TaxTMI 
TaxTMI 
Master Direction – Foreign Investment in India (Updated up to January 20, 2025)
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....o time to incorporate the changes in the regulatory framework and published through gazette notifications. 2. Rule 2(A) of NDI Rules empowers the Reserve Bank of India (RBI) to administer it, and while administering these rules, the RBI may interpret and issue such directions, circulars, instructions, clarifications, as it may deem necessary, for effective implementation of the provisions of these rules. The instructions relating to mode of payment and reporting requirements for investment in India by a person resident outside India are contained in Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 (FEMA 395). 3. RBI, therefore, issues directions to Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), 1999. This Master Direction lays down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/ constituents with a view to implementing the rules framed. 4. Instructions issued on Foreign Investment in India and its related aspects under the FEMA have been compiled in this Master Direction. The list of underlying circulars/ notification....
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....e established or constituted by or under any Central or State Act, which is incorporated in India but does not include a society, trust or any entity, which is excluded as an eligible investee entity under the FDI Policy. Note :Reference to 'company' or 'investee company' or 'transferee company' or 'transferor company' also includes a reference to a body corporate established or constituted by or under any Central or State Act but if the term 'Company ' or 'Indian company' or 'Investee company' or 'transferee company' or 'transferor company' is qualified by a reference to a company incorporated under the Companies Act, 2013 such term shall mean a company incorporated under the said Act but not a body corporate. 2.4 'Control' shall have the same meaning as assigned to it in the Companies Act, 2013 and for the purposes of Limited Liability Partnership, shall mean the right to appoint majority of the designated partners, where such designated partners, with specific exclusion to others, have control over all the policies of an LLP. 2.5 'Convertible Note' is an instrument issued by a start-up company evidenci....
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....iluted basis of a listed Indian company or (b) less than 10 percent of the paid-up value of each series of equity instruments of a listed Indian company. 2.10 'Foreign Portfolio Investor (FPI)' is a person registered in accordance with the provisions of Securities Exchange Board of India (SEBI) (Foreign Portfolio Investors) Regulations, 2014, as amended from time to time. 2.10.1 Any Foreign Institutional Investor (FII) or a sub account registered under the Securities Exchange Board of India (Foreign Institutional Investors) Regulations, 1995 and holding a valid certificate of registration from SEBI shall be deemed to be a FPI till the expiry of the block of three years from the enactment of the SEBI (Foreign Portfolio Investors) Regulations, 2014. 2.11 'Foreign Investment' is any investment made by a person resident outside India on a repatriable basis in equity instruments of an Indian company or to the capital of an LLP. 2.11.1 Issue/ transfer of 'participating interest/ right' in oil fields by Indian companies to a person resident outside India would be treated as foreign investment. 2.11.2 If a declaration is made by persons as per the provisions of the Companies Act,....
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....apital Fund (VCF) established in the form of a trust or a company or a body corporate and registered under the SEBI (Venture Capital Fund) Regulations, 1996 will not be considered as an Investment Vehicle for the purpose of the NDI Rules and this Master Direction. 2.20 'Limited Liability Partnership (LLP)' is a partnership formed and registered under the Limited Liability Partnership Act, 2008. 2.21 'Listed Indian Company' is an Indian company which has any of its equity instruments listed on a recognized stock exchange in India and the expression 'Unlisted Indian Company' shall be construed accordingly 2.22 'Non-Debt Instruments' as determined by Central Government by Gazette Notification S.O. 3722 (E) dated October 16, 2019, means the following instruments; namely: - * all investments in equity instruments in incorporated entities: public, private, listed and unlisted; * capital participation in LLP; * all instruments of investment recognised in the FDI policy notified from time to time; * investment in units of Alternative Investment Funds (AIFs), Real Estate Investment Trust (REITs) and Infrastructure Investment Trusts (InvITs); * investment in units of mutual f....
