Investment into India (FDI)

INVESTMENT IN INDIA

During the past few years, it is observed that investment into India has been a major non- debt financial force behind the increase of the Indian Economy. FDI in India is done through a wide range of industries and it reflects the remarkable scope, faith and trust that foreign investors have in the Indian economy.

To ensure an uninterrupted inflow of investment, the Indian government has created conducive trade atmosphere and effective business policy measures in place. This strategy is reflected in the steps taken by the government, such as easing out the restrictions levied on sectors like stock exchanges, power exchanges, defence, telecommunications, aviation etc.

ENTRY ROUTES FOR INVESTMENT

Investments can be made by non-residents in the equity shares/fully, compulsorily and mandatorily convertible debentures/fully, compulsorily and mandatorily convertible preference shares of an Indian company, through the following routes:
  • Automatic Route
  • Government Route
Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment.

The investment activities which are not covered under the automatic route require prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance. The application has to be filed in the Form FC-IL and has to address to the FIPB. Interestingly, the Board has also allowed and started entertaining such applications which are written in plain paper with the only conditions that it should carry all the relevant details. And another most important thing is that no fees are to be paid to the Board. The main objective behind these is to make the process hassle free so that the foreigner can easily thrive into the Indian Market which would result into the increase of Indian Economy.

Subsequently, The Indian companies having the foreign investment approved through FIPB route do not require any further clearance from the Reserve Bank of India for receiving inward remittance and for the issue of shares to the non-resident investors.

ENTITIES WHICH ARE ELIGIBLE FOR INVESTMENT

  1. FDI in an Indian Company
    • Indian companies can issue capital against FDI.
  2. FDI in Partnership Firm/Proprietary Concern
    • A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India can invest in the capital of a firm or a proprietary concern in India on non repatriation basis provided;
      a)Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO
      b)Account maintained with Authorized Dealers/Authorized banks.
      c)The firm or proprietary concern is not engaged in any agricultural/plantation or real estate business or print media sector.
      d)Amount invested shall not be eligible for repatriation outside India.
    • Investments with repatriation option: NRIs/PIO may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation option. The application will be decided in consultation with the Government of India.
    • Investment by non-residents other than NRIs/PIO: A person resident outside India other than NRIs/PIO may make an application and seek prior approval of Reserve Bank for making investment in the capital of a firm or a proprietorship concern or any association of persons in India. The application will be decided in consultation with the Government of India.
    • Restrictions: An NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business or print media.
  3. FDI in Trusts

    FDI is not permitted in Trusts other than in ‘VCF’ registered and regulated by SEBI and ‘Investment vehicle’.
  4. FDI in Limited Liability Partnerships (LLPs)

    FDI in LLPs is permitted subject to the following conditions:
    • FDI is permitted under the automatic route in Limited Liability Partnership (LLPs) operating in sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance conditions.
    • An Indian company or an LLP, having foreign investment, is also permitted to make downstream investment in another company or LLP in sectors in which 100% FDI is allowed under the automatic route and there are no FDI-linked performance conditions.
    • FDI in LLP is subject to the compliance of the conditions of LLP Act, 2008. 

PROHIBITED SECTORS IN FDI

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

b) Gambling and Betting including casinos etc.

c) Chit funds: As per Chit Fund Act, 1982, Chit means a transaction whether called chit, chit fund, chitty, kuree or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount". 

d) Nidhi company: These companies belong to the non-banking Indian Finance sector and their main business is borrowing and lending money only between their members. They are also known as Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company.

e) Trading in Transferable Development Rights (TDRs)

a) Real Estate Business or Construction of Farm Houses ‘Real estate business’ shall not include development of townships, construction of residential /commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014.

b) Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.

c) Activities/sectors not open to private sector investment e.g. (I) Atomic Energy and (II) Railway operations (other than permitted activities)

d) Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.

