Entry Routes for Investment In India

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  • Investment Route

Investment can be made by Non Resident in the capital of Resident through two routes

a) Automatic Route

b) Government Route

In Automatic route there is no need to take permission from Government of India (GoI) or Reserve Bank of India (RBI), on the Contrary under government route prior approval from either RBI or GoI through Foreign Investment Promotion Board is required. Policy for the Government route is laid down in FDI Policy from time to time after consulting with FIPB & Department of Economic Affairs (DEA), Ministry of Finance.

Investment made by Non Resident can be either in Shares (Fully Paid), Debenture (Mandatorily Convertible) or Preference Shares (Mandatorily Convertible) of the Indian Company. Maximum Investment can be made by Non-resident to the extent of total percentage of total capital mentioned in FDI Policy from time to time. As per latest FDI Policy there are sectors where Investment is prohibited and there are sectors where Investment are allowed subject to restriction or condition or caps.

  • Entry Condition on Investment

Investment in sectors are allowed as per the FDI Policy laid down time to time. Restriction or condition mentioned in Policy is applicable to Non Resident making investment in Capital of a Resident entity only. Condition or restriction mentioned in policy may include norms for minimum capitalization, Lock in Period etc. Table for Latest FDI Policy is attached to this article.

As per Foreign Exchange Management Act,

Resident entities or Person resident in India are those entities: –

Individual: – if he stays more than 182 days during the preceding financial year or

Body Corporate: – If it is registered in India or

Any office, branch or agency in India owned by Person resident outside India (PROI) or

Any office branch or agency outside India owned by Person resident in India (PRI)

Non-residents or Person resident outside India means a person who is not resident in India

  • Other Conditions on Investment beside Entry Condition

a) Non Resident Investor needs to conform the Central Government policies in respect of National Security/Interest.

b) Non Resident Investors needs to conform the State Government policies or legislation, if any in respect of sector in which they are going to invest.

c) Non Resident Investors needs to conform to all relevant sectoral law, regulations, rules etc.

Prohibited Sectors for FDI

FDI is prohibited in following sector: –

a) Lottery Business including Government /private lottery, online lotteries, etc.

b) Gambling and betting including casinos etc.

c) Chit funds

d) Nidhi company

e) Trading in Transferable Development Rights (TDRs)

f)  Real Estate Business or Construction of Farm Houses

g) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes

h) Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).

Permitted Sectors for FDI along with Route and Maximum Cap

S.NO.

Sector

Route

Maximum Cap

1 Agriculture Automatic Route 100%
2 Tea Plantation Government Route 100%
3 Mining Automatic Route 100%
4 Petroleum and Natural Gas Automatic/Government 49-100%
5 Manufacturing Refer MSE Act Not Specified
6 Defense Government Route 26%
7 Service Sector Automatic/Government 26-100%
8 Print Media Government Route 26-100%
9 Civil Aviation Automatic Route 49-100%
10 Courier Services Automatic Route 100%
11 Construction Development Automatic Route 100%
12 Industrial Park Automatic Route 100%
13 Satellites Establishment & Operation Government Route 74%
14 Private Security Agencies Government Route 49%
15 Telecom Services Automatic/Government 49-100%
16 Trading Automatic/Government 49-100%
17 Asset Reconstruction Automatic/Government 49-100%
18 Banking- Private Sector Automatic/Government 49-74%
19 Banking- Public Sector Government Route 20%
20 Commodity Exchanges Automatic Route 23-49%
21 Credit Information Automatic Route 74%
22 Infrastructure Company in securities market Automatic Route 23-49%
23 Insurance Automatic Route 26%
24 Non-Banking Financial Companies Automatic Route 100%
25 Pharmaceuticals Automatic/Government 100%
26 Power Exchange Automatic Route 49%

Those sectors which are not mentioned above is 100% allowed under automatic route. For specific condition mentioned in FDI Policy related to above mentioned sector please refer Latest FDI Policy or contact us to know more about this subject.

Please leave your comments, Your comments are valuable to us.

Rahul Singla

Director

SWAN FinTech Private Limited

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One thought on “Entry Routes for Investment In India

  1. Pingback: GOING TO INVEST IN INDIA ? – Get Your Answer here – I | Welcome To Swan FinTech

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