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....g both foreign investment on a repatriation basis by persons resident outside India in equity instruments of a company or the capital of a LLP, as the case may be, and indirect foreign investment, unless provided otherwise. This shall be the composite limit for the investee Indian entity. 2.27.1 FCCBs and DRs having underlying of instruments being in the nature of debt shall not be included in the sectoral cap. 2.27.2 Any equity held by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned under the sectoral cap. 2.28 'Unit' is the beneficial interest of an investor in an investment vehicle. Explanation.- i) For the purpose of this clause, unit shall include unit that has been partly paid up, which is permitted under the regulations framed by the Securities and Exchange Board of India, in consultation with Government of India. Note: Issuance of partly paid units by Alternative Investment Funds to persons resident outside India was not permitted prior to the issuance of Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2024. Therefore, issuance of such partly paid units prior to....
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....ndia is a member, shall not be treated as an entity of a particular country nor shall any country be treated as the beneficial owner of the investments of such Bank or Fund in India. 3.3 A person who is a citizen of Pakistan or an entity incorporated in Pakistan can, only with the prior Government approval, invest in sectors/ activities other than defence, space, atomic energy and sectors/ activities prohibited for foreign investment. 3.4 In the event of the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction or purview of (3.2) and (3.3) above, such subsequent change in beneficial ownership shall also require government approval. 4. Equity instruments 4.1 An Indian company is permitted to receive foreign investment by issuing equity instruments to the investor. The equity instruments are equity shares, convertible debentures, preference shares and share warrants issued by the Indian company. 4.2 Equity shares: Equity shares are those issued in accordance with the provisions of the Companies Act, 2013 and will include equity shares that have been partly paid....
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....ed from time to time. 4.4.3 In case of non-payment of balance consideration, the forfeiture of the amount paid upfront will be in accordance with the provisions of the Companies Act, 2013 and the Income Tax provisions, as applicable. 4.4.4 These conditions shall also be applicable where the person resident outside India acquires share warrants via transfer. 4.5 The deferment of payment of consideration amount by the foreign investors or shortfall in receipt of consideration amount as per applicable pricing guidelines will not be treated as subscription to partly paid shares and warrants. 4.6 Convertible debentures: Convertible debentures means fully and mandatorily convertible debentures which are fully paid. 4.6.1 Amendment of the tenor of convertible debentures shall be in compliance with the Companies Act, 2013 and rules framed thereunder, as amended from time to time. However, the investee company should ensure that the price/ conversion formula of convertible equity instruments is determined upfront at the time of issue of the instruments. The price at the time of conversion should not in any case be lower than the fair value worked out, at the time of issuance of su....
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....s till their original maturity. Any extension of maturity prior to April 30, 2007 will be considered as original maturity. 4.7.4 Non-convertible/ optionally convertible/ partially convertible preference shares funds for which have been received after April 30, 2007 shall be treated as debt and shall conform to guidelines framed under Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2018, as amended from time to time. 4.8 Equity instruments issued on or after December 30, 2013 can contain an optionality clause subject to a minimum lock-in period of one year or as prescribed for the specific sector, whichever is higher, but without any option or right to exit at an assured price. 5. Entry routes and Permitted sectors 5.1 Entry Routes Foreign investment in the equity instruments of an Indian company can be made through two routes, 5.1.1 Automatic Route is the entry route in which investment by a person resident outside India does not require the prior approval from the Central Government. 5.1.2 Government Route is the entry route in which investment by a person resident outside India requires prior Government approval. Foreign investme....
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....ctoral/ statutory cap 5.2.3 Foreign investment is permitted up to 100% on the automatic route, subject to applicable laws/rules/regulations, security and other conditionalities, in sectors/ activities not listed in Schedule I of the NDI Rules and not prohibited under Para (2) of Schedule I of the NDI Rules. This condition is not applicable for activities in financial services. 5.2.4 Foreign investment in financial services other than those indicated under serial number "F" of table under Para (3)(b) of Schedule I of the NDI Rules would require prior Government approval. 5.2.5 Wherever there is a requirement of minimum capitalization, it will include premium received along with the face value of the equity instrument. However, it should be received by the company upon issue of such instruments to a person resident outside India. Amount paid by the transferee during post-issue transfer beyond the issue price of the equity instrument cannot be taken into account while calculating minimum capitalization requirement. Note: In case of any clarification pertaining to foreign investment in a sector or related conditions, the request may be made to the Department of Promotion of Ind....