 

PERMITTED SECTORS OF INVESTMENTS

AGRICULTURE SECTOR

                               

Sector

% of  Equity/ FDI Cap

Entry Route

a) Floriculture,  Horticulture, Apiculture and Cultivation of Vegetables & Mushrooms under  controlled conditions;

b) Development  and Production of seeds and planting material;

c) Animal  Husbandry (including breeding of dogs), Pisciculture, Aquaculture, under controlled  conditions; and   

d) Services  related to agro and allied sectors

100Automatic
Besides the above, FDI is not allowed in any other agricultural sector/activity.

PLANTATION SECTOR

                               

Sector

% of  Equity/ FDI Cap

Entry Route

(i) Tea sector  including tea plantations

     

(ii) Coffee  plantations

     

(iii) Rubber  plantations

     

(iv) Cardamom  plantations

   

(v) Palm oil  tree plantations

   

(vi) Olive oil  tree plantations

100Automatic

*Besides the above, FDI is not allowed in any other plantation sector/activity. 
*Prior approval of the State Government concerned is required in case of any future land use change.

MINING AND PETROLEUM & NATURAL GAS

                               

Sector

% of  Equity/ FDI Cap

Entry Route

Mining and  Exploration of metal and non-metal ores including diamond, gold, silver and  precious ores but excluding titanium bearing minerals and its ores; subject to  the Mines and Minerals (Development & Regulation) Act, 1957.

     

Coal &  Lignite

     

(1) Coal &  Lignite mining for captive consumption by power projects, iron & steel and  cement units and other eligible activities permitted under and subject to the  provisions of Coal Mines (Nationalization) Act, 1973.

     

 (2) Setting up coal processing plants like  washeries subject to the condition that the company shall not do coal mining  and shall not sell washed coal or sized coal from its coal processing plants in  the open market and shall supply the washed or sized coal to those parties who  are supplying raw coal to coal processing plants for washing or sizing.

     

Mining and  mineral separation of titanium bearing minerals and ores, its value addition  and integrated activities

     

Mining and  mineral separation of titanium bearing minerals & ores, its value addition  and integrated activities subject to sectoral regulations and the Mines and  Minerals (Development and Regulation Act 1957)

   

 

100Automatic

PETROLEUM & NATURAL GAS

                                               

Sector

% of  Equity/ FDI Cap

Entry Route

Exploration activities of oil and natural gas  fields, infrastructure related to marketing of petroleum products and natural  gas, marketing of natural gas and petroleum products, petroleum product  pipelines, natural gas/pipelines, LNG Regasification infrastructure, market  study and formulation and Petroleum refining in the private sector, subject to  the existing sectoral policy and regulatory framework in the oil marketing sector  and the policy of the Government on private participation in exploration of oil  and the discovered fields of national oil companies. 100Automatic

Petroleum  refining by the Public Sector Undertakings (PSU), without any disinvestment or  dilution of domestic equity in the existing PSUs.

49Automatic

DEFENCE

                               

Sector

% of  Equity/ FDI Cap

Entry Route

Defence Industry subject to Industrial license  under the Industries (Development & Regulation) Act, 195149

Automatic  up to 49%

     

Above 49% under

   

Government route on case to case basis, wherever  it is likely to result in access to modern and ‘stateof-art’ technology in the  country

BROADCASTING SERVICES

                                                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

 

 

 (1)Teleports(setting up of up-linking    HUBs/Teleports);

       

(2)Direct to Home (DTH);

     

(3)Cable Networks (Multi System operators    (MSOs) operating at National or State or District level and undertaking    upgradation of networks towards digitalization and addressability);

     

(4)Mobile TV;

     

(5)Headend-in-the Sky Broadcasting Service(HITS)

100%

AUTOMATIC

Cable Networks (Other    MSOs not undertaking upgradation of networks towards digitalization and addressability    and Local Cable Operators (LCOs))

Infusion of fresh foreign investment, beyond 49% in a    company not seeking license/permission from sectoral Ministry, resulting in    change in the ownership pattern or transfer of stake by existing investor to    new foreign investor, will require FIPB approval

NON-BANKING  FINANCE COMPANIES (NBFC)

