FDI Advisory Services in India for Foreign Investors

What does an FDI advisory engagement answer?

An FDI advisory engagement answers three questions: can this investor put money into this Indian business, by which route, and with which filings. Every answer comes from the rules themselves. Policy is set by DPIIT in the Consolidated FDI Policy Circular of 2020 (dated 15 October 2020, amended since by press notes). The law is the FEM (Non-debt Instruments) Rules, 2019 (the NDI Rules), notified by the Ministry of Finance under FEMA. Mode of payment and reporting are governed by RBI's FEM (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019. RBI consolidates all of it in the Master Direction – Foreign Investment in India, last updated up to 15 June 2026. A press note states policy; it binds only when the matching FEMA notification is issued. All three 2026 press notes say so in terms, so dates matter.

Our deliverable is a short memorandum that you, your AD bank, your lawyers and your home-country tax adviser can all rely on. It covers the cap and route for each activity, the land-border analysis, the instrument and pricing rule, the filings, and anything that needs a regulator's approval before or after closing.

Automatic route vs government route: which one applies to me?

If your activity is not prohibited, sits within its sectoral cap and threshold, and no one in your ownership chain triggers the land-border rules, you are on the automatic route. You need no prior approval, only post-investment reporting. The RBI Master Direction defines the automatic route as one where investment "does not require the prior approval from the Central Government". Under the government route, "investment by a person resident outside India requires prior Government approval". Activities that are not listed in Schedule I of the NDI Rules and not prohibited are open to 100% under the automatic route. Financial services are the exception: they need government approval unless they fall under a listed entry (Master Direction, paras 5.2.3–5.2.4). The cap is measured against total foreign investment in the company, direct and indirect (para 5.2). So a company that carries on a capped activity alongside open ones should plan its total foreign holding around the capped activity.

The government route applies in four cases: the sector is on it, the stake exceeds the automatic-route threshold, a land-border investor or beneficial owner is involved, or a citizen or entity of Pakistan invests (government route only, and never in defence, space or atomic energy). For a side-by-side view, see automatic route vs government approval and our explainers on the automatic route and the government approval route.

What are the FDI caps and routes for major sectors in India?

Most sectors are 100% automatic. The main restrictions are in retail, media, banking, defence, space, aviation, security services and brownfield pharma. The table below lists the major sector entries as they stand on 26 September 2026. Every row is taken from the Consolidated FDI Policy 2020 or a later press note or NDI amendment. Each also carries sector conditions that the table does not reproduce, so read the full entry before relying on a row. The same land-border rule applies across every sector. The complete list, with conditions, is in our FDI sectoral caps guide.

Sources: Consolidated FDI Policy 2020; Press Note 4 (2021) (telecom); Press Note 1 (2026) and S.O. 2186(E) of 2 May 2026 (insurance); PIB on the 2024 space-sector policy; RBI Master Direction.

Conditions that catch people out

• E-commerce: 100% FDI is allowed only in the marketplace model. FDI is not permitted in the inventory-based model. A vendor's inventory is deemed controlled by the marketplace if more than 25% of that vendor's purchases come from the marketplace or its group companies (FDI Policy para 5.2.15.2). Press Note 3 (2026 Series) lifts the inventory-model restriction only for e-commerce exports of goods made or produced in India; like other press notes, it takes effect from the date of the matching FEMA notification. See e-commerce FDI.
• Single-brand retail: above 51% foreign investment, 30% of the value of goods purchased must be sourced from India. The requirement is first met as a five-year average from the year the first store or online sales open, and annually after that. Compare single-brand vs multi-brand retail FDI.
• Multi-brand retail: minimum FDI of US$100 million. At least 50% of the first tranche goes into back-end infrastructure within three years, and at least 30% of the value of manufactured or processed products purchased is sourced from Indian small industries.
• Insurance: the 100% automatic route is "subject to approval and verification" by IRDAI. At least one of the chairperson, managing director and CEO must be a resident Indian citizen (S.O. 2186(E), 2 May 2026). See our insurance entry guide.
• Pharmaceuticals: a non-compete clause is not allowed on either route, except in special circumstances with Government approval. Brownfield pharma FDI also carries conditions on maintaining NLEM drug production and R&D spend for five years.
• Defence: foreign investment is subject to MHA security clearance and Ministry of Defence guidelines. See defence FDI.

