Following are the laws applicable in your case:-

1. Section 6 Income Tax Act

2. Section 2 Foreign exchange Managment Act

Reference:

20210001-20210024-374

LAWAYZ-2023-398