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Foreign    investment in NBFC is allowed under the automatic route in only the following    activities:

     

(i)Merchant    Banking

     

(ii) Under    Writing

     

(iii)    Portfolio Management Services

     

 (iv) Investment Advisory Services

     

(v) Financial    Consultancy

     

 (vi) Stock Broking

     

(vii)Asset    Management

     

(viii) Venture    Capital

     

(ix) Custodian    Services

     

(x) Factoring

     

(xi) Credit    Rating Agencies

     

(xii)Leasing    & Finance

     

(xiii) Housing    Finance

     

 (xiv) Forex Broking

     

(xv) Credit    Card Business

     

(xvi) Money    Changing Business

     

 (xvii) Micro Credit

     

 (xviii) Rural Credit

 

       

100

 

       

AUTOMATIC

 

WHITE  LABEL ATM OPERATIONS

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

White Label    ATM Operations

 

       

100

 

       

AUTOMATIC

POWER  EXCHANGES

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Power    Exchanges registered under the Central Electricity Regulatory Commission    (Power Market) Regulations, 2010.

 

       

49

 

       

AUTOMATIC

PENSION  SECTOR

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Pension Sector

 

       

100

 

       

AUTOMATIC

INSURANCE  SECTOR

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

(i) Insurance    Company

     

(ii) Insurance    Brokers

     

(iii) Third    Party Administrators

     

(iv) Surveyors    and Loss Assessors

     

(v)Other    Insurance Intermediaries appointed under the provisions of Insurance    Regulatory and Development Authority Act, 1999 (41 of 1999)

     

 

 

       

49

 

       

AUTOMATIC

INFRASTRUCTURE  COMPANY IN THE SECURITIES MARKET

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Infrastructure    companies in Securities Markets, namely, stock exchanges, commodity    exchanges, depositories and clearing corporations, in compliance with SEBI    Regulations

     

 

 

       

49

 

       

AUTOMATIC

CREDIT  INFORMATION COMPANIES (CIC)

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Credit Information Companies

 

       

100

 

       

AUTOMATIC

BANKING-  PUBLIC SECTOR

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Banking-    Public Sector subject to Banking Companies (Acquisition & Transfer of    Undertakings) Acts 1970/80. This ceiling (20%) is also applicable to the    State Bank of India and its associate Banks.

 

       

20

 

       

GOVERNMENT

BANKING-  PRIVATE SECTOR

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Banking-    Private Sector

     

 

 

       

74

 

       

Automatic    up to 49%

     

Government    route beyond 49% and up to 74%.

ASSET  RECONSTRUCTION COMPANIES

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

‘Asset    Reconstruction Company’ (ARC) means a company registered with the Reserve    Bank of India under Section 3 of the Securitisation and Reconstruction of    Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI    Act).

     

 

 

       

100

 

       

AUTOMATIC

RAILWAY  INFRASTRUCTURE

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Construction,    operation and maintenance of the following:
          (i) Suburban    corridor projects through PPP, (ii) High speed train projects,
          (iii)    Dedicated freight lines,
          (iv) Rolling    stock including train sets, and locomotives/coaches manufacturing and    maintenance facilities,
          (v) Railway    Electrification,
          (vi) Signaling    systems,
          (vii) Freight    terminals,
          (viii)    Passenger terminals,
           (ix) Infrastructure in industrial park    pertaining to railway line/sidings including electrified railway lines and    connectivities to main railway line and
          (x) Mass Rapid    Transport Systems.

     

 

 

       

100

 

       

AUTOMATIC

DUTY  FREE SHOPS

                                       

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Duty Free    Shops

 

       

100

 

       

AUTOMATIC

 

       

(i) Duty Free Shops would mean shops set up in custom bonded area at    International Airports/International Seaports and Land Custom Stations where    there is transit of international passengers.

     

(ii) Foreign investment in Duty Free Shops is subject to compliance of    conditions stipulated under the Customs Act, 1962 and other laws, rules and    regulations.

