- 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
|2||Tea Plantation||Government Route||100%|
|4||Petroleum and Natural Gas||Automatic/Government||49-100%|
|5||Manufacturing||Refer MSE Act||Not Specified|
|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%|
|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%|
|24||Non-Banking Financial Companies||Automatic Route||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.
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