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....pany should be carried out as joint audit wherein one of the auditors is not part of the same network. 6. Permitted Investments by persons resident outside India Unless otherwise specifically stated, any investment made by a person resident outside India shall be subject to the entry routes, sectoral caps or the investment limits, as the case may be, and the attendant conditionalities for making such investment. A person resident outside India may make investment as stated hereinafter. 6.1 Subscribe/ purchase/ sale of equity instruments of an Indian company is permitted as per the directions laid down in Annex 1. 6.2 Purchase/ sale of equity instruments of a listed Indian company on a recognised stock exchange in India by Foreign Portfolio Investors is permitted as per the directions laid down in Annex 2. 6.3 Purchase/ sale of equity instruments of a listed Indian company on a recognised stock exchange in India by Non-Resident Indian (NRI) or Overseas Citizen of India (OCI) on repatriation basis is permitted as per the directions laid down in Annex 3. 6.4 Purchase/ sale of equity instruments of an Indian company or Units or contribution to capital of a LLP or a firm or ....
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....ndian company, the rights issued to persons resident outside India should not be at a price less than the price offered to persons resident in India; * Such investment made through rights issue or bonus issue is subject to the conditions as are applicable at the time of such issue; * The amount of consideration may be paid as inward remittance from abroad through banking channels or out of funds held in 2any repatriable foreign currency or Rupee account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016; * If the original investment has been made on a non-repatriation basis, the amount of consideration may also be paid by debit to the NRO account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. 6.12.2 An individual who is a person resident outside India exercising a right which was issued when he/ she was a person resident in India can hold the equity instruments so acquired on exercising the right on a non-repatriation basis. 6.12.3 Indian company may issue equity instruments under Section 62(1)(a)(iii) of Companies Act, to a person resident outside India (other than an OCB). Such issue shal....
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.... "sweat equity shares" or "Share Based Employee Benefits" so issued under the applicable rules or regulations are in compliance with the sectoral cap applicable to the said company * The issue of "employee's stock option" or "sweat equity shares" or "Share Based Employee Benefits" in a company where foreign investment is under the approval route shall require prior government approval * Issue of "employee's stock option" or "sweat equity shares" or "Share Based Employee Benefits" to a citizen of Bangladesh or Pakistan shall require prior government approval. Note: Issue of "sweat equity shares" to a person resident outside India was permitted with effect from June 11, 2015. Issuance of equity instruments under any share-based employee benefit scheme, other than Employees Stock Options and Sweat equity shares, was permitted with effect from April 12, 2022. 6.13.2 An individual who is a person resident outside India exercising an option which was issued when he/ she was a person resident in India shall hold the equity instruments so acquired on exercising the option on a non-repatriation basis. Note: The percentage of foreign investment shall be calculated on fully diluted ....
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....gement (Deposit) Regulations, 2016 6.15 Merger or demerger or amalgamation of Indian companies 6.15.1 Where a scheme of compromise or arrangement or merger or amalgamation of two or more Indian companies or a reconstruction by way of demerger or otherwise of an Indian company, or transfer of undertaking of one or more Indian company to another Indian company, or involving division of one or more Indian company, has been approved by the National Company Law Tribunal (NCLT) or other authority competent to do so by law, the transferee company or the new company, as the case may be, may issue equity instruments to the existing shareholders of the transferor company resident outside India, subject to the following conditions: * The transfer or issue should comply with entry routes, sectoral caps or investment limits, as the case may be, and the attendant conditionalities of foreign investment as well as reporting in form FC-GPR or FC-TRS as the case may be. * In case the foreign investment is likely to breach the Sectoral caps or the attendant conditionalities, the transferor company or the transferee or the new company should obtain necessary Government approval. * The transf....
