Investment in India

India has in the recent years emerged as a favoured destination for investment in various sectors like Power generation, Heavy Machinery, Infrastructure project, Telecom, Communication, Software etc.

Various hurdles that existed in the economy earlier have been removed as a result of the winds of liberalization sweeping the country. India has now opened its doors to foreign investment in a major way.

Non-Resident Indians and Multinational Companies have to follow certain rules and regulations prior to investment.

Following pages cover up the broad areas under which our country is attracting Investment from foreign sources along with basic Governmental Guidelines on the procedure to facilitate investment in India.



As a General rule, a Non-Resident, as per the Income Tax Act, is a person whose total stay in India during the previous year doesn't exceed 59 days. It means his/ her stay in India between April 1st of previous year and March 31st of the current year, should not exceed 59 days. However in the following cases, his stay in India during the year should not exceed 181 days.
  1. A person who stays in India, not exceeding 364 days in 4 years.
  2. ii. A person who is a citizen of India and is leaving India for the purpose of employment.
  3. A person who is a citizen of India (a person of Indian origin.)
In short, a stay of 59 days or less will always make the person a Non-resident and a stay in excess of 181 days will make the person resident.

A person is of Indian origin if he or either of his parents or his grand parents, were born in undivided India.

Non-resident as per FERA applies to an Indian citizen who goes and stays abroad for Employment, Business, Vacation, Profession or any other purpose. In such circumstances, he would indicate his intention to stay outside India for an uncertain period.


Non-Resident Indians


In the case of Individuals, Non-Resident, under Income Tax Act, a person who controls and manages business outside India. If business is controlled and managed in India, they become Residents of India. Thus, when a part of control and management is in India, he/ she would be considered to be an Indian Resident. Under FERA, this has the same meaning as in Income Tax Act.

Now the government is proposing to replace the FERA with a new Foreign Exchange Management Act (FEMA), which would be consistent with the needs of modern economy. The Government will also bring an anti money laundering Bill along with the bill for FEMA as a protective measure.


PIO card Scheme-Person of Indian Origin


"Person of Indian origin" means a foreign citizen not being a citizen of Pakistan, Bangladesh and other countries as may be specified by the Central Government from time to time if,
  1. He/she at any time held a Indian passport; or;
  2. He/she or either of his/her parents or grand parents or great grand parents was born in and permanently resident in India as defined in the Government of India Act, 1935 and other territories that became part of India thereafter provided neither was at any time a citizens of any of the aforesaid countries; or;
  3. He/she is a spouse of a citizen of India or a person of Indian origin covered under 1 or 2 above.
  1. The Government has announced the launching of a People of Indian Origin Card, which will allow visa free entry to Indian origin people living abroad and give them all the rights enjoyed by Non-Resident Indians (NRIs) including purchase of non-agricultural land. 15 million people of Indian origin living abroad will benefit from the Card.
  2. The fee is US $ 1,000 and is valid for 20 years. However, it would not be issued to people of Indian origin living in Pakistan and Bangladesh.
  3. It does not give voting rights to the holders of the Card. It is eligible for the Indians who hold a foreign passport living abroad till the fourth generation.
  4. The PIO Card holder would be exempt from registration if his stay in India does not exceed 180 days. However, if the stay exceeds 180 days, the PIO Card holder will have to register within 30 days of the expiry of 180 days with the concerned Foreigners Registration Officer at district headquarters.
  5. The right to buy property would not be valid to Jammu & Kashmir. The PIO Card holder would be able to admit their children to educational institution in India under the NRI category. These include the IITs and Indian institutes of Management. They can also benefit from housing schemes of the Life Insurance Corporation, State Governments and other Government agencies.
  1. No requirement of visa to visit India
  2. No requirement to register with the Foreigners Registration Officer if continuous stay does not exceed 180 days. If continuous stay exceeds 180 days, then registration is required to be done within a period of 30 days of the expiry of 180 days
  3. Parity with Non-Resident Indians in respect of facilities available to the latter in economic, financial, educational fields, etc.
These facilities will include
  1. Acquisition, holding, transfer and disposal of immovable properties in India except of agricultural/plantation properties;
  2. Admission of children in educational institutions in India under the general category quota for NRIs- including medical/engineering college, IITs, IIMs etc.
  3. Various housing schemes of Life Insurance Corporation of India, State Governments and other Government agencies
  4. All future benefits that would be extended to NRIs would also be available to the PIO Card holders.
  5. However, they shall not enjoy political rights in India.

Wealth Tax


Wealth Tax is levied on all items of Net Non-Productive assets of an NRI at the rate of 1% of the amount by which such net wealth exceeds 15 lakhs.

The following are Non-Productive Assets:
  1. Residential property, which is not let out for a minimum period of 300 days in a year.
  2. Urban land.
  3. Motor cars
  4. Yachts, boats and aircraft
  5. Cash in hand in excess of 50000/-
Out of the above, the deductions are made towards a house or a part of house or a plot of land at the option of an NRI and any debts incurred for procuring the above non-productive assets.

The balance arrived at is called the net-productive assets on which wealth tax is leviable at 1% of the amount by which such wealth exceeds 15 lakhs.


As the Gift Tax Act has been abolished ,the NRI can gift any property to a person in India or to any other NRI.