     

(iii) Duty Free Shop entity shall not engage into any retail trading    activity in the Domestic Tariff Area of the country.

MULTI  BRAND RETAIL TRADING

                                       

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Multi Brand    Retail Trading

 

       

51

 

       

GOVERNMENT

 

       

(i) Fresh agricultural produce, including fruits, vegetables, flowers,    grains, pulses, fresh poultry, fishery and meat products, may be unbranded.

     

(ii) Minimum amount to be brought in, as FDI, by the foreign investor,    would be US $ 100 million.

     

(iii) Retail trading, in any form, by means of e-commerce, would not be    permissible, for companies with FDI, engaged in the activity of multi-brand    retail trading.

SINGLE  BRAND RETAIL TRADING

                                       

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Single Brand    Retail Trading

 

       

100

 

       

Automatic    up to 49%

     

Government    route beyond 49%

 

E-COMMERCE  ACTIVITIES

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

E-Commerce    Activities

     

 

 

       

100

 

       

AUTOMATIC

TRADING

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Cash &    Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs)

 

       

100

 

       

AUTOMATIC

TELECOM  SERVICES

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Telecom    Services (including Telecom Infrastructure Providers Category-I)

     

All telecom    services including Telecom Infrastructure Providers Category-I, viz. Basic,    Cellular, United Access Services, Unified License (Access Services), Unified    License, National/International Long Distance, Commercial V-Sat, Public    Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications    Services (GMPCS), All types of ISP licenses, Voice Mail/Audiotex/UMS, Resale    of IPLC, Mobile Number Portability Services, Infrastructure Provider    Category-I (providing dark fibre, right of way, duct space, tower) except    Other Service Providers.

     

 

 

       

100

 

       

Automatic up to 49%

     

Government route beyond 49%

PRIVATE SECURITY AGENCIES

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Private Security Agencies

     

 

 

       

49

 

       

GOVERNMENT

* "Private  Security Agency" means a person or body of persons other than a government  agency, department or organisation engaged in the business of providing private  security services including training to private security guards or their  supervisor or providing private security guards to any industrial or business  undertaking or a company or any other person or property

SATELLITES-  ESTABLISHMENT AND OPERATION

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Satellites-    establishment and operation, subject to the sectoral guidelines of Department    of Space/ISRO

 

       

100

 

       

GOVERNMENT

INDUSTRIAL  PARKS

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Industrial Parks -new and existing

     

 

 

       

100

 

       

GOVERNMENT

CONSTRUCTION DEVELOPMENT: TOWNSHIPS, HOUSING,  BUILT-UP INFRASTRUCTURE

                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Construction-development    projects (which would include development of townships, construction of    residential/commercial premises, roads or bridges, hotels, resorts,    hospitals, educational institutions, recreational facilities, city and    regional level infrastructure, townships)

 

       

100

 

       

AUTOMATIC

CIVIL  AVIATION

Airport

                                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

(a) Greenfield    projects

 

       

100

 

       

AUTOMATIC

 

       

(b) Existing    projects

 

       

100

 

       

100% Automatic up to 74% Government route    beyond 74%

AIR TRANSPORT SERVICES

                                                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

(1) (a)    Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline
          (b) Regional    Air Transport Service Automatic

     

 

 

       

49

     

(100% for NRIs)

 

       

AUTOMATIC

     

100% Automatic up to 74% Government route    beyond 74%

 

       

(2)Non-Scheduled    Air Transport Service

 

       

100

 

       

AUTOMATIC

 

       

(3)Helicopter    services/seaplane services requiring DGCA approval

 

       

100

 

       

AUTOMATIC

OTHER SERVICES UNDER CIVIL AVIATION SECTOR

                                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

(1)Ground    Handling Services subject to sectoral regulations and security clearance 100%    Automatic

 

       

100

 

       

AUTOMATIC

 

       

(2)Maintenance    and Repair organizations; flying training institutes; and technical training    institutions.

