Last blog was about eligibility, but what next?
Do you know how much amount you can invest in India. No, then read below to get answer of this question.
Do you remember in our blog ENTRY ROUTES FOR INVESTMENT IN INDIA, I have mentioned some sectoral Cap. Every Non Resident Investor who are eligible to Invest in India needs to identify in which sector he wants to Invest. After identifying the business for your Investment, you need to follow the guideline issued by Indian Government in this respect. Indian Government has laid down the maximum limit for Foreign Investment in each line of business activity in their Foreign Direct Investment Policy.
But How will you calculate that limit?
Guidelines for Calculation of Total Foreign Investment in Indian Company. (Direct or Indirect)
There may be two kind of Investment in Indian Entities: –
a) Direct Foreign Investment: – All Investment made directly by Non Resident entities into the Indian company will be counted as Direct Foreign Investment
b) Indirect Foreign Investment: – If investment made by Indian company (having Foreign investment) in another Indian company then it will be known as Indirect Foreign Investment. The entire investment by the investing company into other Indian Company would be considered for the purpose of calculation of foreign indirect investment.
The total foreign investment would be the sum total of direct and indirect foreign
investment. The above methodology of calculation would apply at every stage of investment in Indian companies and thus to each and every Indian company.
Additional Conditions to be followed: –
A) The full details about the foreign investment including ownership details etc. in Indian company(s) and information about the control of the company(s) would be furnished by the Company(s) to the Government of India at the time of seeking approval.
B) If there is any agreement between the shareholders & Foreign investor in respect of voting rights or management or appointment of board of directors and Foreign Investment needs government approval, then such agreement must disclose before the approving authority.
c) In all the sectors attracting sectoral caps , the balance equity (beyond foreign investment cap) must be held by Indian citizens or Indian entities.
d) If a declaration is made by persons as per section 187C of the Indian Companies Act about a beneficial interest being held by a non resident entity, then even though the investment may be made by a resident Indian citizen, the same shall be counted as foreign investment.
The above mentioned policy and methodology would be applicable for determining the total
foreign investment in all sectors, except in sectors where it is specified in a statute or rule there
under for eg; – Insurance sector.
I hope it will help you to assess how much amount you can invest and in which sector.
Keep following us. More write up to come on this.
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