When an NRI gives a gift to his/ her spouse or to their children, then the income earned out of the gifted asset shall be clubbed with the income of the person who has gifted it


Foreign Exchange Management Act-FEMA


This Act was introduced in 1999
  1. To facilitate external trade & payments, for promoting the orderly development and maintenance of foreign exchange market in India, this Act was introduced. It was put forth ,  to enact a law to consolidate and amend the existing law relating to the  foreign exchange. This Act is also meant for managing the foreign exchange as against restricting the dealings in foreign exchange and  for the smooth flow of foreign trade.
  2. The management of Foreign trade and investment will be done by the  RBI and the Government.

  1. The most important feature of the Act is that the definition of a resident and non-resident are almost in line with income tax Law. Therefore there is uniformity in defining the residential status of persons who are liable for income tax and who are entitled for foreign exchange related exemptions, relaxations and amenities.
  2. The next feature that a"Person"  defined  includes even artificial persons like Firm, Company, HUF etc., which are again coherent with income tax laws. Previously the RBI had powers to determine the residential status of artificial Persons and now the Act has been amended
  3. The Applicability of FEMA is more or less same as FERA.
  4. The Act empowers RBI to authorize any person to deal in Foreign exchange or in foreign securities. The RBI may specify the conditions in the authorisation and may also revoke the same in public interest in the cases of:
  1. Contravention of provisions of the Act
  2. Failure to comply with the conditions in the authorisation.
  1. Except the "Current Account" transactions,  other foreign exchange dealings and payments are still to some extent controlled. All "Capital Account" related transactions are not freely permitted unless specifically allowed under the Law. The restrictions as applicable for "Capital Account" transactions under FERA continue in FEMA also
  2. FEMA has brought in export of services also under regulation along the line of goods.
  3. FEMA has permitted all current Account transactions unless otherwise specifically prohibited by the RBI. The following are some of the Current Account transactions.
  1. Any payment in connection with foreign trade, other current business, services and short term Banking and credit facilities in the ordinary course of business.
  2. Any payment due as interest on loans and as net income from investments.
  3. Any remittances for living expenses of parents, spouse and children residing abroad.
  4. Any expenditure incurred in connection with foreign travel, education and medical care of parents, spouse and children.
  1. FEMA has not permitted Capital Account transactions unless otherwise provided by Law or unless specific permission is obtained from the RBI. Capital Account transactions are those which have the effect of altering the assets and liabilities. This  includes contingent liabilities  of a person resident in India, or the assets and liabilities of a person resident outside India.
The RBI has prohibited, restricted and regulated the following Capital Account transactions.
  1. Transfer or Issue of any foreign Security by a person resident in India.
  2. Transfer or Issue of any security by a person resident outside India.
  3. Transfer or Issue of any security or foreign security by any branch office or agency in India, of a person resident outside India.
  4. Any borrowing or lending in Foreign Exchange in whatever form or by whatever name.
  5. Any Borrowing or Lending in rupees, in whatever form or by whatever name between a person resident in India and a person resident outside India.
  6. Deposits between persons resident in India and persons resident outside India.
  7. Export, Import or holding of currency notes.
  8. Transfer of immovable property outside India, other than a lease not exceeding five years, by a person resident in India.
  9. Acquisition or transfer of immovable property in India, other than a lease not exceeding five years, by a person resident outside India.
  10. Giving of a guarantee or security in respect of any debt, obligation or other liability incurred:
  • by a person resident in India and is owned by a person resident outside India or
  • by a person resident outside India.
  1. Under FEMA  residents who were earlier  non-residents may hold, own, transfer or invest in property abroad, provided such foreign exchange or property, was acquired by them while they were non-residents.
  2. Under FEMA, a blanket permission has been given to NON-RESIDENTS to acquire, hold, own, transfer or dispose  property in India out of money, held by them when they were resident or which they have inherited from residents
  3. It should be noted that the Citizens of Countries like Pakistan, Afganistan, Bangladesh, Nepal, Bhutan and Sri Lanka are not allowed by the RBI to freely hold and transfer property in India. However, movables may be held subject to RBI guidelines, by Citizens of Countries other than Pakistan and Bangladesh.
  4. The obligations of Indian exporters of goods and services are similar to those in the FERA i.e., they would be required to repatriate the foreign exchange earnings into India without delay and expeditiously i.e., normally within six months, as per current regulations.
Criminal prosecution  would not lie against any person violating the Law but only PENALTY would be levied for violation of law under FEMA.

The PENALTY would be a maximum of 300% of the value of contravention or Rs 5,000 whichever is higher and Rs 2,00,000 where the extent of contravention cannot be quantified.

However there is a Criminal Proceedings if the penalty is not paid.

However there is Confiscation of foreign exchange and property acquired by violating FEMA. Thus both moveable and immoveable property can be confiscated if they have been acquired by violating FEMA


NRI Investments in India


Non Resident Indians are allowed to invest any of the following investments in India with conformance to the following stipulations.

  1. Residential Property
  2. Commercial Property
  3. Bank Accounts

Non-residents who are Indian citizens do not require any permission from the Reserve Bank of India for the purchase of immovable property in India provided that the purchase consideration is settled in the manner, which is in accordance with the FERA regulations. However, Non-residents holding foreign passports require filing of relevant applications and declarations with the Reserve Bank of India. NRI's can give their power of attorney to any local person in India who can execute the formalities for purchase of property. Foreign nations of Indian origin have been given general permission to purchase residential property. However, they have to file a declaration within 90 days from the date of purchase with the central office of the Reserve Bank of India. The purchase consideration for the purchase of property in the case of foreign nationals of Indian origin should be met out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/ FCNR accounts maintained with banks in India.