 

       

100

 

       

AUTOMATIC

*Air Transport Services would include  Domestic Scheduled Passenger Airlines; Non-Scheduled Air Transport Services,  helicopter and seaplane services. 
*Foreign airlines are allowed to  participate in the equity of companies operating Cargo airlines, helicopter and  seaplane services, as per the limits and entry routes mentioned above.

PRINT  MEDIA

                                                                               

 

       

Sector

 

       

%    of Equity/ FDI Cap

 

       

Entry Route

 

       

Publishing of    newspaper and periodicals dealing with news and current affairs

 

       

26

 

       

GOVERNMENT

 

       

Publication of    Indian editions of foreign magazines dealing with news and current affairs

 

       

26

 

       

GOVERNMENT

 

       

Publishing/printing    of scientific and technical magazines/specialty journals/ periodicals,    subject to compliance with the legal framework as applicable and guidelines    issued in this regard from time to time by Ministry of Information and    Broadcasting

 

       

100

 

       

GOVERNMENT

 

       

Publication of    facsimile edition of foreign newspapers

 

       

100

 

       

GOVERNMENT

PROCEDURE  AFTER INVESTMENT MADE THROUGH AUTOMATIC ROUTE OR GOVERNMENT APPROVAL

I.On receipt of share application money

Within 30 days of receipt of share application , the Indian company is required to report to the Regional Office concerned of the Reserve Bank of India.
  • Name & address of the foreign investor or investors
  • Date of receipt of funds and the Rupee equivalent
  • Name and address of the authorised dealer through whom the funds have been received
  • Details of the Government approval, if any and
  • Know Your Customer (KYC) report on the non-resident investor from the overseas bank remitting the amount of consideration.

II. Upon issue of shares to non-resident investors:

Within 30 days from the date of issue of shares, a report in Form FC-GPR along with the following documents should be filed with the Regional Office concerned of the Reserve Bank of India: 
  1. Certificate from the Company Secretary of the company that the company has followed the procedure for issue of shares and the  investment is within the sectoral cap / statutory ceiling permissible under the Automatic Route of the Reserve Bank and it fulfils all the conditions laid down for investments under the Automatic Route
  2. Certificate from SEBI indicating the manner of arriving at the price of the shares issued to the persons resident outside India.

GUIDELINES  FOR TRANSFER OF EXISTING SHARES FROM NON-RESIDENTS TO RESIDENTS OR RESIDENTS TO  NON-RESIDENTS

Following are the two ways:

     
  1. Transfer of shares or fully and       mandatorily convertible debentures from Non-Resident to Resident:

The FEMA Regulations give specific  permission covering the following forms of transfer i.e. transfer by way of  sale and gift:

i. Transfer of shares or fully and  mandatorily convertible debentures by way of sale:

a) Any person resident  outside India (not being a Non Resident Indian (NRI) or an erstwhile Overseas  Corporate Bodies), can transfer by way of sale the shares or fully and  mandatorily convertible debentures to any person resident outside India or an NRI  may transfer by way of sale.

b) Any person resident  outside India may sell shares or fully and mandatorily convertible debenture  acquired in accordance with the FEMA Regulations.

ii. Transfer of shares or fully and  mandatorily convertible debentures by way of Gift:

     
  1. Any person resident outside India, (not  being a NRI or an erstwhile Overseas Corporate Bodies), can transfer by way of  gift the shares or fully and mandatorily convertible debentures to any person  resident outside India;
     
  1. An NRI may transfer by way of gift, the  shares or convertible debentures held by him to another NRI only, provided that  the person to whom the shares are being transferred has obtained prior  permission of the Central Government to acquire the shares.
     
  1. Any person resident outside India may  transfer share or fully and mandatorily convertible debentures to a person  resident in India by way of gift.

B. Transfer       of shares or fully and mandatorily convertible debentures from Resident to       Non-Resident:

A person resident  in India may transfer by way of sale to a person resident outside India any  shares or fully and mandatorily convertible debenture of an Indian company  whose activities (other than financial service sector activities) fall under  the Automatic Route of the FDI Scheme.

