Department of Industrial

Policy and
Promotion
Ministry of Commerce and
Industry
Government of India
Consolidated FDI Policy
(
Effective from April
1
7

, 201
4
)
1
Government of India
Ministry of Commerce & Industry
Department of Industrial Policy & Pro
motion
(FC Section)

Consolidated FDI Policy Circular of

201
4
Subject:
Consolidated F
DI
Policy.
The Consolidated FDI Policy is attached.
2. This circular will take effect from
April
1
7
, 201
4
.
(
Anjali Prasad
)
Additional
Secretary to the Government
of India
D/o IPP F. No.
5(1)/201
4
FC.I Dated

the
1
7
.0
4
.2014
Copy forwarded to:
1
.
Press Information Officer, Press Information Bureau
for giving wide publicity to the
above circular.
2
.
NIC
, DIPP
for uploading the circular on DIPP's website.
3
.
Depa
rtment of Economic Affairs, Ministry of Finance, New Delhi
.
4
.
Reserve Bank of India, Mumbai
.
5
.
Hindi Section for Hindi Translation
.
23
(a)
The proposed transferee (donee) is eligible to hold such capital
instruments
under Schedules 1, 4 and
5 of Notification No. FEMA 20/2000

RB dated May
3, 2000, as amended from time to time.
(b)
The gift does not exceed 5 per cent of the paid
up capital of the Indian
company/each series of debentures/each mutual fund scheme.
(c)
The applicable sectoral cap
limit in the Indian company is not breached.
(d)
The transferor (donor) and the proposed transferee (donee) are close
relatives as
defined in Section 6 of the Companies Act, 1956, as amended from
time to
time. The current list is reproduced in
Annex
4
.
(e
)
The value of capital instruments
to be transferred together with any capital
instruments
already transferred by the transferor, as gift, to any person residing
outside India does not exceed the rupee equivalent of USD
50
,000 during the
financial
year.
(f
)
Such other conditions as stipulated by Reserve Bank in public interest
from
time to time.

(i
ii
) Transfer of shar
es from NRI to non
resident.
3.4.5.2
In the following cases, approval of RBI is not required:
A. Transfer of shares from a Non
Resident to Res
ident under the FDI scheme where
the pricing guidelines under FEMA, 1999 are not met provided that
:
i
.
The original and resultant investment are in line with the extant FDI
policy and
FEMA regulations in terms of sectoral caps, conditionalities (such as
minim
um
capitalization, etc.), reporting requirements, documentation, etc.;
ii
.
The pricing for the transaction is compliant with the specific/explicit,
extant
and relevant SEBI regulations/guidelines (such as IPO, Book building,
block
deals, delisting, exit, open
offer/substan
tial acquisition
/SEBI SAST, buy back);
and
iii
.
Chartered Accountants Certificate to the effect that compliance with
the

relevant SEBI regulations/guidelines as indicated above is attached to

the form
FC
TRS to be filed with the AD bank.
B. Trans
fer of shares from Resident to Non
Resident:
i) where the transfer of shares requires the prior approval of the
Government
conveyed through
FIPB
as per the
extant FDI policy provided that
:
a)
the requisite approval of the FIPB has been obtained; and
b)
t
he transfer of share adheres with the pricing guidelines and
documentation
requirements as specified by the Reserve Bank of India from time to
time.
24
ii)
where the transfer of shares attract SEBI (SAST)
Regulations
subject to the
adherence with the pricing
guidelines and documentation requirements as specified by
Reserve Bank of India from time to time.
iii)
where the transfer of shares does not meet the pricing guidelines
under the FEMA,
1999 provided that:
a)

The resultant FDI is in compliance with the ext

ant FDI policy and FEMA
regulations in terms of sectoral caps, conditionalities (such as
minimum
capitalization, etc.), reporting requirements, documentation etc.;
b)
The pricing for the transaction is compliant with the specific/explicit,
extant
and relev
ant SEBI regulations/guidelines (such as IPO, Book building, block
deals, delisting, exit, open offer/substantial acquisition/SEBI SAST);
and
c)
Chartered Accountants Certificate to the effect that compliance with
the
relevant SEBI regulations/guidelines a
s indicated above is attached to the form
FC
TRS to be filed with the AD bank.
iv)
where the investee company is in the financial sector provided that :
a)
Any fit and proper/due diligence requirement
s
as regards the non
resident
investor as stipulated
by the respective financial sector regulator
, from time to
time,
have been complied with
; and
b)
The FDI policy and FEMA regulations in terms of sectoral caps,

