FDI Advisory-India FAQs

1. What is the difference between the automatic route and the government route for FDI in India?

Under the automatic route, a foreign investor does not require prior approval from the Indian government — investment may be made directly, with post-facto intimation to the RBI. Under the government route, prior approval from the relevant ministry or DPIIT is mandatory before the investment is made. The applicable route depends on the sector and the quantum of investment.

2. Which sectors in India are open to 100% FDI under the automatic route?

Most sectors permit 100% FDI automatically, including manufacturing, IT, insurance, logistics, and professional services. Sectors with caps or government route requirements include banking, defence, media, and broadcasting. ATB Legal conducts a current sector analysis against the latest DPIIT Consolidated FDI Policy before any structure is proposed.

3. What are FDI pricing guidelines and why do they matter?

FEMA requires that shares issued to foreign investors or transferred between residents and non-residents are priced at fair market value — determined by a SEBI-registered merchant banker using a recognised valuation methodology. Under-pricing on issuance or over-pricing on transfer constitutes a FEMA violation, attracting compounding penalties and potential transaction voidance. All FDI transactions require a qualified valuation report generally issued by a SEBI registered merchant banker.

4. What is downstream investment and what rules apply to it?

Downstream investment is investment made by a foreign-invested Indian company into another Indian entity. The downstream company must be in an FDI-eligible sector, and the investment must satisfy the route and cap applicable to that sector independently. Indirect foreign investment is traced through the ownership chain, and automatic route approval at one tier does not validate downstream investment into a restricted sector.

5. What FEMA filings are required after an FDI transaction?

Following share issuance: FC-GPR with the RBI within 30 days. On share transfer: FC-TRS within 60 days from the date  of transfer of shares or receipt of funds, whichever is earlier. Annual FLA return: filed by 15 July each year via the FLAIR portal. Delayed filings attract compounding penalties. ATB Legal manages the full compliance calendar.

6. Can a European company invest in India through a UAE holding structure and still access FDI benefits?

Yes, in most cases. Investment made through a UAE entity is treated as FDI from the UAE for purposes of India’s FDI policy — and where the India-UAE CEPA provides relevant investor protections, these may apply. However, the sectoral cap and route analysis must account for the ultimate beneficial ownership, and any round-tripping structures are not permitted. ATB Legal’s dual India-UAE presence enables this structuring to be designed correctly across both jurisdictions.