What is the automatic route vs the government route?
Under the automatic route, a foreign investor does not need prior approval from the Government of India or RBI before bringing capital into an Indian company — the Indian company simply files the post-facto reporting (FC-GPR) on the RBI FIRMS portal.
The government (approval) route applies in two situations: (i) sectors that the FDI policy classifies as sensitive — for example portions of defence, broadcasting, print media, and multi-brand retail; and (ii) under Press Note 3 (2020), any investor that is a resident of — or whose beneficial owner is in — a country sharing a land border with India, irrespective of sector or amount.
What are the sectoral caps for FDI in India?
100% FDI under the automatic route is permitted in most sectors, including IT and software services, manufacturing, e-commerce marketplaces, professional services, and many parts of financial services. Sector-specific caps and conditions continue to apply in areas such as defence, insurance, telecom, private banking, and multi-brand retail. Always confirm the current cap and any conditions for your sector before structuring the round.
At what price can a foreign investor subscribe to shares?
Shares issued to a non-resident must be priced at not less than fair value. That fair value must be certified by a Chartered Accountant or SEBI-registered merchant banker using an internationally accepted valuation methodology — typically Discounted Cash Flow (DCF) for an unlisted company. The same pricing principle applies to transfers: a resident cannot sell shares to a non-resident below fair value, and a non-resident cannot sell to a resident above fair value.
How is the FDI reported?
The Indian company reports the inflow on the RBI FIRMS portal:
- Form FC-GPR — within 30 days of allotment of shares to a non-resident.
- Form FC-TRS — for transfer of shares between a resident and a non-resident.
- Annual FLA Return — Foreign Liabilities and Assets return, due by 15 July every year for any entity that has received FDI or made ODI.
Late FC-GPR, FC-TRS, or FLA filings are common triggers for FEMA contraventions and compounding applications — see FEMA / RBI Compliance.
Which India entry vehicle should a foreign founder choose?
For most operating businesses, a wholly owned subsidiary (WOS) is the cleanest long-term structure — full control, clear ring-fencing, and a straightforward FDI/dividend path. A joint venture makes sense where local relationships, licences, or sector restrictions require an Indian partner. Where you want a presence but not a separate company, look at a branch or liaison office.