Reserve Bank has granted general permission for sale of residential immovable property. In respect of properties purchased on or after 26th may 1993 RBI considers applications for repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of property for two such properties. Repatriation of sale proceeds are considered in the following cases:
  1. The sale takes place after three years from the date of final purchase deed or from the date of payment of final installment of consideration amount, whichever is late.
  2. The consideration amount for the purchase of property must have been met out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India.


Foreign Nationals of Indian origin can also purchase commercial properties and the same conditions for repatriation purchase and sale will apply as above. However, they cannot buy agricultural land/farmhouse/plantation properties.


Rents can be earned out of the property income in India. However, these rents have to be credited to NRO accounts only.


Reserve Bank has granted general permission to certain financial institutions providing housing finance namely HDFC, LIC Housing Finance Limited etc. to grant housing loans to non-residential Indian nationals for acquisition of house, flat for self occupation subject to certain conditions. Authorized dealers have also been given permission subject to certain conditions for grant of loans.


Repatriable accounts

  1. Non-resident External Accounts-Savings, Current and Time deposits.
  2. Foreign currency Non-Resident Bank Accounts-FCNR-B Accounts.
Non-repatriable accounts

  1. Non-Resident ordinary rupee accounts-Savings, Current and Time deposits.
  2. Non-resident Non-repatriable term Deposits.
  3. Non-residents (Special) rupee (NR SR) Account Scheme with effect from 15.4.1999

Remittance of Interest/dividend


Powers have been delegated to banks authorized to deal in foreign exchange to remit dividends to Non-Resident shareholders without Reserve Bank's prior approval in cases where the company paying the dividend is not a FERA company, i.e. a company in which Non-Resident Interest exceeds 40%. Also while granting permission to designated banks for the purchase of shares/Debentures through stock exchanges under the Portfolio Investment Scheme on behalf of Non-resident investors with repatriation rights, the reserve bank grants permission to such designated banks to remit dividend/ interest to the non-resident beneficiaries or credit the amount to their NRE/ FCNR accounts subject to payment of Indian taxes. In such cases, companies are required to send the dividend/ interest warrants to the designated banks of the non-resident investors, which already hold the Reserve bank's approval for remitting.

In case of NRI investments made under the 40% scheme, the company is required to approach the Reserve Bank for permission only to make the first remittance of dividend giving a list of its NRI shareholders and indicating the name of its bank through which it desires to remit the dividend for subsequent years. On receipt of these details, the Reserve Bank scrutinizes the list to ensure that it contains the name of those shareholders who have been allowed to acquire shares with repatriation rights. The Reserve bank then grants general permission to the designated bank to make dividend remittances to the NRI shareholders mentioned in the said list, a copy of which is sent to the designated bank. It is not, therefore, necessary for Indian companies in such cases to approach the reserve bank for its permission to effect dividend remittances for subsequent years. Similar procedure is followed in case of remittance of interest on debentures also. However, remittance of dividend in respect of investments under the 74 percent scheme requires Reserve bank's specific approval.


Specific Permission of RBI


Permission of the RBI is required to be obtained by all Non-Residents, resident foreign citizens, foreign companies and branches of foreign companies operating in India for:

  1. Carrying on in India any trading, commercial or industrial activity on its own or through an agent;
  2. Establishing a place of business in India to carry on such activity;
  3. Acquiring the whole or any part of business or industrial undertaking in India;
  4. The purchase of shares in Indian companies;
  5. Accepting appointment or acting as agents in India of any person or company;
  6. Acquiring, holding, transferring, disposal by sale, mortgage, gift, lease of more than 5 years, settlement or
  7. otherwise, of any immovable property situated in India.

An Indian company in which non-resident interest is more than 40%, requires RBI permission to engage in agriculture or plantation activities or to acquire the whole or part of any undertaking engaged in such activity.

Foreign nationals require RBI permission to practice any profession or to carry on any occupation, trade or business in India if they wish to repatriate their earnings abroad.

Permission of RBI is required for sending goods from India on lease or hire or under any other agreement other than sale or disposal.

Repatriation of foreign capital requires permission of the RBI. Sale proceeds of investments (including capital gains) made in India and income from such investments are allowed to be repatriated with the approval of the Government or the RBI.

Foreign Direct Investments and Guidelines


Foreign Institutional Investors(FIIs) such as pension funds, mutual funds, investment trusts, asset management companies and incorporated/institutional portfolio managers or their power of attorney-holders which are registered with the Securities and Exchange Board of India (SEBI) can invest in listed and unlisted securities and debt markets subject to certain guidelines. FIIs are allowed to invest in all the securities traded on the primary and secondary markets.

There is no restriction on the minimum volume of investment for the purpose of entry of FIIs in the primary/ secondary market. There is no lock-in-period for the purpose of investments made by FIIs.

Portfolio investments in primary or secondary markets in any one company are subject to a ceiling for all FIIs (along with NRIs and OCBs) of 30% of the issued capital of such company.

The holding of a single FII in any one company is subject to a ceiling of 10% of total issued capital of such company. The holding of a FII group is to be counted as holdings of single FII for this purpose.

The maximum holding of 30% of all non-resident portfolios investment includes investment by non-resident Indians, corporate and non-corporate investments, but excludes foreign investments under financial collaborations and investments by FIIs through offshore single/ regional funds, global depository receipts and Euro convertibles.