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....ll be in accordance with the framework issued by the RBI vide A.P. (DIR Series) Circular No. 19 dated November 11, 2024. 7.2 Transfer by an overseas corporate body (OCB) An OCB may transfer equity instruments in accordance with the instructions given in the FAQs on de-recognition of OCBs issued vide A.P (DIR Series) Circular No. 44 dated December 8, 2003 read with AP (DIR Series) Circular No.14 dated September 16, 2003. 7.3 Transfer by an NRI/ OCI by way of gift or sale to any person resident outside India 7.3.1 An NRI or an OCI holding equity instruments of an Indian company or units on repatriation basis can transfer the same by way of sale or gift to any person resident outside India. 7.3.2 Prior Government approval is required for any transfer in case the company is engaged in a sector which requires Government approval. 7.3.3 Where the equity instruments acquired by an NRI or an OCI under the provisions of para 6.3 of this Master Direction has resulted in a breach of the applicable aggregate NRI/ OCI limit or sectoral limits, the NRI or the OCI is required to sell the equity instruments so acquired within five trading days after settlement to a person resident in I....
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....y of sale/ gift or may sell the same on a recognised stock exchange in India in the manner prescribed by SEBI. 7.6.2 The transfer by way of sale is required to be in compliance with and is subject to the adherence to pricing guidelines, documentation and reporting requirements prescribed for such transfers. 7.6.3 Where the equity instruments are held by the person resident outside India on a non-repatriable basis, conditions at 7.6.2 above will not apply. 7.7 Transfer by way of gift by an NRI/ OCI holding securities on a non-repatriable basis or a resident to a person resident outside India 7.7.1 An NRI or an OCI holding securities of an Indian company on a non-repatriation basis or a person resident in India may transfer the securities so held by them to a person resident outside India by way of gift with the prior approval of the RBI and subject to the following conditions: * The donee is eligible to hold the securities under NDI Rules; * The gift does not exceed 5 percent of the paid up capital of the Indian company/ each series of debentures/ each mutual fund scheme; this limit is a cumulative limit for a donor to one particular donee. * The applicable sectoral ca....
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....account in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. 7.10.2 Such Escrow account can be funded by way of inward remittance through banking channels and/ or by way of guarantee issued by an authorized dealer bank, subject to terms and conditions as specified in the Foreign Exchange Management (Guarantees) Regulations, 2000. 7.10.3 Where the transaction is governed by SEBI guidelines/ regulations, operation of the Escrow accounts for securities shall be in accordance with the relevant SEBI regulations, if any. 7.11 Transfer by way of pledge 7.11.1 Any person being a promoter of a company registered in India (borrowing company), which has raised external commercial borrowing (ECB) in compliance with the Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000 may pledge the equity instruments of the borrowing company or that of its associate resident companies for the purpose of securing the ECB raised by the borrowing company subject to the following conditions: * the period of such pledge shall be co-terminus with the maturity of the underlying ECB; * in case of invocation of pledge, transfer shall be in ....
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....urposes, subject to the following conditions: * in case of invocation of pledge, transfer of equity instruments should be in accordance with the credit concentration norm as stated in the Master Direction - Non-Banking Financial Company - Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 (Para 22) and Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 (Para 22) * The AD may obtain a board resolution 'ex ante', passed by the Board of Directors of the investee company, that the loan proceeds received consequent to pledge of equity instruments will be utilised by the investee company for the declared purpose; * the AD may also obtain a certificate 'ex post', from the statutory auditor of investee company, that the loan proceeds received consequent to pledge of shares, have been utilised by the investee company for the declared purpose; * the Indian company has to follow the relevant SEBI disclosure norms, as applicable; * under no circumstances, the credit concentration norms should be breached by the NBFC. If there is a breach on i....
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....be, through banking channels in India or paid out from or received in, as the case may be, 5any repatriable foreign currency or Rupee account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. 7.13.2 In case an investment is held on a non-repatriation basis, in addition to 7.13.1 above, the amount of consideration for transfer may be paid out from or received in, as the case may be, NRO account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. 7.14 Transfer by way of swap of equity instruments and equity capital The transfer of equity instruments of an Indian company between a person resident in India and a person resident outside India may be by way of- * swap of equity instruments, in compliance with the rules prescribed by the Central Government and the regulations specified by the Reserve Bank from time to time; * swap of equity capital of a foreign company in compliance with the rules prescribed by the Central Government including the Foreign Exchange Management, (Overseas Investment) Rules, 2022, and the regulations specified by the Reserve Bank from time to time: Provided that prior ....
