FDI Services

India is one of the top Country in terms of foreign investment destination. To invite and encourage Foreign Direct Investment in India (FDI), the process of regulation and approval has been substantially liberalized. The Reserve Bank of India has prescribed the administrative and compliance aspects of FDI.

FDI can be divided into two broad categories - Investment under automatic route and investment through prior approval of Government

Procedure under automatic route

FDI in sectors/activities to the extent permitted under automatic route does not require any prior approval either by the Government or RBI. The investors are only required to notify the Regional office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors.

Procedure under Government approval

FDI in activities not covered under the automatic route, requires prior Government approval and are considered by the Foreign Investment Promotion Board (FIPB). Approvals of composite proposals involving foreign investment/foreign technical collaboration are also granted on the recommendations of the FIPB. For detail of project under Automatic Route and Government Route.

FDI Allowances in various sectors

Agriculture – 100%

Plantation Sector – 100%

Mining of metal and non-metal ores – 100%

Mining – Coal & Lignite – 100%

Food Product Retail Trading – 100%

Railway Infrastructure – 100%

Asset Reconstruction Companies – 100%

Credit Information Companies – 100%

White Label ATM Operations – 100%

Non-Banking Finance Companies – 100%

Power Exchanges – 49%

Broadcasting Carriage Services (Teleports, DTH, Cable Networks, Mobile TV, HITS) – 100%

Broadcasting Content Service - Up-linking of Non-‘News & Current Affairs’ TV Channels/ Down-linking of TV Channels – 100%

Airports – Greenfield – 100%

Airports – Brownfield – 100%

Air Transport Service – Non-Scheduled – 100%

Air Transport Service – Helicopter Services/ Seaplane Services – 100%

Pharma – Greenfield – 100%

Petroleum & Natural Gas - Exploration activities of oil and natural gas fields – 100%

Petroleum refining by PSUs – 49%

Infrastructure Company in the Securities Market – 49%

Ground Handling Services – 100%

Maintenance and Repair organizations; flying training institutes; and technical training institutions – 100%

Construction Development – 100%

Industrial Parks – new and existing – 100%

Trading – Wholesale – 100%

Trading – B2B E-commerce – 100%

Duty Free Shops – 100%

Commodity Exchanges – 49%

Insurance – 49%

Pension – 49%

Frequently Asked Questions

The routes under which foreign investment can be made is as under:

  • a. Automatic Route: Foreign Investment is allowed under the automatic route without prior approval of the Government or the Reserve Bank of India, in all activities/ sectors as specified in the Annex B of Schedule 1 to Notification No. FEMA 20.
  • b. Government Route: Foreign investment in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance. Application can be made in Form FC-IL, which can be downloaded from Plain paper applications carrying all relevant details are also accepted. No fee is payable.

An Indian company issuing shares/ convertible debentures to a person resident outside India shall receive the amount of consideration by:

  • a. inward remittance through normal banking channels;
  • b. debit to NRE/ FCNR (B) account of a person concerned maintained with an AD Category I bank;
  • c. debit to non-interest bearing Escrow account in Indian Rupees in India which is opened with the approval from AD Category – I bank and is maintained with the AD Category I bank on behalf of residents and non-residents towards payment of share purchase consideration;
  • d. conversion of royalty/ lump sum/ technical know-how fee due for payment or conversion of ECB;
  • e. conversion of pre-incorporation/ pre-operative expenses incurred by the a non-resident entity up to a limit of five percent of its capital or USD 500,000 whichever is less;
  • f. conversion of import payables/ pre incorporation expenses/ can be treated as consideration for issue of shares with the approval of FIPB;
  • g. against any other funds payable to a person resident outside India, the remittance of which does not require the prior approval of the Reserve Bank or the Government of India: and
  • h. Swap of capital instruments, provided where the Indian investee company is engaged in a Government route sector, prior Government approval shall be required
  • If the shares or convertible debentures are not issued within 180 days from the date of receipt of the inward remittance or date of debit to NRE/ FCNR (B)/ Escrow account, the amount shall be refunded. Further, Reserve Bank may on an application made to it and for sufficient reasons permit an Indian Company to refund/ allot shares for the amount of consideration received towards issue of security if such amount is outstanding beyond the period of 180 days from the date of receipt.

Foreign investment is prohibited in the following sectors:

  • i. Lottery Business including Government / private lottery, online lotteries, etc.
  • ii. Gambling and Betting including casinos etc.
  • iii. Chit funds
  • iv. Nidhi company
  • v. Trading in Transferable Development Rights (TDRs)
  • vi. Real Estate Business or Construction of Farm Houses
  • vii. Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
  • viii. Activities / sectors not open to private sector investment e.g. (I) Atomic energy and (II) Railway operations (other than permitted activities mentioned in entry 18 of Annex B).
  • Note: Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.

All foreign investments are repatriable (net of applicable taxes) except in cases where the investment is made or held on non-repatriation basis or where the sectoral condition specifically mentions non-repatriation. Further, dividends/ profits (net of applicable taxes), on foreign investments, being current income can be remitted outside India through an Authorised Dealer bank.

Only NRIs are allowed to set up partnership/ proprietorship concerns in India on non-repatriation basis.