Monthly India Business Briefing: Key Developments for Foreign Companies

Why Foreign Companies Need a Structured India Briefing

India's regulatory environment generates an average of 40-50 significant policy changes per quarter that directly affect foreign-owned companies. These range from amendments to FEMA regulations and RBI circulars to MCA notifications, GST council decisions, and union budget announcements. Missing even one critical change — a new filing deadline, a revised FDI sectoral cap, or a compliance amnesty window — can result in penalties running into lakhs of rupees or lost business opportunities.

This monthly briefing distills the most consequential developments for foreign companies operating in India, organized by category: FDI policy, taxation, compliance, corporate governance, and sectoral updates. Whether you operate through a wholly owned subsidiary, branch office, or liaison office, this briefing covers what your India leadership team needs to know.

FDI Policy: Major Liberalization for Border Countries

On March 10, 2026, the Union Cabinet approved significant amendments to India's Foreign Direct Investment (FDI) policy governing investments from countries sharing a land border with India. This is the first substantive relaxation of the Press Note 3 framework since its introduction in April 2020.

Key Changes to Land Border Country FDI Rules

• 10% automatic route threshold: Foreign investors from land border countries (China, Bangladesh, Pakistan, Nepal, Myanmar, Bhutan, Afghanistan) can now invest up to 10% in Indian companies via the automatic route, without prior government approval. Previously, all investments from these countries required government approval regardless of size.
• 60-day fast-track approval: For investments that still require government approval under Press Note 3, authorities must process and decide within 60 calendar days. This is a binding timeline — previously there was no statutory deadline, and approvals routinely took 6-18 months.
• Strategic manufacturing sectors: The fast-track mechanism specifically applies to capital goods, electronic capital goods, electronic components, polysilicon, and ingot-wafer manufacturing — sectors critical to India's semiconductor and electronics manufacturing ambitions.
• Beneficial ownership clarity: For the purpose of the 10% threshold and ownership scrutiny, Press Note 2 (2026) anchors the test to the definition of "beneficial owner" under the Prevention of Money Laundering Act (PMLA), strengthening oversight of Indian companies that are effectively under land-border-country control but structured to avoid Press Note 3 scrutiny.

What This Means for Foreign Companies

Companies from non-border countries are unaffected — 100% FDI continues under the automatic route for most sectors. For companies with Chinese, Bangladeshi, or other border-country investors in their cap table, the 10% automatic threshold (where the holding is non-controlling and below 10% on a PMLA beneficial-ownership basis) creates a meaningful ease of doing business. However, anchoring scrutiny to the PMLA beneficial-owner test means that layered ownership structures designed to circumvent Press Note 3 will face closer examination.

Taxation: The Income Tax Act, 2025 Takes Shape

India's most significant tax legislation reform in decades — the Income Tax Act, 2025, which replaces the 1961 Act — will come into effect from April 1, 2026 (FY 2026-27). While the Act was passed in 2025, the supporting Income Tax Rules, 2026 were notified in early March 2026, providing the operational framework.

Key Changes for Foreign Companies

Corporate Tax Rates: No Change

The headline corporate tax rates remain unchanged: 22% (plus surcharge and cess, effective ~25.17%) under section 200 read with section 205(1) of the Income-tax Act, 2025 (section 115BAA of the Income-tax Act, 1961) for domestic companies. Note that the concessional 15% (effective ~17.16%) rate for new manufacturing companies under section 115BAB of the Income-tax Act, 1961 (from 1 April 2026, section 201 (Table, Sl. No. 1) read with section 205(2) of the Income-tax Act, 2025) was available only to companies that commenced manufacturing on or before 31 March 2024; that window has closed and was not extended, so new manufacturers now default to the 22% rate under section 200. Foreign companies (branch offices, liaison offices) continue to be taxed at 35% plus surcharge and cess.