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....uidelines will apply for those shares which have not been tendered to the company during the delisting process; or * the valuation of equity instruments done as per any internationally accepted pricing methodology for valuation on an arm's length basis duly certified by a Chartered Accountant or a SEBI registered Merchant Banker or a practicing Cost Accountant, in case of an unlisted Indian Company. 8.3 Equity instruments transferred by a person resident outside India to a person resident in India 8.3.1 The price of equity instruments of an Indian company transferred by a person resident outside India to a person resident in India should not exceed: * the price worked out in accordance with the relevant SEBI guidelines in case of a listed Indian company; * the price at which a preferential allotment of shares can be made under the SEBI Guidelines, as applicable, in case of a listed Indian company or in case of a company going through a delisting process as per the SEBI (Delisting of Equity Shares) Regulations, 2009. The price is determined for such duration as specified in the SEBI Guidelines, preceding the relevant date, which shall be the date of purchase or sale of sha....
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....ntribution/ profit share of an LLP. 8.9.2 In case of transfer of capital contribution/ profit share of an LLP from a person resident outside India to a person resident in India, the transfer should be for a consideration which is not more than the fair price of the capital contribution/ profit share of an LLP. 8.10 Non-applicability of pricing guidelines 8.10.1 The pricing guidelines will not apply for investment in equity instruments by a person resident outside India on non-repatriation basis. 8.10.2 The pricing guidelines will not be applicable for any transfer by way of sale done in accordance with SEBI regulations where the pricing is prescribed by SEBI. A Chartered Accountant's Certificate to the effect that relevant SEBI regulations/ guidelines have been complied with has to be attached to the form FC-TRS filed with the AD bank. 8.11 Validity of valuation certificate The valuation certificate issued by a Chartered Accountant or a SEBI registered Merchant Banker or a practicing Cost Accountant, for application of pricing guidelines, must not be more than ninety days old as on the date of the investment; Provided the above shall not apply in case where the price ....
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....to others, have control over all the policies of an LLP. 9.1.9 'Company controlled by resident Indian citizens' is an Indian company, the control of which is vested in resident Indian citizens and/ or Indian companies which are ultimately owned and controlled by resident Indian citizens. 9.1.10 An 'LLP controlled by resident Indian citizens' is an LLP, the control of which is vested in resident Indian citizens and/ or Indian entities, which are ultimately owned and controlled by resident Indian citizens. 9.1.11 'Company controlled by persons resident outside India' is an Indian company the control of which is vested with persons resident outside India. 9.1.12 An 'LLP controlled by persons resident outside India' is an LLP the control of which is vested with persons resident outside India. 9.1.13 'Downstream Investment' is investment made by an Indian entity which has received foreign investment or an Investment Vehicle in the equity instruments or the capital, as the case may be, of another Indian entity. 9.1.14 'Holding Company' will have the same meaning as defined in Companies Act, 2013. 9.1.15 'Indirect Foreign Investment' is downstream investment received by an I....
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....is required to comply with the entry route, sectoral caps, pricing guidelines and other FDI linked performance conditions as applicable for foreign investment. 9.3.2 Downstream investment by an LLP which has received foreign investment and is not owned and not controlled by resident Indian citizens or owned or controlled by persons resident outside India is allowed in an Indian company operating in sectors where foreign investment up to 100 percent is permitted under automatic route and there are no FDI linked performance conditions. 9.3.3 Indirect foreign Investment is permitted in an LLP in sectors where foreign investment is allowed 100% under automatic route and there are no FDI linked performance conditions. 9.3.4 If the sponsors/ managers/ investment managers of an investment vehicle are individuals, for the downstream investment made by such investment vehicle not to be considered as Indirect Foreign Investment for the investee, the sponsors/ managers/ investment managers of the investment vehicle should be resident Indian citizens. In case the sponsor/ manager/ investment manager is organised in any other form, SEBI will determine whether it is foreign owned and/ or c....
