Guide · Investment
Foreign direct investment in India: how companies invest
A foreign company can invest in India by creating a company, buying into an existing one or forming a joint venture. In most sectors this goes through the automatic route, with no prior approval. What matters is checking your sector first, then respecting the pricing and reporting rules that follow.
This guide is for companies investing in businesses in India, not for individuals buying shares or funds.
In short
- Most sectors allow 100% foreign ownership without prior approval.
- Some sectors are capped or need approval; a few are closed.
- Investors from countries bordering India need approval in every sector.
- Shares are priced and reported under foreign exchange rules, with short deadlines.
Contents
Automatic route or government approval
Is your activity in a closed sector (lottery, gambling, tobacco products...)?
YesNo foreign investment possible
Nonext question
Is your company, or its ultimate owner, from a country bordering India?
YesGovernment approval needed, whatever the sector
Nonext question
Is your sector capped or listed under the government route?
YesGovernment approval, within the cap
OtherwiseAutomatic route: invest, then report through your bank
Automatic route
No prior approval. You invest, then report the investment through your bank within the deadlines. This covers most sectors.
Government route
Approval needed before investing, through the government's online portal and the ministry in charge of the sector.
Separately, any investor based in a country that shares a land border with India needs government approval, whatever the sector. This also applies when the ultimate owner of the investing company is from such a country.
Sectors: open, capped, closed
- Open to 100% through the automatic route
- Most manufacturing, IT and software, e-commerce marketplaces, logistics, renewable energy, many services.
- Capped or partly under approval
- For example defence, insurance, broadcasting and media, telecoms, multi-brand retail, some financial services and pharma acquisitions.
- Closed to foreign investment
- Including lottery, gambling and betting, chit funds, trading in real estate and the manufacture of tobacco products.
Caps and conditions change with each update of the foreign investment policy. Check your exact activity before choosing how to invest. To produce without investing in an entity, see contract manufacturing in India.
Three ways to invest: build, buy or partner
| Build | Buy | Partner | |
|---|---|---|---|
| What it is | Create your own subsidiary | Acquire all or part of an Indian company | Joint venture with an Indian company |
| Speed to market | Slower: you build everything | Fast: customers and team exist | Fast if the partner brings assets |
| Control | Full | Depends on your stake | Shared |
| Main risk | Time and execution | Hidden liabilities | Disagreement with the partner |
Read more on setting up a company in India, on branch, liaison office or subsidiary and on choosing a joint venture partner in India.
Buying a stake in an Indian company
An acquisition gives you customers, staff and licences on day one. It also gives you the company's past. Steps, structures and checks are detailed in how to acquire a company in India.
- Due diligence: company law filings, tax assessments and disputes, labour compliance, licences, litigation, related-party transactions.
- Valuation: the price paid by a non-resident must respect the fair value rules under foreign exchange regulations.
- Listed companies: crossing certain shareholding thresholds triggers takeover rules, including an open offer to other shareholders.
- Competition clearance: larger deals may need approval from the competition authority.
Pricing and reporting rules after you invest
Most penalties in foreign investment come from paperwork, not from the investment itself. The main obligations:
- Share issue reported through your bank within a short deadline after allotment.
- Share transfer between a resident and a non-resident reported within its own deadline.
- Annual return on foreign liabilities and assets filed each year.
- Downstream investment by your Indian company into another Indian company follows the same sector rules.
Questions about foreign direct investment in India
What counts as foreign direct investment in India?
Investment by a non-resident in the shares of an Indian company, through a new company, a capital increase or a purchase of shares. In a listed company, a stake of 10% or more is treated as direct investment; below that it is portfolio investment, which follows other rules.
Can a foreign company invest in India without approval?
Yes, in most sectors. Under the automatic route, no prior approval is needed: the investment is reported after it is made. Some sectors and some investors, including those from countries sharing a land border with India, need government approval first.
How long does an FDI approval take?
Under the automatic route there is no approval step. Where government approval is needed, the official target is a few months, but timing varies with the sector and the file. Plan for it in your timeline.
Can I buy an existing Indian company?
Yes, subject to sector rules. The price must respect foreign exchange pricing rules, and the transfer must be reported. Listed companies add takeover rules once you pass certain thresholds.
Can I take profits out of India?
Yes. Dividends, sale proceeds and the return of capital can generally be sent abroad, after Indian taxes and subject to foreign exchange rules. Tax treaties between India and your country can reduce withholding tax.
Do you help individuals invest in Indian stocks or funds?
No. This page is about companies investing in businesses in India. For personal investments in shares or funds, speak to a regulated financial adviser in your country.
Read next
General information, updated 2026. Not legal, tax or investment advice. Foreign investment rules change: every case is confirmed by qualified professionals in India. Expand into India does not advise on or arrange personal investments.