conditionalities (such as minimum capitalization, pricing, etc.),

reporting
requirements, docume
ntation etc., are complied with.
3.4.6
Conversion of ECB/Lump
sum Fee/Royalty
etc.
into Equity
(i)
Indian companies have been granted general permission for
conversion of External
Commercial Borrowings (ECB) (excluding those deemed as ECB) in
convertible
f
oreign currency into equity shares/fully compulsorily and mandatorily
convertible
preference shares, subject to the following conditions and reporting
requirements
:
(a)
The activity of the company is covered under the Automatic Route for
FDI or
the company
has obtained Government approval for foreign equity in the
company;
(b)
The foreign equity after conversion of ECB into equity is within the
sectoral
cap, if any;
(c)
Pricing of shares is as per the
provision of para 3.4.2 above;
(d)
Compliance with the r
equirements prescribed under any other statute and
regulation in force; and

reson policy measures

100% FDI allowed in medical devices

FDI cap increased in insurance & sub-activities from 26% to 49%

100% FDI allowed in the telecom sector.

100% FDI in single-brand retail.

FDI in commodity exchanges, stock exchanges & depositories, power exchanges,

petroleum refining by PSUs, courier services under the government route has now been
brought under the automatic route.

Removal of restriction in tea plantation sector.

FDI limit raised to 74% in credit information & 100% in asset reconstruction companies.

FDI limit of 26% in defence sector raised to 49% under Government approval route.
Foreign Portfolio Investment up to 24% permitted under automatic route. FDI beyond
49% is also allowed on a case to case basis with the approval of Cabinet Committee on
Security.

Construction, operation and maintenance of specified activities of Railway sector opened

to 100% foreign direct investment under automatic route.

Summary
India has already marked its presence as one of the fastest growing economies of the world. It
has been ranked among the top 3 attractive destinations for inbound investments. Since 1991, the
regulatory environment in terms of foreign investment has been consistently eased to make it
investor-friendly

TYPES OF INVESTORS

Individual:

FVCI

Pension/Provident Fund

Financial Institutions

Company:

Foreign Trust

Sovereign Wealth Funds

NRIs / PIOs

Foreign Institutional Investors:

Private Equity Funds

Partnership / Proprietorship Firm

Others

Note : Citizen or entity from Bangladesh & Pakistan can invest only under the government route
also investor from Pakistan cannot invest in defence, space, atomic energy and sectors
prohibited for foreign investment.

Sectors where Foreign Direct Investment is prohibited:

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

Gambling and Betting including casinos etc.

Chit funds

Nidhi company-(borrowing from members and lending to members only).

Trading in Transferable Development Rights (TDRs)

Real Estate Business (other than construction development) or Construction of Farm

Houses

Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco

substitutes

Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway
Transport (other than construction, operation and maintenance of (i) Suburban corridor
projects through PPP, (ii) High speed train projects, (iii) Dedicated freight lines, (iv)
Rolling stock including train sets, and locomotives/coaches manufacturing and
maintenance facilities, (v) Railway Electrification, (vi) Signaling systems, (vii) Freight
terminals, (viii) Passenger terminals, (ix) Infrastructure in industrial park pertaining to
railway line/sidings including electrified railway lines and connectivities to main railway
line and (x) Mass Rapid Transport Systems.)

Services like legal, book keeping, accounting & auditing.

FOREIGN DIRECT INVESTMENT

SUMMARY
RECENT POLICY MEASURES
TYPES OF INVESTORS
SECTORS WITH RESTRICTIONS
SECTORS WITH CAPS

Petroleum Refining by PSU (49%).

Teleports (setting up of up-linking HUBs/Teleports),Direct to Home (DTH), Cable

Networks (Multi-system operators (MSOs) operating at national, state or district level
and undertaking upgradation of networks towards digitalization and addressability),
Mobile TV and Headend-in-the-Sky Broadcasting Service (HITS) (74%).

Cable Networks (49%).

Broadcasting content services- FM Radio (26%), uplinking of news and current affairs
TV channels (26%).

Print Media dealing with news and current affairs (26%).

Air transport services- scheduled air transport (49%), non-scheduled air transport (74%).

Ground handling services Civil Aviation (74%).

Satellites- establishment and operation (74%).

Private security agencies (49%).

Private Sector Banking- Except branches or wholly owned subsidiaries (74%).

Public Sector Banking (20%).

Commodity exchanges (49%).

Credit information companies (74%).

Infrastructure companies in securities market (49%).

Insurance and sub-activities (49%).

Power exchanges (49%).

Defence (49% above 49% to CCS).