Facilities that are available to all overseas corporate bodies that are predominantly owned by Non-Resident Indians of Indian Nationality/Origin are as follows:


As a measure of providing greater investment opportunities in India to Non-resident Indians, the schemes outlined in the preceding paragraphs have been extended (with the exception of investment in proprietary and partnership concerns) to overseas companies, partnership firms, societies, trusts and other corporate bodies owned directly or indirectly to the extent of at least 60% by non-residents of Indian nationality or origin (OCBs). Under these schemes, entities of the above types are eligible to make investments in India in share, debentures and company deposits. Likewise, they can also invest in Units of UTI, National Plan/savings certificates and others Government Securities if permitted under the terms of and conditions governing the sale/issue of such securities and the purchase/ subscription is arranged through authorized dealers. It is a necessity for such entities to submit the certificates to the Reserve Bank in the prescribed form OAC or OAC-1 (annexure 16.20and 16.21) (as the case may be) from an overseas auditor/Chartered Accountants/certified public accountant along with the applications for investments in India. They are also required to submit such certificates to banks in India with whom they intend to open accounts. If the ownership interest in any such entity (irrevocable beneficial interest in the case of trusts) held by non-residents of Indian nationality or origin falls below the level of 60 percent at any time in future, if has to intimate the change immediately to its bankers in India or the Reserve Bank as the case may be.


Overseas bodies owned by non-residents of Indian nationality or origin to the extent indicated above may open with authorized dealers (and not with authorized co-operative/commercial banks) NRE/FCNR and NRO accounts out of funds remitted by them to India, provided the bank maintaining the account is satisfied that such funds have legitimately accrued to the account holders. Various tax exemptions granted to non-resident individuals of Indian nationality or origin are not available to the overseas corporate entities.


Applications from OCBs for permission to designated banks for purchasing on their behalf shares/debentures through stock exchanges on non repatriation basis may be made in form NRC (annexure 16.18) and applications for purchasing share/debentures with repatriation rights may be made in Form RPC (annexure 16.19) to the controller, Exchange Control Department (Foreign Investment division), Reserve Bank of India, Central Office, Mumbai-400 023.

Applications for issue of shares/debentures to OCBs on non-repatriation basis under the direct investment scheme should be to the office of the Reserve Bank under whose jurisdiction the company's head/registered office are situated. However, in the case of investment in new issues of shares/ debentures on repatriation basis, applications may be made in Form ISD (annexure 16.13) by the Indian companies to the Controller, Exchange Control Department (Foreign Investment Division) RBI, Central Office, Mumbai-400 023.


Applications for permission to sell shares/debentures through stock exchange/ s in India should be made by OCBs to the Central Office of Reserve Bank in Form TS 3 (annexure 16.15) in respect of shares/debentures acquired with repatriation rights under the Portfolio Investment Schemes. For sale through stock exchange of shares/ debentures acquired on non-repatriation basis, a consolidated application (by letter) giving full details including names of the Indian companies, total number of share/ debentures, their face value. Folio through stock exchange or out of new issues of the companies concerned and number and date of the Reserve Bank approval for acquiring or holding them, should be made to the concerned office of Reserve Bank. If the sale/transfer is desired to be made by private arrangement, the application should be made in Form TS 1 (annexure 16.17) to the concerned office of Reserve Bank if the sale/transfer is on non-repatriation basis and to the Bank's Central Office if such sale/transfer is with repatriation rights

General permission by RBI


General permission for resident individuals, proprietorship concerns, partnership firms or raising Rupee loan from non-resident of Indian Nationality/persons of Indian origin.

Reserve Bank has by issue of a notification number F.E.R.A 200/99-RB dated 30th March 1999 now granted general permission to resident individuals/proprietorship concerns/partnership concerns to avail of interest bearing loans from NRIs/PIOs on non-repatriation basis subject to the following conditions:

  1. Such loan may be granted out of funds remitted from abroad in foreign exchange by NRIs/PIOs through normal banking channels or out of NRE/FCNR/NRO/NRSR accounts maintained with authorized dealers in India.
  2. The rate of interest on such loans should not exceed two percentage points over the bank's rate prevailing on the date of granting of the loan.
  3. The maturity period of the loan should not exceed 3 years.
  4. In case where the amount of loan was received by way of remittance from abroad through normal banking channel or out of fund held in the lender's NRE/FCNR/NRO account maintained with an authorized dealer in India, payment of Interest/repayment of loan should be made by credit to NRO/NRSR account of the non-resident lender with an authorized dealer in India. In case such loan was granted out of funds held in NRSR account of the lender, payment of interest/repayment of loan should be made by credit to NRSR account of the lender maintained with an authorized dealer in India.
  5. The amount of loan will not be allowed to be repatriated abroad.
  6. The amount of loan should not be utilized for the purpose of carrying on agricultural/plantation activities, purchase of immovable property, shares, debentures, bonds and for re-lending.
General permission for transfer by way of gift of immovable property held in India by non-resident persons of Indian origin or Registered Charitable Trusts/ Organizations in India