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....9.5.2 FCCBs and DRs having underlying of instruments in the nature of debt will not be reckoned for total foreign investment. 9.5.3 The methodology for calculating total foreign investment would apply at every stage of investment in Indian companies and thus in each and every Indian company. 9.5.4 For the purpose of downstream investment, the portfolio investment held as on March 31 of the previous financial year in the Indian company making the downstream investment will be considered for computing the total foreign investment of the investee Indian entity. 9.5.5 The indirect foreign investment received by a wholly owned subsidiary of an Indian company will be limited to the total foreign investment received by the company making the downstream investment 9.6 Conditions for exit 9.6.1 Equity instrument of an Indian company held by another Indian company which has received foreign investment and is not owned and not controlled by resident Indian citizens or is owned or controlled by persons resident outside India may be transferred to: * a person resident outside India, subject to reporting requirements in Form FCTRS. However, pricing guidelines will not apply for such ....
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.... bank may permit the remittance of sale proceeds of a security (net of applicable taxes) to the seller resident outside India provided: * the security was held by the seller on repatriation basis; and * either the security has been sold in compliance with the pricing guidelines or the RBI's approval has been obtained in other cases for sale of the security and remittance of the sale proceeds thereof. 11. References to the Reserve Bank Any requests for clarification pertaining to foreign investment framework may be made to the Authorized Dealer (AD) bank concerned. The AD bank may, if required, forward the request to the concerned Regional Office of Reserve Bank for guidance. Such representation shall be routed through a nodal office of the AD bank specifically designated for this purpose, along with specific recommendation/ observations, FEMA provisions, reason for submission to Reserve Bank and relevant documents. The jurisdiction of a regional office of Reserve Bank shall be as per the registered office of the Indian investee entity. Annex 1 Purchase/ Sale of equity instruments of an Indian company by a person resident outside India 1. Purchase/ sale of equity i....
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....orm FC-GPR. 1.3.2 Pre-incorporation/ pre-operative expenses will include amounts remitted to the investee Company's account or to the investor's account in India if it exists or to any consultant or attorney or to any other material/ service provider for expenditure relating to incorporation or necessary for commencement of operations. 1.4 Other modes of issue 1.4.1 An Indian company may issue equity shares (excluding partly paid shares) to a person resident outside India against any funds payable by it to such person, the remittance of which is permitted under the Act or the rules or the regulations framed or directions issued thereunder or does not require prior permission of the Central Government or the RBI under the Act or the rules or the regulations framed or directions issued thereunder subject to the following conditions: * Issue of such shares that require Government approval or import dues deemed as ECB or trade credit or payables against import of second hand machinery will be dealt in accordance with respective guidelines; * The issue of such shares under this provision shall be subject to tax laws as applicable to the funds payable and the conversion to equi....
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....e the beneficial ownership and identity of the importer company as well as the overseas entity; and * Applications (complete in all respects) for capitalization should be submitted within 180 days from the date of shipment of goods. (d) Pre-operative/ pre-incorporation expenses (including payments of rent etc.), subject to the following conditions: (i) Verification and certification of the pre-incorporation/ pre-operative expenses by the statutory auditor; (ii) Submission of FIRC for remittance of funds by the overseas promoters for the expenditure incurred; (iii) Payments should be made by the foreign investor to the company directly or through the bank account opened by the foreign investor as provided under the Act or the rules or the regulations framed thereunder; and (iv) In case of applications submitted for Government approval: * The applications should be accompanied by documents evidencing 1.4.4(d)(i), (ii) and (iii) above and a special resolution of the company. * The application (complete in all respects) for capitalization being made within a period of 180 days from the date of incorporation of the company. 2. Mode of payment, issue of equity instrumen....
