Foreign Direct Investment (FDI) Advisory in India Automatic route or Government approval

Investment through equity instruments by a person resident outside India in an unlisted Indian company counts, whatever the size. In a listed company, it counts only if it holds 10 percent or more of the post-issue paid-up equity capital on a fully diluted basis. That is the test in para 2.1.16 of the Consolidated FDI Policy of 2020.

It stays FDI. The note to para 2.1.16 states that where an existing investment by a person resident outside India in the capital instruments of a listed company falls below 10 percent of the post-issue paid-up equity capital on a fully diluted basis, the investment continues to be treated as FDI.

Para 4.1 of the Reserve Bank’s Master Direction on Foreign Investment in India lists them as equity shares, convertible debentures, preference shares, and share warrants. Preference shares and debentures have to be fully paid and mandatorily and fully convertible; anything short of that is a debt instrument governed elsewhere.

No. The Consolidated FDI Policy Circular of 2020, effective 15 October 2020, is the only consolidation in force. Para 1.1.3 records that it remains in force until superseded and has not been superseded. It is amended piecemeal through press notes, which the Department of Economic Affairs then notifies as amendments to the NDI Rules.

The notification. Para 1.1.2 of the FDI Policy settles it: in case of any conflict, the relevant notification under the FEM (Non-Debt Instruments) Rules, 2019 prevails. A press note states policy and takes effect from the date of the FEMA notification that carries it into the Rules.

Not as a general rule. Minimum capitalization is a sector-specific entry condition under para 3.6.1, not a universal floor, so it applies only where the Chapter 5 entry for your activity applies. Multi-brand retail trading, for instance, carries its own minimum in para 5.2.15.4.

Find your activity in Chapter 5 of the FDI Policy. If it is not there, para 5.2(a) puts you at 100% on the automatic route. If it is there, the cap and route in that entry govern. Separately, para 3.4.2 and the land-border rule can pull an otherwise automatic transaction onto the Government route.

Online, on the Foreign Investment Facilitation and National Single Window System portal. The SOP dated 4 May 2026 makes the process entirely paperless, so no physical copies are filed. The portal states that no fee is charged for submitting any proposal.

Annexure V of the SOP sets a cumulative 12 weeks: two days for DPIIT to circulate the file, twelve days for initial scrutiny, two weeks for DPIIT clarifications, six weeks for comments from consulted Ministries and the regulator, and four weeks for the competent Ministry to decide.

No. The note to Annexure V explicitly states that the prescribed limits exclude the time applicants take to remove deficiencies or supply additional information. DPIIT also gets an extra two weeks during which a proposal is proposed for rejection or for approval with additional conditions.

The competent authority is defined in para 2.1.7 as the concerned Administrative Ministry or Department. DPIIT identifies which one it is and assigns the file. Chapter 4 of the FDI Policy contains the allocation, so defense goes to the Department of Defense Production, telecom to the Department of Telecommunications, and so on.

Yes. Under para 4.1.5, where total foreign equity inflow exceeds ₹5,000 crore, the competent authority places the proposal before the Cabinet Committee on Economic Affairs. The Committee also takes proposals referred to it by the Minister in charge of the competent authority.

Often not. Para 4.2.1 lists cases needing no fresh approval, including additional foreign investment up to a cumulative ₹5,000 crore into the same entity within an approved foreign equity percentage, or into a wholly owned subsidiary, and cases where the sector has since moved to the automatic route.

Para 5.1 lists lottery, gambling and betting, chit funds, Nidhi companies, trading in Transferable Development Rights, real estate business or construction of farm houses, tobacco product manufacturing, and activities closed to private investment, namely atomic energy and railway operations. Foreign technology collaboration is also barred in the areas of lottery, gambling, and betting.

Not into “real estate business,” but the term is narrower than it sounds. Para 5.1(f) excludes development of townships, construction of residential or commercial premises, roads or bridges, and SEBI-registered REITs. Construction-development projects fall at 100% on the automatic route under para 5.2.10, subject to the conditions in that entry.

100% on the automatic route for insurance companies and for insurance intermediaries, and 20% on the automatic route for the Life Insurance Corporation of India. Press Note No. 1 (2026 Series) dated 9 February 2026 amended para 5.2.22 to that effect, subject to approval or verification by IRDAI.

The instruments do not name them. Rule 6(a) and para 3.1.1(a) refer to “a country which shares a land border with India”, so the test is geographic rather than a list. Pakistan imposes an additional express restriction: a Pakistani citizen or entity cannot invest in defense, space, atomic energy, or prohibited activities.

Since Press Note No. 2 (2026 Series), the expression carries the meaning in Section 2(1)(fa) of the Prevention of Money Laundering Act, 2002, as determined under Rule 9(3) of the PML (Maintenance of Records) Rules, 2005. The test is applied at the level of the investor entity, not the Indian company.

The Cabinet decision of 10 March 2026 states that non-controlling land-border beneficial ownership of up to 10% is permitted under the automatic route, subject to the applicable caps, routes and conditions. Both limbs have to hold. A small stake that carries control, or ultimate effective control, still needs approval.

Yes. Rule 6(a) and para 3.2.1 of the Reserve Bank’s Master Direction both provide that investment by an investor entity with any direct or indirect land-border ownership that does not require prior approval remains subject to the Reserve Bank’s reporting requirements.

Yes. Para 3.4 of the Master Direction extends it to any transfer of ownership of existing or future FDI, directly or indirectly, that results in beneficial ownership falling within the restriction. Secondary sales, exits, and internal reorganizations all require prior Government approval when they cross that line.

Within sixty days of receipt of the consideration, under Regulation 3.1 of FEMA 395. For partly paid shares, the sixty days run from the date of receipt of each call payment. The money itself has to come as an inward remittance through banking channels or from a repatriable foreign currency or rupee account.

For an unlisted Indian company, at not less than the valuation done on any internationally accepted pricing methodology on an arm’s length basis, duly certified by a Chartered Accountant, a SEBI-registered Merchant Banker or a practicing Cost Accountant. That is para 8.1.1 of the Master Direction on Foreign Investment in India.

It reports the issue of equity instruments to a person resident outside India, in which case the issue is treated as FDI. Regulation 4(1) of FEMA 395 requires that it be done no later than 30 days from the date of issue. It is filed through an AD Category-I bank on the Reserve Bank’s FIRMS portal.

Regulation 5 of FEMA 395 makes the person responsible for the filing liable to a late submission fee, decided by the Reserve Bank in consultation with the Central Government. Paying it regularises the delay; leaving it unaddressed leaves the contravention open under the Act.

The Annual Return on Foreign Liabilities and Assets. Under Regulation 4(2), an Indian company or LLP that received foreign investment in the previous or current year files it on or before 15 July each year, reckoned for the April to March year.