  1. In terms of its notification number F.E.R.A 152/ 93 RB dated 26th may 1993, Reserve Bank has granted general permission to foreign citizens of Indian origin to acquire by way of purchase or inheritance and disposal by way of sale, any immovable property, not being agricultural land/ farm house/plantation property situated in India subject to certain conditions. Reserve Bank has now vide its notification no. F.E.R.A 201/99 RB dated 30th March, 1999 granted general permission to non-resident persons (foreign citizens) of Indian origin (PIOs) to transfer by way of gifts, immovable property held by them in India to relatives and registered charitable trusts/organizations subject to the condition that the provision of any other law including Foreign Contribution (Regulation) Act, 1976, as applicable, are duly compiled with.
To facilitate various transactions by NRIs/PIOs the Reserve Bank has granted general permission to
  1. Resident individuals, partnership, proprietorship concerns to avail of interest bearing rupee loans for NRIs/PIOs out of funds remitted by them from abroad or out of funds held in their bank accounts in India, on non-repatriation basis, subject to certain conditions one of them being that the rate of interest on such loans should not exceed bank rate plus two percentage points.
  2. NRIs/ PIOs to transfer by way of gifts shares held by them in Indian companies and to PIOs to transfer by way of gift immovable property held by them in India to registered charitable trusts/organizations subject to compliance with other applicable rules/regulations including the provision of Foreign Contribution regulation Act, 1976 by the Charitable trusts/organizations concerned.
  3. NRIs/OCBs for investment on repatriation basis in Air Taxi operations subject to, among other conditions that the approval of Director General of Civil Aviation has been obtained.
  4. All domestic purpose public/ private sector mutual funds for issue of Units to NRIs/PIOs/OCBs on both repatriation as well as non-repatriation basis.
  5. NRIs/PIOs/OCBs to place deposits with Indian firms, on non-repatriation basis and with Indian companies including non-banking financial companies on both repatriation and non-repatriation basis.
  6. NRIs/PIOs/OCBs for sale of shares acquired under direct investment schemes on stock exchanges in India.
The Reserve Bank will grant general permission to NRIs/PIOs/OCBs to invest in Government security and treasury bills while granting permission for investments in shares and debentures under the portfolio scheme.

Taking into account the facilities that are already available, and the above new measures, NRIs/PIOs will not have to seek specific permission of the Reserve bank for a whole variety of approved financial/investment transactions. This should considerably reduce paperwork and the time taken for undertaking such transactions.

After the above changes come into effect, the areas in which facilities available to NRIs/PIOs/OCBs will not be same as available to domestic residents, will primarily relate to investment by them in real estate/agriculture and plantation business



Subject Declaration Form

To whom the application is to be submitted

1       CDF

Currency Declaration Form

At Airport/port to customs

2       CNX

Allotment of code numbers to exporters

Regional Office of RBI

3       DIN

Declaration for direct investment by NRIs/ OCBs in Indian firms/companies

Regional Office of RBI
4       DSS

Declaration of shares required by NRIs through subscription to Memorandum and Articles of associationChief GM, Exchange Control Development (ECD), Reserve Bank of India (RBI), Foreign Investment Division (FID), 11th Floor, COB, Mumbai-400023.

5      ECFEncashment Certificate

Issued by Banks
6      EFC

Application by exporter for opening of foreign currency account with Bank of India or Abroad

Regional Office of RBI through bank
7      EFN

Application for practicing profession or carrying on occupation, trade or business in India by foreign national Chief GM, ECD, RBI, FID, Mumbai-400 001.
8      EMG Emigration questionnaire Regional Office of RBI
9      FAD 1 Maintenance of Foreign Currency Accounts and holding in foreign currency securities and immovable properties abroad Chief GM, ECD, RBI, Foreign Accounts Section, 3rd Floor, Amar Building, Fort, Mumbai-400 001.
10    FAD2


Acquisition/holding of foreign currency shares of a joint venture/subsidiary to company abroad. Regional Office of RBI

Approval of foreign investment and technology transfer agreement Chief GM, ECD, RBI, FITT Section, 11th Floor, COB, Mumbai-400 023.
12   FNC 1  

Application for acting or accepting appointment of agent in IndiaChief GM, ECD, RBI, FID, 11th Floor, COB, Mumbai-400 023.
13   FNC 2

Undertaking fresh business activity or establishing place of business in India by foreign companies


14   FNC 3

Undertaking business activity in India by foreign companies


15   FNC 4 Permission to establish a branch office in India by an overseas company


16   FNC 5 Establishing a representative office by overseas company for, liaison activities or to open a project/site office in India


17   FNC 6 Acquisition of whole or part of an undertaking in India.


18   FNC 7 Purchase of shares of companies in India


18   IPI 1 

Fresh acquisition and holding of immovable properties in India


19   IPI 2  

Sale/transfer of immovable property in India (other than coffee/tea/rubber plantations in India)


20   IPI 3 Sale of tea/coffee/rubber plantations in India

21   IPI 4  


Particulars of productivity income, etc. of tea/coffee/rubber plantations in India


22   IPI 5Declaration of immovable property acquired/held in India under general permission granted to foreign companies


22   IPI 6

Declaration of immovable property in India held as on 1st January, 1974


23   IPI 7


Declaration of immovable property acquired under general permission granted to foreign citizens of Indian origin


24   IPI 8

Permission to repatriate the original investment made in commercial/resident immovable property


25   ISD

Issue of shares/debentures to non-residents


26   SD (R)

Investment by NRIs/OCBs in Indian firms/companies on repatriation basis


27   LOV 1


Loans in India to (a) non residents against fixed deposit securities,(b) residents against guarantees by non-residents

Regional Office of RBI 

28   LOV 2

Loans/overdrafts to foreign nationals for personal purposes


29   NRC  

Investments in shares/debentures through stock exchanges by NRIs on non-repatriation basis

Chief GM, ECD, RBI, FID, 11th Floor, COB, Mumbai-400 023. 