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....ons, 2016. Annex 2 Investments by Foreign Portfolio Investors 1. Purchase/ sale of equity instruments 1.1 A Foreign Portfolio Investor (FPI) may purchase or sell equity instruments of an Indian company on a recognised stock exchange in India. Explanation, - In case two or more FPI's including foreign Governments, or their related entities are having common ownership, directly or indirectly, of more than fifty percent or common control, all such FPIs shall be treated as forming part of an investor group. 1.2 The total holding by each FPI or an investor group as referred in SEBI (FPI) Regulations, 2014, should be less than 10 per cent of the total paid-up equity capital on a fully diluted basis or less than 10 per cent of the paid-up value of each series of debentures or preference shares or warrants issued by an Indian company and the total holdings of all FPIs put together should not exceed 24 per cent of paid-up equity capital on a fully diluted basis or paid up value of each series of debentures or preference shares or warrants. The limit of 10 percent and 24 percent will be called individual and aggregate limit, respectively. 1.3 The aggregate limit of 24 percent m....
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.... any authority designated to do so by the RBI or SEBI. * Borrowing of equity shares by FPIs will only be for the purpose of delivery into short sale. * The margin/ collateral will be maintained by FPIs as applicable in the cash and F&O segment of equity market. No interest shall be paid to the FPI on such margin/ collateral. * The designated custodian banks shall separately report all transactions pertaining to short selling of equity shares and lending and borrowing of equity shares by FPIs in their daily reporting with a suitable remark (short sold/ lent/ borrowed equity shares) for the purpose of monitoring by the RBI. 1.8 Investments will be subject to the limits and margin requirements prescribed by the RBI/ SEBI. 2. Mode of payment 2.1 The amount of consideration for purchase of equity instruments should be received from abroad through banking channels through inward remittance or out of funds held in a foreign currency account and/ or a Special Non-Resident Rupee (SNRR) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. 2.2 The foreign currency account 9can be used only and exclusively for transactions under this ....
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....agement (Deposit) Regulations, 2016; * Sale proceeds (net of taxes) of equity instruments acquired on repatriation basis in accordance with instructions contained in this annex and sold on stock exchange; and * Dividend or income earned on investment made on repatriation basis in accordance with instructions contained in this annex. 2.2.2 The specific debits permitted for the NRE (PIS) account are as follows: * Outward remittances of dividend or income earned on investment made on repatriation basis in accordance with instructions contained in this annex; * Amounts paid on account of purchase of equity instruments on repatriation basis on stock exchanges in accordance with instructions contained in this annex; * Any charges on account of sale/ purchase of equity instruments in accordance with instructions contained in this annex; and * Remittances outside India or transfer to NRE/ FCNR (B) accounts of the NRI/ OCI or any other person eligible to maintain such accounts in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. 3. Remittance of sale proceeds The sale proceeds (net of taxes) of the equity instruments can be remitted outside India....
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.... an OCI is permitted to invest, on a non-repatriation basis, by way of contribution to the capital of a firm or a proprietary concern in India. 1.2 The investee firm or proprietary concern should not be engaged in any agricultural/ plantation activity or print media or real estate business i.e., dealing in land and immovable property with a view to earning profit or earning income therefrom. 2. Mode of payment 2.1 The amount of consideration should be received from abroad through banking channels or paid out of funds held in NRE/ FCNR(B)/ NRO accounts maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. 3. Sale/ maturity proceeds 3.1 The disinvestment proceeds should be credited only to the NRO account of the person concerned, irrespective of the type of account from which the consideration was paid. 3.2 The amount invested for contribution to the capital of a firm or a proprietary concern and the capital appreciation thereon cannot be repatriated abroad. Annex 5 Investment in a Limited Liability Partnership (LLP) 1. Investment in a LLP 1.1 Foreign Investment was permitted in an LLP with effect from May 20, 2011. 1.2 A per....