Sectors wch need central govt approval

Tea sector, including plantations 100%.

Mining and mineral separation of titanium-bearing minerals and ores, its value addition
and integrated activities -100%.

FDI in enterprise manufacturing items reserved for small scale sector 100%.

Defence up to 49% under FIPB/CCEA approval, beyond 49% under CCS approval
(on a case-to-case basis, wherever it is likely to result in access to modern and state-ofthe-art technology in the country).

Teleports (setting up of up-linking HUBs/Teleports), Direct to Home (DTH), Cable

Networks (Multi-system operators operating at National or State or District level and
undertaking upgradation of networks towards digitalization and addressability), Mobile
TV and Headend-in-the Sky Broadcasting Service(HITS) beyond 49% and up to 74%.

Broadcasting Content Services: uplinking of news and current affairs channels 26%,
uplinking of non-news and current affairs TV channels 100%.

Publishing/printing of scientific and technical magazines/specialty journals/periodicals

100%.

Print media: publishing of newspaper and periodicals dealing with news and current
affairs- 26%, Publication of Indian editions of foreign magazines dealing with news and
current affairs- 26%.

Terrestrial Broadcasting FM (FM Radio) 26%.

Publication of facsimile edition of foreign newspaper 100%.

Airports brownfield beyond 74%.

Non-scheduled air transport service beyond 49% and up to 74%.

Ground-handling services beyond 49% and up to 74%.

Satellites 74%.

Private securities agencies 49%.

Telecom-beyond 49%.

Single brand retail beyond 49%.

Asset reconstruction company beyond 49% and up to 100%

Banking private sector (other than WOS/Branches) beyond 49% and up to 74%, public
sector 20%.

Pharmaceuticals brownfield 100%.

All the items other than above are under the automatic route.

ENTRY STRUCTURES

Incorporating a company in India:

It can be a private or public limited company. Both wholly owned & joint ventures are
allowed. Private limited company requires minimum of 2 shareholders.

Limited liability partnerships:

Allowed under the Government route in sectors which has 100% FDI allowed under the
automatic route and without any conditions.

Sole proprietorship/partnership firm:

Under RBI approval. RBI decides the application in consultation with Government of
India.

Extension of foreign entity:

Liaison office, Branch office (BO) or Project Office (PO). These offices can undertake
only the activities specified by the RBI. Approvals are granted under the Government and
RBI route. Automatic route is available to BO/PO meeting certain conditions.

Other structures:

Foreign investment or contributions in other structures like not for profit companies etc.
are also subject to provisions of Foreign Contribution Regulation Act (FCRA).

STEPS INVOLVED IN INVST

Identification of structure
Central Government approval if required
Setting up or incorporating the structure
Inflow of funds via eligible instruments and following pricing guidelines
Meeting reporting requirements of RBI and respective Act
Registrations/obtaining key documents like PAN etc.
Project approval at state level
Finding ideal space for business activity based on various parameters like incentives,
cost, availability of man power etc.
Manufacturing projects are required to file Industrial Entrepreneurs Memorandum
(IEM), some of the industries may also require industrial license.
Construction/renovation of unit
Hiring of manpower
Obtaining licenses if any
Other state & central level registrations
Meeting annual requirements of a structure, paying taxes etc

Repatriation of Dividend :

Dividends are freely repatriable without any restrictions (net after tax deduction at source
or Dividend Distribution Tax.

Repatriation of Capital :

AD Category-I bank can allow the remittance of sale proceeds of a security (net of
applicable taxes) to the seller of shares resident outside India, provided the security has
been held on repatriation basis, the sale of security has been made in accordance with the
prescribed guidelines and NOC / tax clearance certificate from the Income Tax
Department has been produced.

Investments are subject to lock-in period of 3 years in case of construction development

sector.

Repatriation of Interest :

Interest on fully, mandatorily & compulsorily convertible debentures is also freely

repatriable without any restrictions (net of applicable taxes).

FOREIGN DIRECT INVESTMENT

SUMMARY
RECENT POLICY MEASURES
TYPES OF INVESTORS
SECTORS WITH RESTRICTIONS
SECTORS WITH CAPS
GLOSSARY OF DEFINITIONS
SECTORS REQUIRING CENTRAL GOVERNMENT APPROVAL
SECTORS UNDER AUTOMATIC ROUTE
ENTRY STRUCTURES
STEPS INVOLVED IN INVESTMENT

REPATRIATION OF DIVIDENDS & CAPITAL

ASPECTS OF TAXATION

Direct Taxes :

The investor is required to pay tax on net income earned in India. The rates of taxes differ
among structures.