Transfer Pricing Safe Harbour Expansion

The transfer pricing safe harbour regime has been rebuilt. For tax year 2026-27 onwards, rule 89(2) of the Income-tax Rules, 2026 sets a single safe-harbour margin of 15.5% of operating expense for the provision of information technology services — software development, ITeS, KPO and software-related contract R&D together — where aggregate operating revenue from the transaction does not exceed INR 2,000 crore. That replaces the separate 17% and 18% software and ITeS margins and the 24%/21%/18% KPO employee-cost ladder, which remain correct law only for FY 2025-26 and earlier tax years (Rule 10TD of the Income-tax Rules, 1962, as amended by Notification 21/2025), on transaction values up to INR 300 crore. The IT-services election runs for five consecutive tax years, with the INR 2,000 crore threshold tested in the first of those years (rule 91(1)-(2)), and the option is now exercised in Form No. 49 filed with the Director General of Income-tax (Systems) rather than in Form 3CEFA with the Assessing Officer. The rate table itself is fixed for a block of three tax years beginning with 2026-27 (rule 89(4)). Rule 89(2) also adds provision of data centre services as a new category at not less than 15%, and retains corporate guarantees at not less than 1% per annum. The rules are made under section 167 of the Income-tax Act, 2025 (section 92CB of the Income-tax Act, 1961). This benefits the hundreds of foreign companies running shared services centers and GCCs in India.

Labour Codes: Finally in Force

After years of delay, all four Labour Codes came into force on November 21, 2025, replacing 29 existing central labour laws. The Government published draft Central Rules on December 30, 2025, with the public comment period closing in February 2026.

The Four Codes and Their Impact

Immediate Action Items

Foreign companies with Indian subsidiaries should immediately conduct a compensation restructuring analysis. The requirement that basic pay constitute at least 50% of CTC will increase employer PF and gratuity contributions for many employees, raising effective labour costs by 8-12% for companies that currently structure basic at 30-40% of CTC. Engage your HR and payroll teams — the transition deadline is still being finalized by individual states, but companies should prepare now.

GST 2.0: Structural Reforms and Compliance Changes

The GST framework continues to evolve rapidly, with Budget 2026-27 enacting several GST Council recommendations and introducing new compliance structures.

Intermediary Services: A Landmark Change

Perhaps the most significant GST change for foreign companies is the reclassification of intermediary services. Previously, intermediary services supplied to overseas clients attracted 18% GST (place of supply was the supplier's location in India). Budget 2026-27 aligns the place of supply to the recipient's location, effectively reclassifying these services as exports — zero-rated, with input tax credit refunds available.

This benefits thousands of Indian subsidiaries of foreign companies that provide intermediary, procurement, and coordination services to their parent entities abroad. If your Indian subsidiary acts as a procurement hub, sourcing agent, or coordination center for the parent, review your GST classification immediately — you may be entitled to refunds on previously paid GST.

Rate Simplification

The 56th GST Council meeting paved the way for a two-slab structure: 5% (essentials) and 18% (standard). The 12% and 28% slabs are being phased out, with sin goods taxed at a new 40% rate. This simplification reduces compliance complexity but requires companies to review their product/service classification.

Cloud Services Tax Holiday

Foreign companies providing cloud services through India-based data centers receive a tax holiday extending to 2047, with related entities eligible for a 15% cost-based safe harbour: from tax year 2026-27, rule 89(2) of the Income-tax Rules, 2026 adds provision of data centre services as a new safe-harbour category, at an operating profit margin of not less than 15% of operating expense. This is a direct incentive for hyperscalers and cloud providers to establish Indian data center operations.

MCA and Corporate Governance Updates

ROC Restructuring

The MCA has restructured ROC offices across India effective February 16, 2026, establishing 6 new ROC offices and 3 new Regional Directorates. ROCs now have expanded adjudication powers to directly impose penalties for statutory non-compliance. Read our detailed analysis in MCA New Registrar of Companies Offices 2026.

CCFS-2026 Amnesty Scheme

The Companies Compliance Facilitation Scheme, 2026 runs from April 15 to July 15, 2026, offering a 90% waiver on late filing penalties. Foreign companies with any overdue MCA filings — AOC-4, MGT-7, FC-3, FC-4, DIR-3 KYC — should take advantage of this window.