30   NRI

Investments in shares/debentures through stock Exchange by NRIs on non-repatriation basis


31   NRU Non-repatriation undertaking


32   OBR

Appointments of representative or establishment of office/branch abroad

Regional Office of RBI 

32   QA 22


Opening of bank accounts in India by foreign companies by foreign nationals

To be submitted to bank where account is to be opened 

33   RFC

Opening of resident foreign currency account with bank in India by returning Indians


34   RFN Retirement facilities to foreign nationals

Regional Office of RBI 

35   RPC

Investment in shares/debentures by OCBs with repatriation basis

Chief GM, ECD, RBI, FID, 11th Floor, COB, Mumbai-400 023.

36   RPI

Investment in shares/debentures by NRIs with repatriation basis


37   RSU Investment in sick companies by NRIs/OCBs


38   TS 1 Transfer of shares/debentures by non-residents to residents

Regional Office of RBI 

39   TS 2


Transfer of shares/debentures by foreign national resident in India


40   TS 3


Transfer of shares through stock exchange acquired by OCBs under portfolio investment scheme with repatriation basis

Chief GM, ECD, RBI, FID, 11th Floor, COB, Mumbai-400 023.

41   TS 4


Transfer of shares through Stock Exchange acquired by NRIs/OCBs under direct investment scheme with repatriation basis 


Approval of Foreign Direct Investment By FIPB



  1. The following Guidelines are laid down to enable the Foreign Investment Promotion Board (FIPB) to consider the proposals for Foreign Direct Investment (FDI) and formulate its recommendations.
  2. All applications should be put up before the FIPB by the SIA (Secretariat of Industrial Assistance) within 15 days and it should be ensured that comments of the administrative ministries are placed before the Board either prior to/ or in the meeting of the Board.
  3. Proposals should be considered by the Board keeping in view the time-frame of 6 weeks for communicating Government decision (i.e. approval of IM/ CCFI of rejection as the case may be.
  4. In cases in which either the proposal is not cleared or further information is required, in order to obviate delays, presentation by applicant in the meeting of the FIPB should be resorted to.
  5. While considering cases and making recommendations, FIBP should keep in mind the sectoral requirements and the sectoral policies vis- -vis the proposals.
  6. FIPB would consider each proposal in totality (i.e. if it includes apart from foreign investment, technical collaboration/ industrial license) for composite approval or otherwise. However, the FIPB's recommendation would relate only to the approval for foreign financial and technical collaboration and the foreign investor will need to take other prescribed clearance separately.
  7. The Board should examine the following while considering proposals submitted to it for consideration:
  8. Whether the items of activity involve industrial license or not and if so the considerations for grant of industrial license must be gone into;
  9. Whether the proposal involves technical collaboration and if so, (a) the source and nature of technology sought to be transferred, (b) the terms of payment (payment of royalty by 100% subsidiaries is not permitted);
  10. Whether the proposal involves any mandatory requirements for exports and if so, whether the applicant is prepared to undertake such obligation (this is for Small Industrial units, as also for dividend balancing, and for 100% EOUs/ EPZ units);
  11. Whether the proposal involves any export projection and if so, the items of export and the projected destinations;
  12. Whether the proposal has concurrent commitment under other schemes such as EPCG Scheme, etc;
  13. In the case of Export Oriented Units (EOUs) whether the prescribed minimum value addition norms and the minimum turnover of exports are met or not;
  14. Whether the proposal involves relaxation of locational restrictions stipulated in the industrial licensing policy; and
  15. Whether the proposal has any strategic or defence related considerations.
  16. While considering proposals, the following may be prioritized:
  1. Items falling within Annexure III of the New Industrial Policy (i.e., those which do not qualify for automatic approval).
  2. Items falling in infrastructure sector.
  3. Items that have an export potential.
  4. Items which have large scale employment potential and especially for rural people.
  5. Items that have a direct or backward linkage with agro-business/farm sector.
  6. Items that have greater social relevance such as hospitals, human resource development, life saving drugs and equipment.
  1. Proposals that result in induction of technology or infusion of capital.
  2. The following should be especially considered during the scrutiny and consideration of proposals:
  1. The extent of foreign equity proposed to be held (keeping in view sectoral caps if any- e.g. 24% for SSI units, 40% for air taxi/airlines operator, 49% in basic/cellular/paging, etc. in Telecom sector.)
  2. Extent of equity with composition of foreign/ NRI (which may include OCB)/ Resident Indians.
  3. Extent of equity from the point of view whether the proposed project would amount to a holding company/wholly owned subsidiary/a company with dominant foreign investment (i.e. 76% or more)/joint venture.
  4. Whether the proposed foreign equity is for setting up a new project (joint venture or otherwise) or whether it is for enlargement of foreign/NRI equity or whether it is for fresh induction of foreign equity/NRI equity in an existing Indian company.
  1. In the case of fresh induction of foreign/ NRI equity and/ or in cases of enlargement of foreign/ NRI equity in existing Indian companies whether there is a resolution of the Board of Directors supporting the said induction/ enlargement of foreign/NRI equity and whether there is a shareholders agreement or not.
  2. In the case of induction of fresh equity in the existing Indian companies and/ or enlargement of foreign equity in existing Indian companies, the reason why the proposal has been made and the modality for induction/ enhancement [i.e. whether by increase of paid-up capital/ authorized capital, transfer of shares (hostile or otherwise) whether by rights issue, or by what modality].
  3. Issue/transfer/pricing of shares will be as per SEBI/RBI guidelines.
  4. Whether the activity is an industrial or a service activity or combination of both.
  5. Whether the item of activity involves any restriction by way of reservation for small-scale sector.
  6. Whether there are any sectoral restrictions on the activity (e.g. there is ban on foreign investment in real estate while it is not so for NRI/ OCB investment).
  7. Whether the item involves only trading activity and if so whether it involves export or both export or import, or also includes domestic trading and if domestic trading, whether it also includes retail trading.
  8. Whether the proposal involves import of items, which are hazardous, banned or detrimental to environment (e.g. import of plastic scrap and recycled plastics).
  9. In respect of the industries/activities listed in Annex III of the New Industrial Policy, automatic approval for majority equity holding (50/51/74 per cent) is accorded by the Reserve Bank of India. FIPB may consider recommending higher levels of foreign equity in respect of these activities keeping in view the special requirements and merit of each case.
  10. In respect of other industries/activities listed, the Board may consider recommending 51% foreign equity on examination of each individual proposal. For higher levels of equity upto 74%, the Board may consider such proposals keeping in view considerations such as the extent of capital needed for the project, the nature and quality of technology, the requirements of marketing, the management skills and the commitment for exports.
  11. FIPB may consider and recommend proposals for 100% foreign owned holding/subsidiary companies based on the following criteria:
  12. Where only "holding" operation is involved and all subsequent/ downstream investments to be carried out would require prior approval of the Government;
  13. Where proprietary technology is sought to be protected or sophisticated technology is proposed to be brought in;
  14. Where at least 50% of production is to be exported;
  15. Proposals for consultancy; and
  16. Proposals for power, roads, ports and industrial model towns/industrial parks or estates;
  17. In special cases, where the foreign investor is unable initially to identify an Indian joint venture partner, the Board may consider and recommend proposals permitting 100 % foreign equity on a temporary basis on the condition that the foreign investor would divest to the Indian parties (either individuals joint venture partners or general public or both) at least 26 per cent of its equity within a period of 3-5 years.
  18. Similarly in the case of a joint venture, where the Indian partner is unable to raise resources for expansion/technological up gradation of the existing industrial activity, the Board may consider and recommend increase in the proportion/percentage (upto 100 per cent ) of the foreign equity in the enterprise.
In respect of trading companies, 100 per cent foreign equity may be permitted in the case of the activities involving the following:
  1. Exports.
  2. Bulk imports with export/expanded warehouse sales;
  3. Cash and carry wholesale trading;
  4. Other import of goods or services provided at least 75% is for procurement and sale of goods and services among the companies of the same group.
In respect of the companies in the infrastructure/services sector where there is a prescribed cap for foreign investment, only the direct investment should be considered for the prescribed cap and foreign investment in an investing company should not be set off against the cap provided the foreign direct investment in such investing company does not exceed 49 per cent and the management of the investing company is with the Indian owners.