However, the above general permission is  not available where:

a) The transfer of shares or fully and  mandatorily convertible debentures falls within the provisions of SEBI.

b) The transfer of shares or fully and  mandatorily convertible debentures is at a price which does not adhere to the  pricing guidelines specified by the Reserve Bank of India from time to time

c) The activity of the Indian investee  company falls outside the automatic route and where Foreign Investment  Promotion Board (FIPB) approval has been obtained for the said transfer.

C. Transfer  of security by way of gift to a person resident outside India by a person  resident in India:

A person resident in India who proposes  to transfer security by way of gift to a person resident outside India shall  make an application to the Central Office of the Foreign Exchange Department, by  submitting the following information, such as:

     
  • Name  and address of the transferor and the proposed transferee
     
  • Relationship  between the transferor and the proposed transferee
     
  • Reasons  for making the gift.
     
  • In  case of Government dated securities, treasury bills and bonds, a certificate issued  by a Chartered Accountant.
     
  • Certificate  from the Indian company concerned certifying that the proposed transfer of  shares or convertible debentures, by way of gift, from resident to the non-resident  shall not breach the applicable sectoral cap.
     
  • The  transfer of security by way of gift may be permitted by the Reserve bank  provided:

i.    The donee is eligible to hold such security.

ii.   The gift does not exceed 5 per cent of the  paid up capital of the Indian company

iii.  The applicable sectoral cap/ foreign direct  investment limit in the Indian company is not breached.

vi.  Such other conditions as specified by the  Reserve Bank.

Guidelines  on issue and valuation of shares in case of existing companies:

     
  • The  price of shares issued to persons resident outside India under the Foreign  Direct Investment Scheme shall not be less than:
     
  • the price worked out in accordance       with the SEBI guidelines
     
  • the fair valuation of shares done by       a SEBI
     
  • the price as applicable to transfer       of shares from resident to non-resident as per the pricing guidelines by       the Reserve Bank

b)  The price of shares transferred from  resident to a non-resident and vice versa should be determined as under:

i.Transfer  of shares from a resident to a non-resident:

a) In case of listed shares, at a price which is not less than  the price at which a preferential allotment of shares would be made

b)  In case of unlisted shares at a price which is not less than  the fair value as per the Discount Free Cash Flow (DCF) Method to be determined  by a SEBI.

ii)Transfer of shares from a non-resident to a resident - The  price should not be more than the minimum price at which the transfer of shares  would have been made from a resident to a non-resident.

Documents to be submitted by a person  resident in India for transfer of shares to a person resident outside India by  way of gift:

     
         
    1. Name and address of the transferor        (donor) and the transferee (donee).
    2.    
    3. Relationship between the transferor        and the transferee.
    4.    
    5. Reasons for making the gift.
    6.    
    7. A declaration from the donee        accepting partly paid shares or warrants that donee is aware of the        liability.
    8.  

Investment  in sectors/activities under government approval route will be subject to  government approval where:

     
  1. An Indian company is being       established with foreign investment and is not owned by a resident entity       or
     
  1. An Indian company is being       established with foreign investment and is not controlled by a resident entity or
     
  1. The control of an existing Indian       company, currently owned or controlled by resident Indian citizens and       Indian companies, which are owned or controlled by resident Indian       citizens, will be/is being transferred/passed on to a non-resident entity       as a consequence of transfer of shares and/or fresh issue of shares to       non-resident entities through amalgamation, merger/demerger, acquisition       etc. or
     
  1. It is clarified that any equity       holding by a person resident outside India resulting from conversion of       any debt instrument under any arrangement shall be reckoned as a investment.
     
  1. Investment by NRIs under FEMA Regulations       will be deemed to be domestic investment at par with the investment made       by residents.
     
  1. A company, trust and partnership       firm incorporated outside India and owned and controlled by non-resident       Indians will be eligible for investments under FEMA regulations. 

For any further assistance, please  contact us at office@indialawoffices.com

 

 

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