[Opinion] A brief about Foreign Direct Investment in India

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  • Last Updated on 13 February, 2023

Foreign Direct Investment in India

[2023] 147 taxmann.com 158 (Article)

What is Foreign Direct Investment?

Foreign Investment in India is governed by the FDI policy announced by the Government of India and the provisions of the Foreign Exchange Management Act (FEMA) 1999.

FOREIGN DIRECT INVESTMENT (‘FDI’) means investment through capital instruments by a person resident outside India in:

(a) Unlisted Indian company

(b) 10 % or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company.

    • INVESTMENT means to subscribe, acquire, hold or transfer any security or unit issued by a person resident in India.
    • CAPITAL INSTRUMENTS means equity shares, debentures, preference shares and share warrants issued by the Indian company.

• Equity shares: Equity shares are those issued in accordance with the provisions of the Companies Act, 2013 and will include partly paid equity shares issued on or after July 8, 2014.
• Share warrants: Share warrants issued on or after July 8, 2014 will be considered as capital instruments.
• Debentures: means fully, compulsorily and mandatorily convertible debentures.
• Preference shares: means fully, compulsorily and mandatorily convertible preference shares.

Important Links:

FDI Policy – https://dpiit.gov.in/sites/default/files/FDI-PolicyCircular-2020-29October2020.pdf read with https://dpiit.gov.in/sites/default/files/Press_Note_1_2022_14March2022.pdf
Master Direction FDI – https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11200&fn=5&Mode=0
FAQS on FDI – Reserve Bank of India – Frequently Asked Questions (rbi.org.in)

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