No condition specific to the letter of approval issued to a foreign investor would be changed or additional condition imposed subsequent to the issue of a letter of approval. This would not prohibit changes in general policies and regulations applicable to the industrial sector.

Where in case of a proposal (not being 100% subsidiary) foreign direct investment has been approved upto a designated percentage of foreign equity in the joint venture company, the percentage would not be reduced while permitting induction of additional capital subsequently. Also in the case of approved activities, if the foreign investor(s) concerned wishes to bring in additional capital on later dates keeping the investment to such approved activities, FIPB would recommend such cases for approval on an automatic basis.

As regards proposal for private sector banks, the application would be considered only after "in principle" permission is obtained from the Reserve Bank of India (RBI).

The restrictions prescribed for proposals in various sectors as obtained at present, are given in the Annex and these should be kept in view while considering the proposals.

These Guidelines are meant to assist the FIPB to consider proposals in an objective and transparent manner. These would not in any way restrict the flexibility or bind the FIPB from considering the proposals in their totality or making recommendations based on other criteria or special circumstance or features it considers relevant. Besides these are in the nature of administrative guidelines and would not in any way be legally binding in respect of any recommendation to be made by the FIPB or decisions to be taken by the Government in cases involving Foreign Direct Investment (FDI).

These Guidelines are issued without prejudice to the Government's right to issue fresh guidelines to change the legal provisions and policies whenever considered necessary.




1. BankingNRI 40%.

Foreign investment of upto 20% is permitted.



Non-Banking Financial Services

  1. Upto 51% foreign equity, no special conditions are attached except those requiring approval of SEBI/ RBI, etc.
  2. For foreign equity beyond 51% but upto 75%, it is necessary that foreign investment should be minimum US$ 5 million and it should come in one lot.
  3. For foreign investment beyond 75%, minimum foreign investment should be US $ 50 million. 

Domestic Air-Taxi Operations/Airlines

  1. Foreign equity upto 40% can be permitted on a case-by-case basis.
  2. 100% by NRIs. 


Foreign investment in power sector can either be in the form of a joint venture with an Indian partner or as a fully owned operation with 100% foreign equity. 


Telecommunications (Basic, Value Added)

In basic, Cellular Mobile and Paging Services, foreign investments are limited to 49% subject to grant of license from DoT. 


Drugs and Pharmaceutical Industry

Foreign investment upto 51% in the case of bulk drugs, their intermediates and formulations thereof (except those produced by the use of recombinant DNA technology) are granted automatic approval by the RBI. Other proposals are considered on merit on a case-by-case basis by the Government Manufacturing activity essential for FDI above 51% as per Drug Policy. 



Foreign companies can invest upto 100% of the equity in any venture in petroleum sector.

8. Real Estate

No foreign investment in this sector is permitted. NRIs/ OCBs are allowed.