DIR-3 KYC Changes: Triennial Filing

The MCA has shifted DIR-3 KYC from an annual filing to a triennial one: every DIN holder now files once every three financial years by 30 June, rather than every year by 30 September. Foreign directors who were compliant under the old annual regime have their next filing due 30 June 2028. A director whose passport, address, or other particulars change mid-cycle must still file a fresh KYC promptly, regardless of where they fall in the three-year cycle. This reduces the compliance burden for foreign directors managing multiple DINs.

SEBI and Capital Markets

SWAGAT-FI Framework

SEBI has introduced the SWAGAT-FI (Single Window Automatic and Generalised Access for Trusted Foreign Investors) framework, notified on January 16, 2026 and effective June 1, 2026, to streamline onboarding and consolidate compliance for a specified class of trusted, low-risk foreign investors — including sovereign wealth funds, central banks, pension funds, multilateral agencies, and regulated insurers. Eligible FPIs receive an extended ten-year registration validity (versus the standard three-year renewal cycle) and can register as FVCIs without additional documentation.

PROI Investment Limits Increased

Notification S.O. 3030(E) dated 12 June 2026 substituted Schedule III of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. An individual Person Resident Outside India (PROI) must now hold less than 10% of the paid-up equity capital of a listed Indian company on a fully diluted basis, up from 5%. The combined cap for all individual PROIs in a single company is a flat 24%, up from 10% raisable to 24% by special resolution; that resolution route has been withdrawn. This opens additional investment headroom for NRI and OCI investors.

Trade Agreements and Market Access

India-EU Free Trade Agreement

India and the European Union concluded negotiations on a landmark free trade agreement on January 27, 2026, the culmination of talks spanning nearly two decades. The deal still requires ratification — approval by the Council of the EU, consent of the European Parliament, and approval by India's Union Council of Ministers — before it enters into force. Key provisions reported for foreign companies include broad tariff reductions phased over several years, provisions on services and professional mobility, simplified customs procedures, and investment-related commitments.

Other FTAs in Progress

India has also concluded the India-UK Comprehensive Economic and Trade Agreement (signed July 24, 2025), which entered into force on July 15, 2026. Additional free trade agreements with Oman, EFTA countries (Switzerland, Norway, Iceland, Liechtenstein), and New Zealand are at various stages of negotiation or ratification.

Economic Context: India's Growth Trajectory

India's GDP growth is projected at 7.5-7.8% for FY 2026-27, making it the fastest-growing major economy. Key data points for foreign companies evaluating or expanding India operations:

• FDI inflows: US$50.01 billion in FY 2024-25, representing a 13% increase over the previous year
• Digital infrastructure: India ranks third globally in AI talent, holding approximately 16% of the world's AI workforce
• E-commerce growth: Consumer-facing digital platforms are driving foreign investment in FMCG, beauty and personal care, and home products
• Manufacturing: The Production Linked Incentive (PLI) scheme has attracted over US$30 billion in committed investments across 14 sectors
• GCC expansion: India hosts over 1,700 Global Capability Centers, with 70+ new GCCs established in 2025 alone

Digital Personal Data Protection Act (DPDP): Compliance Timeline

The DPDP Act, 2023 is being operationalized in phases. For foreign companies:

• Data fiduciaries: Companies processing personal data of Indian residents must appoint a grievance redressal officer and establish data processing consent mechanisms
• Cross-border data transfer: Data can be transferred to countries notified by the Central Government. Transfers to non-notified countries require additional safeguards
• Significant data fiduciaries: Large foreign companies processing high volumes of Indian personal data may be classified as significant data fiduciaries, with additional obligations including data protection impact assessments and independent audits

The rules framework is expected to be fully notified by Q3 2026. Companies should begin compliance readiness assessments now. For more details, see our guide on DPDP Act compliance for foreign companies.