Which sectors are prohibited for FDI?

Foreign investment is prohibited in lottery, gambling and betting, chit funds, Nidhi companies, trading in transferable development rights, real estate business and farm-house construction, and the manufacture of cigars, cheroots, cigarillos and cigarettes. It is also barred from atomic energy and railway operations. This is the list in para 3.1 of the RBI Master Direction. Foreign technology collaboration in any form, including franchise, trademark and management contracts, is also prohibited for lottery, gambling and betting. "Real estate business" does not include township development, construction of residential or commercial premises, roads or bridges, or SEBI-registered REITs. Development is therefore open while trading in land is not; see what foreign investors can do in real estate. A company already in a prohibited sector may issue bonus shares to existing non-resident shareholders if their shareholding pattern does not change (Press Note 2 (2025 Series), effective from the matching FEMA notification). More detail: FDI prohibited sectors.

Press Note 3 after 2026: does the land-border rule catch my investment?

Since 2 May 2026, the land-border rule catches an investment on four grounds. First, the investor is an entity or citizen of a country that shares a land border with India. Second, land-border citizens or entities together hold rights in the foreign investor above the Rule 9(3) PML Rules threshold. Third, they control the investor. Fourth, they have ultimate effective control of the Indian company. Smaller, non-controlling land-border holdings stay on the automatic route but must be reported to DPIIT first.

The 2020 rule, Press Note 3 (2020 Series) of 17 April 2020, put any investment on the government route where the beneficial owner was situated in or a citizen of a land-border country. It never defined "beneficial owner", so any trace of a land-border owner in a fund was treated as a trigger. The Union Cabinet approved changes on 10 March 2026. DPIIT issued Press Note 2 (2026 Series) on 15 March 2026, and the Ministry of Finance gave it legal effect through the FEM (Non-debt Instruments) (Amendment) Rules, 2026 (S.O. 2174(E), dated 1 May 2026, in force on publication on 2 May 2026). The new Rule 6(a) works like this:

• Who is caught directly: "an entity or a citizen of a country, which shares land border with India", or an investment whose beneficial owner is a citizen of such a country, or whose beneficial ownership "is vested in any such country".
• Where beneficial ownership is measured: at the level of the investor entity incorporated outside the land-border countries. "Beneficial owner" has the PMLA meaning and is determined under Rule 9(3) of the PML (Maintenance of Records) Rules, 2005.
• When it is "vested" in a land-border country: land-border citizens or entities, "individually or cumulatively", hold rights (A) above the Rule 9(3) threshold over the investor, (B) giving control over the investor, or (C) giving "ultimate effective control over the Investee entity in any manner".
• The thresholds in Rule 9(3): more than 10% of shares, capital or profits for a company; more than 10% of capital or profits for a partnership; more than 15% for an unincorporated association or body of individuals; for a trust, beneficiaries with 10% or more. "Control" for a company includes the right to appoint a majority of directors or to control management or policy decisions.
• Below the threshold, but some land-border ownership: the investment may use the automatic route (sector permitting) but is "subject to reporting requirements". Under Annexure VII of the DPIIT SOP of 4 May 2026, the Indian investee or resident transferor must file the prescribed information with DPIIT on the portal before the remittance. If no money is remitted, the filing is due before the shares are issued or transferred.
• Later transfers: any direct or indirect transfer that brings the beneficial ownership within the rule needs prior Government approval.
• Carve-out: a multilateral bank or fund of which India is a member is not treated as an entity of any country.

