Foreign Investment in India

Business Registration & FDI Compliance in India

Expanding into India can be a great opportunity to grow—but navigating regulatory requirements, approvals, and compliance under FEMA and RBI can be complex.

We assist foreign investors and companies to establish their business in India without any difficulties, and in full compliance with FDI regulations, company laws and reporting.

Whether it is the selection of the appropriate entry structure or the end-to-end filings, our professionals make the entry of India and subsequent compliance simple.

1. Entry Options for Foreign Companies in India

Foreign entities can locate their presence in India using various structures based on business objectives, control styles, and regulatory factors:

A. Company Incorporation (Most Preferred Route)

Wholly Owned Subsidiary (WOS)
Complete ownership and control by the foreign investor.
Joint Venture (JV)
Partnership with an Indian entity for local expertise or regulatory requirements

Both are regulated by the Companies Act, 2013 and allow operational flexibility, scalability, and funding access.

B. Establishment of Offices (RBI Approval Required)

Liaison Office (LO)
In the case of market research, communication and promotion (no revenue generating activity)
Branch Office (BO)
Authorized to perform certain commercial operations including export/import,
Project Office (PO)
Established to implement certain contracts or projects in India.

2. Routes for Foreign Direct Investment (FDI)

i) Automatic Route

No previous government permission was necessary.
The ones that companies in most industries usually have (or frequently up to 100% FDI)
RBI reporting after investment was only necessary.

ii) Government Route

Prior approval required from the Government of India
The applications that are processed using the Foreign Investment Facilitation Portal (FIFP)
Applies to restricted or sensitive sectors

3. Prohibited Sectors for FDI

FDI is not permitted in the following sectors:

Lottery business (including online)
Gambling and betting
Chit funds and Nidhi companies
Real estate trading (excluding development projects)
Tobacco manufacturing
Atomic energy
Railway operations (except those which are allowed)
Trading in Transferable Development Rights (TDRs)

4. Step-by-Step FDI Procedure in India

Step 1: Receipt of Funds

The payments should be received through the legitimate banking paths.
File Advance Reporting Form (ARF) within 30 days.

Step 2: Allotment of Shares

Shares need to be issued not later than 60 days after receipt of funds.

Step 3: Filing of FC-GPR

File Form FC-GPR must be filed within 30 days of allotment of shares.
Registered by an Authorized Dealer (AD) Bank

Key Documents Required:

FIRC (Foreign Inward Remittance Certificate)
KYC of investor
Board resolution
Valuation certificate

Step 4: Annual Compliance

File FLA (Foreign Liabilities and Assets Return) by 15 July every year

5. Penalties for Non-Compliance

Non-compliance under FEMA can result in:

Penalty up to 3× the amount involved, or
Up to ₹2 lakh (if amount not quantifiable)
Additional ₹5,000 per day for continuing default

Compounding of offences can be done through RBI to regularize delays.

6. Transfer of Shares (Resident ↔ Non-Resident)

A. Transfer by Sale

Should be in accordance with price regulations and industry restrictions.
Submission of FC-TRS within 60 days

B. Transfer by Gift

Permitted with RBI approval if:

Does not exceed 5% of paid-up capital
Value ≤ USD 25,000 per financial year
Parties are relatives

7. Pricing Guidelines

Listed Companies: According to the regulations of SEBI.
Unlisted Companies: Fair valuation (DCF or internationally recognized methods)

Certification of valuation should be by a Chartered Accountant or Merchant Banker.

8. Modes of Payment for FDI

Inward remittance via banking channels
Debit from:
- NRE / FCNR accounts (NRIs)
- NRO accounts (non-repatriation investments)
- Special Non-Resident Rupee Accounts

9. Repatriation of Funds

Capital and profits can be repatriated freely (paying taxes).
The dividends may be paid back using approved banks.
Exception: Non-repatriation investments

10. Securities Issuable to Foreign Investors

Indian companies have the ability to issue:

Equity shares
Fully & mandatorily convertible debentures
Fully & mandatorily convertible preference shares

Other permitted instruments:

ESOPs
Bonus shares
Rights issue
Share swaps
Conversion of royalty or ECB into equity

11. Investment in Unlisted Companies

Foreign investors are free to invest in unlisted entities under the following:

FDI policy compliance
Valuation norms
Sectoral caps

12. Partnership / Proprietorship Restrictions

It is Only NRIs / PIOs can establish:

Partnership firms
Proprietorship concerns

Condition: The investment should be on a non-repatriation basis.

13. Key Compliance Forms & Timelines

Form	Purpose	Timeline
ARF	Reporting receipt of funds	Within 30 days
FC-GPR	Reporting share allotment	Within 30 days of issue
FC-TRS	Reporting share transfer	Within 60 days
FLA	Annual foreign liabilities/assets	By 15 July each year

Why Professional Assistance Matters

Although India has liberal and investor friendly FDI regime, the compliance to the regulations is stern and time bound. The reporting, valuation, or structuring errors may cause penalties and delays.

Our services help you:

Select the appropriate entry structure (WOS, JV, or office setup)
Make sure end-to-end FEMA and RBI compliance.
Handle FDI filings (ARF, FC-GPR, FC-TRS, FLA)
Get government approvals where necessary.
Administer valuation and recording.
Provide easy repatriation and continuing compliance.

Get Expert Guidance

Expanding into the Indian market does not necessarily need to be complicated. You can establish faster, maintain compliance and grow confidently with the right advisory.