Nexdigm - Your Partner for India Entry

FDI regulations in India are mainly governed by

• The Foreign Exchange Management Act, 1999 (FEMA)
• Rules and notifications by the Reserve Bank of India (RBI)
• Sector-specific policies by the DPIIT. Two chief routes exist for FDI: (a) Automatic Route - most sectors allow for 100% FDI without government approval, and (b) Government Route - which requires prior government or sectoral ministry approval for notified sectors.

NRI Portfolio Investments are typically made under the Portfolio Investment Scheme (PIS) in India regulated by the Reserve Bank of India (RBI). The procedure involves:

• Open an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account with a designated bank.
• Obtain a PAN (Permanent Account Number) and complete Know Your Customer (KYC) norms.
• Open a demat and trading account with a registered broker under the PIS.
• All investments and disinvestments must be routed only through a designated branch of the bank.
• Only delivery-based purchase and sale of securities is allowed; speculative transactions are not permitted.
• Profits and capital gains earned can be repatriated based on whether investments were made via NRE (fully repatriable) or NRO (subject to limits) account, after applicable taxes.

Investment vehicles are financial instruments, structures, or platforms through which investors can invest in assets and securities for the purpose of wealth creation in India. Common types include:

• Mutual Funds
• Exchange-Traded Funds (ETFs)
• Alternative Investment Funds (AIFs)
• Real Estate Investment Trusts (REITs)
• Infrastructure Investment Trusts (InvITs)
• Bonds, stocks, and other pooled investment schemes

Foreign investors can establish business in India by

• Incorporating a Private Limited Company, Public Limited Company, or a Wholly-Owned Subsidiary (where sectoral policy permits)
• Ensuring at least one director is resident in India
• Fulfilling regulatory requirements with the Ministry of Corporate Affairs (MCA)
• Complying with FDI and sectoral regulations, and opening a business bank account in an RBI-approved bank

Yes. Foreign entities can set up in India through

• Branch Office (BO): For business/earning purposes.
• Liaison Office (LO): For representation/communication only, not for commercial activities.
• Project Office (PO): Established for executing a specific project in India.
• Each has distinct eligibility and permitted activity criteria, subject to RBI approval and compliance.

Key prohibited sectors for FDI in India

• Lottery businesses (government/private/online)
• Gambling and betting (including casinos)
• Chit funds (except NRIs/OCIs on non-repatriation basis)
• Nidhi companies
• Trading in Transferable Development Rights (TDRs)
• Real estate business or construction of farm houses
• Manufacturing of cigars, cheroots, cigarillos, and cigarettes of tobacco or tobacco substitutes
• Sectors not open to private sector: atomic energy, railway operations (except permitted sub-activities)
• Foreign tech collaboration in lottery and gambling.

Sectoral caps and entry routes in India vary

• Sectors have specified FDI caps (e.g., 49%, 74%, 100%).
• Certain thresholds may shift entry from automatic to government route (e.g., up to 74% automatic, beyond 74% government).

Examples:

• Defence: Up to 74% automatic, beyond that government route.
• Telecom: Up to 49% automatic, beyond that government route.
• Multi-brand retail: 51% government route only.

Details for each sector are listed in the DPIIT’s consolidated FDI policy and website - https://www.dpiit.gov.in/

• Foreigners/NRI are generally not allowed to set up traditional partnership or proprietorship firms in India under FDI policy.
• Foreigners could open a Branch Office / Liaison Office / Project Office in India, without incorporating a Company.
• LLPs and companies are the preferred mode for foreign investment, as they are permitted under automatic route for most sectors.
• Any partnership/proprietorship setup involving foreigners/NRI is only possible with stringent restrictions and mostly on a non-repatriation basis.

Capital Gains Tax

• Short-term (held <12 months) on listed securities: 15% plus surcharge and cess.
• Long-term (held ≥12 months) on listed securities: 10% plus surcharge and cess on gains exceeding ₹1,00,000 in a financial year.

Interest and Dividends

• Generally taxed at a flat rate of 20% for Non-Residents on income from investments, plus applicable surcharge and cess.

Treaties

• Double Taxation Avoidance Agreements (DTAA) may provide credits or exemptions, reducing double taxation on income earned in India.

• Electronics & Semiconductors
• Electric Vehicles and Automotive
• Pharmaceuticals & Life Sciences
• Renewable Energy (Solar, Wind)
• Textiles & Garments
• Consumer Durables
• Chemicals & Petrochemicals
• Aerospace & Defence

• Labour is abundant, with unskilled and semi-skilled workers available across all states, often in tier 2/3 cities at lower cost.
• Skilled labor (IT, engineering, pharma) is concentrated around metros like Bengaluru, Pune, Hyderabad, Chennai.

• Mumbai and Delhi (NCR): Represent the highest absolute volume of international schools in India, often accounting for 15-20% of all authorized institutions nationally. They possess the longest-established institutions (some with 30-50 year histories) and the greatest depth of selection.
• Bengaluru: Is characterized by a high density and specialization, featuring a strong concentration of schools tailored to the high-tech and international business communities, with a high prevalence of full IB curriculum adoption.
• Hyderabad: Shows the fastest rate of expansion in new international school offerings over the past decade. This growth is directly linked to the city's rapid development as a major tech and pharmaceutical hub, increasing the availability of options.

• Monthly cost for a single expat: Roughly ₹65,000–₹80,000 ($800–$1,000), including rent, utilities, groceries, dining, and transport in most metros.
• Family of four: Typically between ₹140,000–₹180,000 ($1,800–$2,200) per month, varying with city, schooling, and housing choices.
• Major monthly costs: Mumbai has the highest rents (1-bedroom city center: ₹44,000+), followed by Bengaluru, Delhi, and Hyderabad. Daily essentials, domestic help, and meals are affordable by global standards.