Worked example: a Singapore fund with Chinese limited partners

A Singapore limited partnership fund plans to invest ₹40 crore for 18% of an Indian SaaS company. SaaS is not listed in Schedule I, so the sector is 100% automatic. The land-border analysis runs at the fund's level, because the fund is the investor entity incorporated outside the land-border countries:

• Case 1: one Chinese citizen LP is entitled to 8% of the fund's capital and profits and has no board, investment-committee or veto rights. That is not more than 10%, with no control, so the deal stays on the automatic route. The Indian company must file the DPIIT report before the money arrives, then FC-GPR within 30 days of allotment.
• Case 2: two unconnected Chinese LPs hold 6% each. The test counts land-border holders "individually or cumulatively", so this is 12%, above the threshold. The deal needs government approval.
• Case 3: the Chinese LP holds only 5% but, through a side letter, can veto the fund's investment decisions. For a partnership, the PML Rules treat the right to control management or policy decisions as control, so a veto of this kind is likely to be treated as control over the investor, and the deal goes on the government route whatever the percentage.

In practice, the analysis turns on the fund documents (LPA, side letters, investment-committee charter), not on a cap table. The SOP asks for exactly these details.

The 60-day window for listed manufacturing activities

Proposals that still need approval get a firm decision date in specified manufacturing. The Cabinet decision covers capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer, and the SOP's Schedule II adds advanced battery components, rare-earth permanent magnets and rare-earth processing. The decision must be conveyed within 60 days of filing where two conditions hold. The land-border investors, individually or together, hold up to 49% of the capital or voting rights. Majority shareholding and control stay "at all times" with resident Indian citizens or Indian entities owned and controlled by them (SOP Annexure VII, para 7).

Which countries, and what about Hong Kong?

Neither the Press Note nor the NDI Rules list the countries. They say "a country which shares land border with India". The Ministry of Home Affairs lists India's land borders as those with Bangladesh, Pakistan, China, Nepal, Bhutan, Myanmar and Afghanistan. Hong Kong is not named anywhere in the 2020 or 2026 texts, and we have found no primary source that settles whether an entity incorporated there is an entity "of" China for this rule. We therefore do not assume either answer. We trace the chain to the citizenship of the natural persons and the controllers, apply the test to them, and where the answer is genuinely open we seek clarification from DPIIT before money moves. The Master Direction names DPIIT as the place to send sector clarifications. See our Hong Kong FEMA page and Press Note 3 for Chinese investors.

How does government approval work on the FIF portal, and how long does it take?

You file online on the Foreign Investment Facilitation (FIF)/NSWS portal. DPIIT assigns the proposal to the administrative ministry, which consults RBI, MEA and, where security clearance applies, MHA. The SOP allows 12 weeks from filing to decision, not counting the time you take to answer queries. The timeline in Annexure V of the SOP dated 4 May 2026 breaks down as follows:

A few more points from the SOP. Security clearance from MHA is needed for broadcasting, telecom, space, private security agencies, defence, civil aviation and titanium-mineral mining, and for every land-border proposal. MEA comments on all land-border proposals. A ministry that proposes to reject or add conditions needs DPIIT concurrence, which takes two more weeks. Proposals with total foreign equity inflow above ₹5,000 crore go to the Cabinet Committee on Economic Affairs (FDI Policy para 4.1.5). An application can be closed for missing documents after one week and two seven-day reminders. Closure is not rejection, but you start again. For a company not yet incorporated, the certificate of incorporation, MoA and AoA must follow within 60 days of approval. Because an application can be closed for incomplete documents, we build the beneficial-ownership section first.

Which instrument should a foreign investor use: equity, CCPS, CCDs or convertible notes?

Under FEMA, only equity shares and instruments that are fully, compulsorily and mandatorily convertible (CCPS and CCDs), plus share warrants, count as equity. Optionally convertible or non-convertible debentures and preference shares are debt, governed by the ECB framework instead.

• Equity shares: the default, reported in FC-GPR. Partly paid shares are allowed: 25% upfront, fully called within 12 months (unless a monitoring agency is appointed).
• CCPS and CCDs: the usual VC and PE instruments. The price or conversion formula must be fixed upfront. The conversion price cannot be lower than fair value worked out at the time of issue. An optionality clause is allowed after a minimum lock-in of one year (or the sector's own lock-in, if longer), "without any option or right to exit at an assured price".
• Convertible notes: only for DPIIT-recognised startups, at ₹25 lakh or more per investor in a single tranche. They are convertible or repayable within 10 years, reported in Form CN within 30 days. Citizens and entities of Pakistan and Bangladesh cannot subscribe. See convertible notes under FEMA.
• Debt from the parent is not FDI. It is an external commercial borrowing. See ECB rules for parent lending.