Roads and Highways

Private sector, including foreign equity participation upto 100% in the highways is envisaged on Build, Operate and Transfer (BOT) concept Investors in identified highway projects would be permitted to recover their investment by way of collection of tolls for specified periods. At the end of the agreed concession period, the facilities will revert to the Government. Construction of by-passes, bridges and widening of high density corridors, of National Highways have been identified for four laning through the BOT route. The Government has, in the Budget Session of 1995, passed the necessary legislation for collection of toll tax. The rates of toll charges as well as the period of concession will be on the basis of competition/ bids and the Government free from encumbrances would provide land requirement for the construction and operation of the facilities. Private parties would also be allowed to develop service and the rest areas along the road entrusted to them. 





Indian ports offer significant potential to foreign investors in major operational and infrastructural areas. The following areas have been identified for participation/investment by the private sector:

  1. Leasing our existing assets of the Port
  2. Construction/creation of additional assets, such as:
  1. Construction and operation of container terminals.
  2. Construction and operation of bulk, break bulk, multipurpose and specialized cargo berths.
  3. Warehousing, container freight stations, storage facilities and tank farms.
  4. Cranage/Handling equipment.
  5. Setting up of captive power plants.
  6. Dry-docking and ship repair facilities.
  1. Leasing of equipment for port handling and leasing of floating crafts from the private sector.
  2. Captive facilities for Port based industries.
These areas are indicative in nature. Further details regarding participation by the foreign investors are available with individual port authorities and the Ministry of Surface Transport, Government of India. 





This is a sector with immense possibilities for foreign investment. 100% foreign equity is permissible in the sector and automatic approvals are also granted by the Reserve Bank of India for foreign equity upto 51% and subject to specified parameters.





  1. Foreign equity participation of upto 50% in the mining sector would be automatic, except for gold, silver, diamonds and precious stones.
  2. For gold, silver, diamonds and precious stones, approvals would be given keeping in view, inter alia, the following parameters:
  1. The size of the project.
  2. Commitment of external resources for funding project cost.
  3. Track record of company in the mining sector.
  4. The level of the technology sought to be employed in the project.
  5. Financial strength of the company.
  6. Level of the Indian equity in the joint venture at the mining stage for the JV partner/Indian partner.
For companies, which seek to set up 100% wholly owned subsidiaries, permission may be given subject to the condition that in case the company wishes to enter into a joint venture for investment in mining where a foreign equity holding in excess of 50% is envisaged, prior approval of the FIPB would be taken.



Coal While this has been reserved for the public sector, private and foreign investment is permitted in coal for captive consumption only (generation of power) and for washeries, etc. 




Venture Capital Fund

An offshore venture capital company may contribute 100% of the capital of domestic venture capital fund and may also set up a domestic asset management company to manage the fund.

VCFs and VCCs are permitted upto 40% of paid up corpus of the domestic VCFs/ VCCs. 

List of High Priority Industry



Metallurgical Industries

Boilers and steam generating plants

Prime movers (other than electrical generators)

Electrical equipment


Industrial machinery

Machine tools

Agricultural machinery

Earth moving machinery

Industrial instruments

Scientific and electro medical instruments and laboratory equipment

Nitrogenous & phosphatic fertilizers

Chemicals (other than fertilizers)

Drugs and pharmaceuticals


Rubber products

Plate glass


Cement products

High technology reproduction and multiplication equipment

Carbon and carbon products

Pretensioned high-pressure RCC pipes

Rubber machinery

Printing machinery

Welding electrodes other than those for welding mild steel

Industrial synthetic diamonds

Photosynthesis improvers, nitrogen fixers, pheromones and bio-insecticides

Extraction and upgrading of minor oils

Pre-fabricated building material

Soya products

High yield seeds and plantlets

All food processing industries other than milk food, malted foods and flour, but excluding the items reserved for small-scale sector.

All items of packaging for food processing industries excluding the items reserved for small-scale sector

Hotels and tourism related industry

Software industry

Starch and its derivatives

Cotton textiles

Wool silk and man-made fiber textiles

Textile fabrics (water-proof)

Basic chemicals and chemical products (except products of petroleum and coal)

Rubber, plastic, petroleum and coal products

Metal products and parts except machinery and equipment

Machinery and equipment other than transport equipment

Land transport (support services)

Water transport (support services)

Services incidental to transport not elsewhere classified

Renting and leasing (not elsewhere classified) of transport equipment, office accounting and computing machinery and equipment, other industrial machinery and equipment and refrigerated transport.

Business services not elsewhere classified like technical testing and analysis, market research and development, health and medical services and other services.


Mining of Iron ore

Mining of metal ores other than iron ore (except Uranium group ores)

Mining of non-metallic minerals not elsewhere classified.


Mining services

Basic metals and alloys industries

Other manufacturing industries, viz., items based on solar energy, navigational, metrological, geophysical and related instruments and apparatus, etc.

Electric generation and transmission

Non-conventional energy generation and distribution.

Construction and maintenance of infrastructure

Pipeline transport

Water transport

Storage and warehousing services of agricultural products with refrigeration.


Distillation and brewing of alcoholic drinks.


Cigars and cigarettes of tobacco and manufactured tobacco substitutes.

Electronic aerospace and defence equipment: all types.

Industrial explosive including detonating fuses, safety fuses, gunpowder, nitrocellulose and matches.

Hazardous chemicals.

Drugs and pharmaceuticals (except for all bulk drugs and their formulations subject to few).

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