Upcoming Deadlines: Q2 2026

Sector Spotlight: GCCs and the India Opportunity

Global Capability Centers continue to be the dominant vehicle for foreign companies establishing operations in India. The GCC landscape in India has evolved beyond cost arbitrage into genuine capability building:

• Scale: Over 1,700 GCCs employing 1.9 million professionals, with aggregate revenue exceeding US$64 billion
• Function migration: GCCs are increasingly handling strategic functions — product development, data science, cybersecurity, and financial planning — not just back-office operations
• Geographic diversification: While Bengaluru, Hyderabad, and Pune remain the top three GCC cities, Tier-2 cities like Ahmedabad, Kochi, Coimbatore, and Jaipur are seeing accelerating GCC establishment
• Regulatory framework: India does not have a separate regulatory regime for GCCs. They operate as private limited companies under the Companies Act, 2013, with standard FDI compliance, FEMA compliance, and employment law obligations

Key Takeaways

• The FDI framework for land border countries has been liberalized via Press Note 2 (2026) — a 10% automatic route threshold (non-controlling) and a 60-day fast-track approval target for strategic manufacturing sectors — while ownership scrutiny is now anchored to the PMLA beneficial-owner definition
• The Income Tax Act, 2025 takes effect April 1, 2026 — foreign companies should note the electronics manufacturing tax incentives it introduces, and the rebuilt transfer pricing safe harbour that arrives with it under rules 86 to 93 of the Income-tax Rules, 2026 — a single 15.5% margin for information technology services where aggregate operating revenue does not exceed INR 2,000 crore, from tax year 2026-27; the equalisation levy, by contrast, was already abolished under Finance Act 2025 (6% ad levy from 1 Apr 2025), a year before this Act takes effect
• All four Labour Codes are now in force — the 50% basic pay requirement will increase effective labour costs by 8-12% for companies restructuring compensation; begin preparation immediately
• GST intermediary services reclassification is a windfall for Indian subsidiaries acting as procurement or coordination hubs for foreign parents — review your GST classification for potential refunds
• The CCFS-2026 amnesty window (April 15 to July 15, 2026) offers a 90% waiver on late filing penalties — clear all overdue MCA filings during this period

RBI and Banking Developments

Revised ECB Framework

The Reserve Bank of India has updated the External Commercial Borrowing (ECB) framework through Notification FEMA 3(R)(5)/2026-RB, which substituted Schedule I of the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 and came into force on 16 February 2026. The all-in-cost ceiling has been removed for ECB with an average maturity of three years or more, which is now priced in line with prevailing market conditions; prepayment and penal charges are treated the same way. Only ECB with an average maturity under three years remains subject to a ceiling, at the Trade Credit level of the benchmark rate plus 300 basis points for foreign-currency ECB and plus 250 basis points for rupee ECB. The automatic-route limit is now the higher of outstanding ECB of US$1 billion or total outstanding borrowing — external and domestic — of 300% of net worth per the last audited standalone balance sheet, replacing the earlier US$750 million per financial year cap. The minimum average maturity is three years for all eligible borrowers, including ECB raised from foreign equity holders, with manufacturing-sector borrowers permitted one-to-three-year ECB capped at US$150 million outstanding. Form ECB-2 returns are due within seven calendar days from the end of the month in which proceeds were received or debt servicing was undertaken, filed through the designated AD Category-I bank. These changes benefit foreign-owned subsidiaries that use intercompany loans from their parent companies to fund Indian operations.

UPI for Foreign Nationals

The RBI and National Payments Corporation of India (NPCI) have expanded UPI access to foreign nationals visiting India on business visas. Foreign nationals with an Indian bank account linked to their passport can now use UPI for transactions up to INR 200,000 per month. This is particularly relevant for foreign directors and expat managers of Indian subsidiaries who previously relied on international credit cards for day-to-day transactions.

FEMA Compliance Updates

The RBI has streamlined the FEMA compliance reporting framework. The FIRMS portal now supports bulk upload of FC-GPR returns for companies with multiple share allotment tranches. The FC-GPR filing deadline remains 30 days from share allotment, with a Late Submission Fee of INR 7,500 plus 0.025% of the transaction amount multiplied by the number of years of delay, under A.P. (DIR Series) Circular No. 16 dated 30 September 2022, rounded up to the nearest month and capped at 100% of the amount involved.