How are shares priced for a foreign investor?

Shares issued or transferred to a non-resident cannot be priced below fair value, and shares a non-resident sells to a resident cannot be priced above it. For an unlisted company, fair value comes from any internationally accepted methodology on an arm's length basis, certified by a chartered accountant, a SEBI-registered merchant banker or a practising cost accountant. The valuation certificate must be no more than 90 days old on the date of investment. Listed companies follow SEBI pricing. A swap of shares needs a SEBI-registered merchant banker or a regulated investment banker abroad, whatever the amount. Subscription to the MoA at incorporation is at face value. The investor may not be guaranteed an exit price (Master Direction, para 8). Full detail: FDI pricing guidelines and valuation methods.

What filings follow an FDI investment, and when?

The Indian company files Form FC-GPR within 30 days of issuing shares, and the FLA return every year by 15 July. Resident-to-non-resident share transfers go in Form FC-TRS within 60 days. These deadlines are in regulation 4 of FEMA 395/2019 and are filed through the AD bank on RBI's FIRMS portal.

Also remember the 60-day allotment window: shares must be issued within 60 days of receiving the money, or it must be refunded within the next 15 days. Late filings can be regularised by paying a late submission fee. Anything beyond that is a contravention. Step-by-step guides: FC-GPR, FC-TRS, FLA. Ongoing filings can sit with our FEMA and RBI compliance service.

What are the downstream investment rules?

When an Indian company that is not owned and controlled by resident Indian citizens invests in another Indian company, that investment is indirect foreign investment. It must meet the same entry route, caps, pricing and conditions as direct FDI. "Ownership" means beneficial holding of more than 50% of the equity. "Control" means the right to appoint a majority of directors or to control management or policy decisions. The investing company must bring the funds from abroad or use internal accruals, not domestic borrowings. It must file Form DI and notify DPIIT within 30 days, and it needs an annual certificate from its statutory auditor, mentioned in the directors' report (Master Direction, para 9). NRI and OCI investment on a non-repatriation basis is treated as domestic investment and is left out of this calculation. See FOCC and downstream investment rules.

What changed in India's FDI rules in 2025 and 2026?

Six changes since April 2025 matter to foreign investors: the land-border reform, 100% automatic FDI in insurance, a wider portfolio route for individuals, an export-only opening for inventory e-commerce, the bonus-share clarification, and new FEMA regulations on guarantees and cross-border mergers.

• 7 April 2025, bonus shares in prohibited sectors: Press Note 2 (2025) allows bonus issues to existing non-resident shareholders if their shareholding pattern does not change.
• 9 February and 2 May 2026, insurance: Press Note 1 (2026) and the NDI (Second Amendment) Rules, 2026 (S.O. 2186(E)) allow 100% FDI under the automatic route in insurance companies and intermediaries, subject to IRDAI verification, and 20% in LIC.
• 15 March and 1–2 May 2026, land-border investors: Press Note 2 (2026) and S.O. 2174(E), explained above. The DPIIT SOP of 4 May 2026 adds the prior-reporting format and the 60-day window.
• July 2026, e-commerce exports: Press Note 3 (2026 Series) allows an inventory-based e-commerce model exclusively for exporting goods manufactured or produced in India. It takes effect from the date of the matching FEMA notification, so check that the NDI Rules have been amended before relying on it.
• June 2026, portfolio route for individuals: the NDI (Third Amendment) Rules, 2026 (S.O. 3030(E), 12 June 2026), with FEMA 395 amended to match by FEMA 395(4)/2026-RB of 13 June 2026, now let any individual person resident outside India, not only NRIs and OCIs, buy listed Indian shares on a repatriation basis. The individual limit is less than 10% and the aggregate limit 24%. Transfers that hand control of a listed company to a land-border buyer need approval. See FEMA rules for NRIs.
• Other FEMA regulations: the FEM (Guarantees) Regulations, 2026 (FEMA 8(R)/2026-RB, 6 January 2026) replace the 2000 regulations for guarantees between residents and non-residents, relevant when a foreign parent guarantees its Indian subsidiary's borrowing (our note). The Cross Border Merger (Amendment) Regulations, 2026 (29 May 2026) replace "NCLT" with "Competent Authority" for merger approvals.

