Press Note 3 and the 2026 changes: FDI from land-border countries

Last reviewed: November 2026 · Written and reviewed by CA Regi Tom Antony, FCA

What is Press Note 3?

Press Note 3 (2020 Series) was issued by the Department for Promotion of Industry and Internal Trade (DPIIT) on 17 April 2020 to stop opportunistic takeovers of Indian companies during the pandemic. It amended paragraph 3.1.1 of the Consolidated FDI Policy and is given legal effect by rule 6(a) of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

It applies to entities of, and citizens of, the seven countries that share a land border with India: China, Pakistan, Bangladesh, Nepal, Myanmar, Bhutan, Afghanistan. The test is not only who invests, but who ultimately owns the investor. A fund in Singapore, Mauritius or the US with land-border beneficial owners can be caught.

What changed in 2026?

Who can now use the automatic route?

The 2026 relief is narrow. All of these must be true:

• The investor is not itself an entity of a land-border country, and is not a citizen of one
• Land-border beneficial ownership in the investor is 10% or less, measured under the PMLA thresholds
• That land-border interest is non-controlling: no board control, veto rights or side-letter rights that amount to control of the investor or the Indian company
• The sector is open under the automatic route, and the sectoral cap and other FDI conditions are met
• The investment is reported to DPIIT in the format DPIIT prescribes

Example: a Singapore fund with a 7% passive Chinese limited partner investing in an Indian SaaS company can now use the automatic route. The same fund with a Chinese LP holding 15%, or holding a board seat or veto, still needs approval. A company incorporated in China needs approval for any investment.

How is beneficial ownership tested?

Since the 2026 amendments, "beneficial owner" takes its meaning from section 2(1)(fa) of the Prevention of Money-laundering Act, 2002, with the thresholds in rule 9(3) of the PML (Maintenance of Records) Rules, 2005. Beneficial ownership is treated as sitting in a land-border country where its citizens or entities:

• hold rights or entitlements in the foreign investor above the prescribed thresholds;
• can exercise control over the foreign investor; or
• have ultimate effective control over the Indian company.

Before 2026 there was no threshold, so even a token land-border interest could trigger approval. The clearer test reduces that uncertainty, but control rights still count at any percentage.

Which proposals get a 60-day decision?

The press release of 10 March 2026 committed to deciding proposals within 60 days in specified manufacturing sectors, including capital goods, electronic capital goods, electronic components, and polysilicon and ingot-wafer, where majority shareholding and control of the Indian company stay with resident Indian citizens or entities they own and control. Other sectors follow the normal approval process, with ministry review and Ministry of Home Affairs security clearance.

Does Press Note 3 apply to acquisitions and share transfers?

Yes. Approval is needed where a transfer of existing or future FDI results in beneficial ownership falling within the land-border restriction, and, from June 2026, for listed-equity purchases or transfers that give land-border investors ownership or control. A foreign buyer acquiring an Indian company should therefore test its own ownership chain, and a seller should test the buyer's. See acquiring an Indian company and FC-TRS filing.

How do you check whether Press Note 3 applies?

1. 1

   Map the ownership chain

   Trace every shareholder, partner, limited partner and controlling person in the investor up to the ultimate beneficial owners, with percentages and rights.

2. 2

   Apply the land-border test

   Check whether the investor is itself from a land-border country, whether land-border ownership exceeds the PMLA thresholds, and whether any land-border holder has control through board seats, vetoes or side letters.

3. 3

   Choose the route

   If the investor is a third-country entity with non-controlling land-border ownership of 10% or less in a permitted sector, proceed on the automatic route and report to DPIIT. Otherwise prepare a Government approval application.

4. 4

   File on NSWS

   Submit the proposal on the National Single Window System, cleared through the Foreign Investment Facilitation Portal, with the ownership chart, KYC, board resolutions, funding source and business plan; respond to ministry and security-clearance queries.

5. 5

   Close and report

   After approval or on the automatic route, receive funds through banking channels, issue shares within 60 days, and file FC-GPR within 30 days of allotment (or FC-TRS within 60 days for a transfer).

Common Press Note 3 mistakes

• Checking only the immediate investor and not the limited partners or ultimate shareholders
• Ignoring board seats, vetoes and side letters, which can amount to control at any percentage
• Treating the 2026 relief as covering investors incorporated in a land-border country
• Closing first and seeking approval later; FDI made without required approval is a FEMA contravention
• Missing the DPIIT reporting on automatic-route investments with any land-border ownership

For the wider route and sector-cap picture, see FDI entry routes and sector caps and company registration for foreign companies.

Sources: DPIIT Press Note 3 (2020 Series) and Press Note 2 (2026 Series); Government press release of 10 March 2026; Foreign Exchange Management (Non-debt Instruments) Rules, 2019, rule 6, as amended by S.O. 2174(E) of 1 May 2026 and the Third Amendment Rules of 12 June 2026; Prevention of Money-laundering Act, 2002, section 2(1)(fa); PML (Maintenance of Records) Rules, 2005, rule 9(3); Foreign Investment Facilitation Portal and the National Single Window System. Last reviewed: November 2026 · Reviewed by CA Regi Tom Antony, Regi Tom Antony & Associates. General guidance; DPIIT's reporting format and further clarifications may follow.