FDI & FEMA
FDI Entry Routes & Sector Caps in India
Before you incorporate an Indian entity, confirm two things: which FDI route applies to your activity — automatic or government — and what sectoral cap and conditions attach to it.
Automatic vs Government route
Automatic route
No prior approval. Investor incorporates the Indian entity, remits capital, allots shares and reports FC-GPR to the RBI within 30 days.
Government route
Prior approval from the administrative ministry via the National Single Window System (formerly FIFP) is mandatory before shares are issued.
Indicative sector caps
Sector policy is updated by DPIIT from time to time. As at the date of this page, the position is broadly as follows — always confirm the current FDI Policy circular and press notes before investing:
| Sector | Cap | Route |
|---|---|---|
| IT / software / SaaS | 100% | Automatic |
| Manufacturing (most) | 100% | Automatic |
| E-commerce (marketplace model) | 100% | Automatic |
| Single-brand retail | 100% | Automatic |
| Multi-brand retail | 51% | Government |
| Insurance | 74% | Automatic (with conditions) |
| Defence | 74% / above 74% | Automatic up to 74%; Government beyond |
| Print media (news) | 26% | Government |
| Broadcasting (news) | 26% | Government |
| Telecom | 100% | Automatic up to 49%; Government beyond |
| Banking (private) | 74% | Automatic up to 49%; Government beyond |
Prohibited sectors
- Lottery, gambling & betting, including casinos
- Chit funds & Nidhi companies
- Real-estate trading (other than construction development / townships)
- Manufacture of cigars, cigarettes and tobacco products
- Atomic energy & railway operations (except permitted areas)
Press Note 3 — land-border countries
Investments from countries that share a land border with India (or where the beneficial owner is situated in / a citizen of such a country) require prior government approval regardless of the sector or otherwise-applicable automatic route.
Press Note 3 (2020 series), now embedded in the FEMA (Non-debt Instruments) Rules, 2019, applies at the level of the beneficial owner, not only the immediate investor — so a fund or holding company routed through a third jurisdiction can still be caught (position as of 2026). Plan the approval timeline into your setup schedule; see cost and timeline of company setup in India.
Downstream / indirect foreign investment
Where an Indian company is foreign-owned or controlled and itself invests in another Indian company, that is downstream investment — treated as indirect foreign investment under the FEMA (Non-debt Instruments) Rules, 2019. The second-level company must satisfy the same sectoral cap, entry route and pricing conditions as if the funds came directly from abroad, and the investment is reported in Form DI within 30 days. Getting this wrong is a common way an otherwise automatic-route structure ends up needing approval after the fact.
Pricing & FEMA compliance
- Issue price to a non-resident must not be below the fair value under FEMA pricing guidelines
- Transfer between a resident and non-resident is subject to a floor / ceiling on price
- Valuation certificate by a SEBI-registered merchant banker or a Chartered Accountant is required
- FC-GPR within 30 days of allotment; FC-TRS within 60 days of transfer; annual FLA return to RBI by 15 July
How we help
We confirm your sector position and route, prepare FEMA valuation, incorporate the Indian entity and file FC-GPR / FC-TRS / FLA — coordinated with our sister firm SME Advisory for ongoing FEMA / RBI compliance. See our foreign company formation service or WOS setup.
Choosing between vehicles first? Compare them on branch vs liaison vs project office vs subsidiary. Once the entity is funded and profitable, the exit side of the same FEMA framework is covered in profit repatriation from India, and the setup mechanics in foreign company formation in India.
Frequently asked questions
What is the automatic route for FDI in India?
What is the government route?
Which sectors are prohibited for FDI?
Do investors from Press Note 3 countries need government approval?
What is the FC-GPR filing timeline?
What is downstream (indirect foreign investment)?
Which route applies if my sector has a partial cap?
Last reviewed: July 2026 · Reviewed by CA Regi Tom Antony, Regi Tom Antony & Associates. Sector caps are indicative — always confirm the current DPIIT FDI Policy circular before investing.
Not sure which FDI route applies?
Send us your sector and structure — we’ll confirm the route, cap and filings.