A running log is on our FDI policy changelog.

Can NRIs and OCIs invest outside the FDI caps?

Yes, in effect. Investment by NRIs and OCIs on a non-repatriation basis under Schedule IV of the NDI Rules is "deemed to be domestic investment at par with the investment made by residents", so it is not counted as foreign investment. The price is that the capital and gains are not freely repatriable, and the pricing guidelines do not apply. On a repatriation basis, an NRI is a foreign investor like any other, with one sector exception: scheduled airlines allow NRIs 100% under the automatic route. NRIs and OCIs can also contribute to LLPs and buy convertible notes on a non-repatriation basis.

Country notes for US, UK, Singapore, UAE, Canadian and Australian investors

• United States, United Kingdom, Canada, Australia: none is a land-border country, so the only land-border question is who sits in your own chain. A US or UK parent with a Chinese-citizen shareholder above the PML threshold is caught, even though the parent is American or British.
• Singapore and UAE holding and fund vehicles: these are the structures most often affected by the 2026 LP-level analysis, because their investor bases are international. Expect to disclose GPs, managers and investment-committee members.
• Tax is separate from FDI eligibility: the treaty rate on dividends and capital gains depends on your country. Claiming it needs a tax residency certificate and Form 41 (formerly Form 10F). See our DTAA guide and dividend repatriation.
• First-time subsidiaries: every Indian company needs at least one director who has stayed in India for 182 days or more in the financial year (Companies Act, section 149(3)). See resident director service and foreign subsidiary registration.

What happens if an investment breaks the FDI rules?

An investment that breaks a cap, route or condition is a FEMA contravention. The penalty is up to three times the sum involved where it can be quantified, up to ₹2 lakh where it cannot, and up to ₹5,000 a day while the contravention continues. These amounts are in section 13(1) of FEMA. Contraventions can be compounded under section 15 of FEMA; the DPIIT SOP points ministries to RBI's compounding directions. Compounding, and any unwinding of shares, takes far longer than getting the route right first. See FEMA penalties and compounding.

Common mistakes we see

1. Using the 2020 Press Note 3 test in 2026. Some investors still treat any trace of a land-border LP as fatal. Others apply the 10% relief only to manufacturing. The threshold test in Rule 6(a) applies across sectors. The 60-day window is what is limited to listed manufacturing activities.
2. Forgetting the DPIIT pre-remittance report. A below-threshold land-border holding still needs the report before the money is wired.
3. Adding holdings one at a time. The test is "individually or cumulatively". Two 6% LPs make 12%.
4. Ignoring control rights. A veto or any other right that gives control of the investor, or ultimate effective control of the Indian company, puts even a 3% holder on the government route.
5. Using optionally convertible instruments. They are debt under FEMA, not FDI.
6. A stale valuation. A certificate more than 90 days old at the date of investment fails the pricing rule.
7. Missing the 60-day allotment window. Money held longer must be refunded.
8. Getting inventory e-commerce wrong. A marketplace that controls a vendor's inventory (more than 25% of the vendor's purchases from the marketplace group) is treated as inventory-based, and FDI is not permitted there, apart from the export-only route in Press Note 3 (2026) once it is notified under FEMA.
9. Relying on the automatic route for unregulated financial services. These need government approval.

How long does FDI advisory take?

For an automatic-route deal with a clean ownership chain, the written advice usually takes one to two weeks, most of it spent waiting for the structure chart and the valuer. A fund with a land-border analysis adds a week or two, depending on how quickly the fund documents arrive. Government-route deals then follow the SOP clock: 12 weeks, or 60 days for qualifying land-border manufacturing proposals, excluding query time. If you are also setting up the company, see India entry strategy. If you are raising a round into an existing Indian company, see fundraising compliance.