Employment and Immigration

Employment Visa Processing

The Ministry of Home Affairs has introduced an expedited processing track for employment visa applications from nationals of countries with bilateral social security agreements. Processing times have been reduced from 30 days to 10 working days for applicants from the UK, Germany, France, Australia, Japan, South Korea, and other treaty countries. The minimum annual salary threshold for employment visas remains US$25,000 for most nationalities.

Social Security Agreements

India now has bilateral social security agreements with 22 countries, allowing totalization of social security contributions. This is relevant for foreign companies deploying expatriate employees to India — proper structuring under these agreements can eliminate dual social security contributions and reduce effective employment costs by 15-20%.

Intellectual Property Updates

Trademark Registration Acceleration

The Controller General of Patents, Designs and Trade Marks has significantly reduced trademark registration processing times. First examination reports are now issued within 30 days of filing (compared to 6-12 months historically), and uncontested trademarks are being registered within 4-6 months of filing. Foreign companies entering India should file trademark applications early in the market entry process.

Design Registration

India's Design Act amendments have streamlined design registration for foreign applicants. Multiple designs can now be filed in a single application (similar to the Hague System), and the examination timeline has been reduced to 3-4 months. Registration fees remain modest: INR 4,000 for a single design (e-filing) for small entities.

Infrastructure and Real Estate

Office Market Trends

India's Grade A office market continues to expand, driven by GCC demand. Key data points for foreign companies evaluating office space: vacancy rates in Bengaluru (5.2%), Hyderabad (7.8%), and Mumbai (12.4%) indicate a tightening market in tech hubs. Average Grade A office rents in Bengaluru have increased 8-12% year-over-year to INR 85-120 per sq ft per month. For a detailed comparison, see our guide on office rent across Indian cities.

SEZ Policy Updates

The Development of Enterprise and Service Hubs (DESH) Bill continues to be developed, but has not yet been tabled. In the interim, the existing SEZ framework remains operational. Companies in SEZs continue to enjoy duty-free imports and simplified customs procedures. The income-tax deduction for SEZ units, however, is closed to new entrants from 1 April 2026: section 144 of the Income-tax Act, 2025 (section 10AA of the Income-tax Act, 1961) is a grandfathering provision under which only units that had already begun to manufacture or provide services under section 10AA of the 1961 Act carry their remaining entitlement forward on the same graduated scale. No new SEZ unit can qualify. New SEZ developments have slowed, with the government encouraging conversion of underutilized SEZ land for non-SEZ purposes.

Startup and Innovation Ecosystem

DPIIT Recognition Benefits

Foreign-founded startups incorporating in India can apply for DPIIT (Department for Promotion of Industry and Internal Trade) recognition, which provides access to self-certification for 9 labour and 3 environmental laws, fast-tracked patent examination (expedited from 2-3 years to 6-12 months), income tax exemption under section 140 of the Income-tax Act, 2025 (section 80-IAC of the Income-tax Act, 1961) for eligible startups (3 out of 10 years), and participation in government procurement with relaxed eligibility criteria. The angel-tax exemption that DPIIT recognition once carried is now redundant: the angel-tax charge under section 56(2)(viib) of the Income-tax Act, 1961 was withdrawn with effect from assessment year 2025-26 and has no counterpart in the Income-tax Act, 2025. The DPIIT has recognized over 150,000 startups as of January 2026, with approximately 8% having foreign founders or significant foreign investment.

Venture Capital and Private Equity

India's venture capital and private equity ecosystem continues to mature. The FDI route for VC investments is well-established through SEBI-registered Alternative Investment Funds (AIFs). Category I and Category II AIFs can raise foreign capital without additional RBI approval, provided the fund manager is Indian and the fund is registered with SEBI. The total AIF commitment as of December 2025 exceeded US$130 billion.