Company :

The company incorporated in India is required to pay 30% tax+surcharge+education cess

on net income earned. It is also required to deduct tax on profits distributed @15.5%
+surcharge+education cess.

Branch Office / Project Office / Liaison Office or Permanent

Establishment :

The fixed place of business in India is treated as a permanent establishment and is

required to pay tax @40%+surcharge+education cess. There is no tax on profits
distributed.

LLPs :

LLPs are required to pay tax @30%+surcharge+education cess. There is no tax on profits
distributed.

Minimum Alternate Tax :

18.5%+SC+EC- Indian tax law requires MAT to be paid by corporations in cases where
the tax payable according to the regular tax provisions is less than 18.5% of their book
profits. However MAT credit (MAT-actual tax) can be carried forward in next 10 years
for set-off against regular tax payable during the subsequent years subject to certain
conditions.

Please Note : Please note transactions between associated enterprises needs to follow transfer
pricing regulations.

Central Government Incentives :

Investment allowance (additional depreciation) at the rate of 15 percent to manufacturing

companies that invest more than INR 1 billion in plant and machinery available till to
31.3.2015.

Incentives available to units set-up in SEZ, NIMZ etc. and EOUs.

Exports incentives like duty drawback, duty exemption/remission schemes, focus

products & market schemes etc.

Areas based incentives like unit set-up in north east region, Jammu & Kashmir, Himachal
Pradesh, Uttarakhand.

Sector specific incentives like M-SIPS in electronics.

State Government Incentives :

Each state government has its own incentive policy, which offers various types of
incentives based on the amount of investments, project location, employment generation,
etc. The incentives differ from state to state and are generally laid down in each states
industrial policy.

The broad categories of state incentives include: stamp duty exemption for land
acquisition, refund or exemption of value added tax, exemption from payment of
electricity duty etc.

SPECIAL DISPENSATIONS have been envisaged for NRI investments in the following :

Construction development

Ground Handling & Air transport services

NRI investing on non repatriable basis

FDI from NEPAL & BHUTAN is allowed in Indian rupees

Wh
at
We
Do

The Department of Industrial Policy & Promotion was established in the wake of the
economic liberalization of India with an intention of regulation and administration of the
industrial sector. The Departments role and functions have grown steadily ever. Today, the
DIPP not only regulates the industrial sector but also a facilitator of technology and
investment flows in an ever growing and liberalized Indian economy.
Following the Department's key focus areas:
Formulation and Implementation of India's Industrial Policy
The Department is responsible for formulation and implementation of promotional and
developmental measures for growth of the industrial sector, keeping in view the national
priorities and socio-economic objectives. It is responsible for the overall Industrial Policy. It
also monitors the growth and development in certain key industrial areas and makes
appropriate policy amendments to address the emerging concerns.
Formulation and Amendment of the FDI policy
The DIPP is responsible for formulation of the FDI policy and facilitation of FDI inflows
into the country. The department provides direct assistance in the resolution of problems
faced by foreign investors. It also disseminates information about the positive investment
climate that exists in the Indian economy to promote investments. The Department also
encourages and facilitates foreign technology collaborations among Indian companies and
bilateral Economic cooperation agreements in the region.
Industrial Promotion
The Department is involved in promotion of industry throughout the country. As a part of
this responsibility, the Department monitors and stimulates industrial growth, promotes
industrial activity in remote and underdeveloped areas of the country and undertakes
programmes for improving productivity and quality. Through its Infrastructure Up
gradation Scheme (IIUS) the department works towards enhancing competitiveness of the
domestic industry.
Formulation and Implementation of Intellectual property Rights Policy
The DIPP recognise the importance of Intellectual Property in the day to days' global
business environment. The Department formulates and implements a comprehensive
Intellectual Property Rights policy covering Patents, Designs, Trade Marks and
Geographical Indications of Goods. Apart from this the Department works towards creating
awareness regarding IPRs by working closely with organisations such as the World
Intellectual Property Organization (WIPO).
Mission

MISSION
We shall work consciously and dedicatedly for positioning India amongst the

top industrial countries of the world in a relatively shorter time frame. We sha

create enormous opportunities for investment in sustainable industrial activiti

and open up employment avenues for enhancing the quality of life of the

common man. We shall achieve excellence in formulating balanced Industrial

policies and expeditiously implement them for the maximum good of the
people of India. Our guiding principles in realizing these lofty goals will be

through judicious resource utilization, improvement in productivity, dispersal

of industries, development of backward areas and more importantly,
blossoming of entrepreneurial talents