Direct Tax Services
Audit
Consulting
ESG Advisory
Indirect Tax Services
RBI Services
SEBI Services
IRDA Registration
FEMA Advisory
Compliances
IBC Services
VCFO Services
Developed
Developing
BOTs
American
EU-1
EU-2
South East
South Asia
Gulf
ME
Select Your Location
In India, foreign Investment is governed by the FDI Policy[1] which is announced by the Government of India and the provisions of the Foreign Exchange Management Act (FEMA) Act 1999. Foreign Direct Investment (FDI) has been an important source of funds for those countries where capital is not readily available. Read the FEMA/RBI Compliances Checklist
Generally, FDI is allowed in two forms –
It refers to an investment made by the non-resident entity or a person resident outside India in Capital of Indian Company.
In India, investment through FDI can be done either under –
Table of Contents
In FDI, every non-resident entity is allowed to invest in India either under Automatic or Government Approval Route, except in prohibited sectors*. However, Individuals or entities of Bangladesh and Pakistan can invest only under Government Route.
However, it limits the individual holding of an FII/FPI below 10% of the capital of the company and the aggregate limit of investment to 24% of the capital of the company.
Prohibited Sector for Investment in India are mentioned below-
Read, Also: Foreign Investments Criteria for NBFCs: An Overview.
The eligibility of FDI in resident entities are-
Restrictions – An NRI or PIO is not allowed to invest in a firm or proprietorship concerned engaged in any agricultural/plantation activities or real estate business (i.e. dealing in land and immovable property to earn a profit or earning income therefrom) or engaged in the Print Media.
FDI in Trusts-FDI in Trusts other than VCF is not permitted.
FDI in Small sector Industries – The foreign investors except for the prohibited sectors, are allowed to invest in small-scale industrial unit operating in various sectors. Provided, the investment is limited to 24% of the paid-up capital of an SSI unit.
SSI units have to comply with the following conditions to issue more than 24% to foreign investors,
As per Micro, Small and Medium Enterprises Development Act, 2006, The Small-Scale Industries has to give up its status as SSI, i.e. exceeding prescribed limits of investment in plant and machinery.
Various documents are also required for the FDI Proposal –
Indirect types of Foreign Investment –
There are additional types of indirect foreign investments to be considered:
Recommended Post: Protection of Exit Clauses for Foreign Investors under FEMA.
Training audit refers to a fact-based assessment to know whether the work the Learning & De...
The entertainment industry works and flourishes on human emotions. The entertainment sector com...
The Securities Exchange Board of India (SEBI) has issued a circular on the redressal of investo...
There has been a revolutionary transformation in the world of finance with the rise of cryptocu...
The World Trade Organisation defines e-commerce as ‘distribution, production, sale, marketing...
Are you human?: 2 + 2 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
The Remitting Investors should ensure that (for FDI) – Funds have to flow only from the investors’ bank accoun...
07 Sep, 2019
To provide relief to the FPI (Foreign Portfolio Investor), SEBI came out with the revised KYC norms for FPIs &...
25 Jun, 2023
Chat on Whatsapp
Hey I'm Suman. Let's Talk!