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....ctor * Dairy industry * Poultry industry * Production of bio-fuels * Hotel-cum-convention centres with seating capacity of more than three thousand. * Infrastructure sector. The term 'Infrastructure Sector' has the same meaning as given in the Harmonised Master List of Infrastructure sub-sectors approved by Government of India vide Notification F. No. 13/06/2009-INF dated March 27, 2012 as amended/ updated. 1.3 An FVCI can invest in equity or equity linked instrument or debt instrument issued by an Indian startup company irrespective of the sector in which the startup company is engaged. Provided that: if the investment is in equity instruments, then the sectoral caps, entry routes and attendant conditions shall apply. 1.4 An FVCI can acquire units of a Venture Capital Fund (VCF) or of a Category I Alternative Investment Fund (Cat-I AIF) or units of a scheme or of a fund set up by a VCF or by a Cat-I AIF. 1.5 Investment by an FVCI in equity instruments of an Indian company will be subject to the reporting, sectoral caps, entry routes and attendant conditions. 1.6 An FVCI may purchase the securities/ instruments permitted for it either from the issuer of these se....
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....in 13any repatriable foreign currency or Rupee account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. 3. Remittance of sale/ maturity proceeds The sale/ maturity proceeds (net of taxes) of the units may be remitted outside India or credited to the 14any repatriable foreign currency or Rupee account of the person concerned maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. Annex 8 Investment in Depository receipts by a person resident outside India 1. Issue/ transfer of eligible instruments to a foreign depository for the purpose of issuance of depository receipts by eligible person(s) 1.1 In terms of Depository Receipts Scheme, 2014 (DR Scheme, 2014), Depository Receipts can be issued against any security or unit in which a person resident outside India is allowed to invest under NDI Rules. These will be referred to as 'eligible instruments' for the purpose of this annex. 1.2 A person is permitted to issue or transfer eligible instruments to a foreign depository for the purpose of issuance of depository receipts in accordance with the DR Scheme, 2014 and guidelines issued by Central Go....
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.... issuance of IDRs by eligible foreign companies in Indian markets. This limit would be monitored by SEBI 3. Transfer, redemption and two way fungibility of IDRs 3.1 Redemption/ conversion of IDRs into underlying equity shares of the issuing company shall comply with the 16Foreign Exchange Management (Overseas Investment) Rules, 2022. 3.2 IDRs shall not be redeemable into underlying equity shares before the expiry of one year from the date of issue. 3.3 Limited two way fungibility of IDRs is permissible. 3.4 The guidelines to be followed for 3.1, 3.2 and 3.3 above are as follows: * Listed Indian companies may either sell or continue to hold the underlying shares subject to compliance with the Foreign Exchange Management (Overseas Investment) Rules, 2022. * Indian Mutual Funds, registered with SEBI may either sell or continue to hold the underlying shares subject to compliance with the Foreign Exchange Management (Overseas Investment) Rules, 2022. * Other persons resident in India including resident individuals are allowed to hold the underlying shares only for the purpose of sale within a period of 30 days from the date of conversion of the IDRs into underlying share....
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....ed in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. Annex 12 List of notifications/circulars which have been consolidated in this Master Direction SN Rules/Notifications/ A.P. (DIR Series) Circulars Date 1 Foreign Exchange Management (NDI) Rules, 2019 October 17, 2019 3 FEM (NDI) (Amendment) Rules, 2019 December 05, 2019 4 FEM (NDI) (Amendment) Rules, 2020 April 22, 2020 5 FEM (NDI) (Second Amendment) Rules, 2020 April 27, 2020 6 FEM (NDI) (Amendment) Rules, 2021 August 06, 2021 7 FEM (NDI) (Second Amendment) Rules, 2021 August 19, 2021 8 FEM (NDI) (Third Amendment) Rules, 2021 October 05, 2021 9 FEM (NDI) (Fourth Amendment) Rules, 2021 October 12, 2021 10 FEM (NDI) (Amendment) Rules, 2022 April 12, 2022 11 FEM (NDI) (Amendment) Rules, 2024 January 24, 2024 11 Foreign Exchange Management (Non-Debt Instruments) (Second Amendment) Rules, 2024 March 14, 2024 12 Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2024 August 16, 2024 1 Inserted vide Notification No. FEMA 395(3)/2025-RB dated January 15, 2025 2 Modified vide Notification No. FEMA 395(3)/2025-RB dated January 15, 2025.....