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Foreign Investment in India

Q.11: Whom to approach for Government approval or in case of doubt regarding the concerned Administrative Ministry/ Department or regarding the classification of an activity or the sectoral route ? +

Answer: Please refer to the ‘Standard Operating Procedure (SOP) for Processing FDI Proposals’ issued by Department of Industrial Policy & Promotion, Government of India → http://fifp.gov.in/Forms/SOP.pdf

Q.12: Whether the definition of Indian company in FEMA 20(R) covers companies incorporated under both the Companies Act, 1956 and Companies Act, 2013 +

Answer: Indian company includes all those entities covered under section 1(4) of the Companies Act, 2013.

Q.13: Whether the percentage of foreign investment should be calculated at the time of issuance of Employee Stock Options (ESOP) or vesting stage or exercising stage ? +

Answer: Foreign investment percentage has to be calculated on a fully diluted basis i.e. at the time of issuance of Employee Stock Options.

Q.14: Whom to approach for clarifications if any required, related to Schedule 5 to FEMA 20(R) +

Answer: Financial Markets Regulation Department, RBI.

Q.15: Whether cash is a permissible mode of payment for making foreign direct investment in Indian company. +

Answer: No, refer to Para 7.13 of Master Direction-Foreign Investment in India.

Q.16: Are the investments and profits earned in India repatriable ? +

Answer: All foreign investments are repatriable (net of applicable taxes) except in cases where the investment is made or held on non-repatriation basis.

Q.17: What is meant by investment on repatriation basis and investment on non-repatriation basis ? +

Answer: Investment on repatriation basis means an investment, the sale/ maturity proceeds of which are, net of taxes, eligible to be repatriated out of India. The expression investment on non-repatriation basis may be construed accordingly.

Q.18: What are the guidelines on valuation of capital instruments ? +

Answer: Please refer to regulation 11 of FEMA 20(R).

Particulars	Listed Company	Un-Listed Company
Issue by an Indian company or transferred from a resident to non-resident - Price should not be less than	The price worked out in accordance with the relevant SEBI guidelines	The fair value worked out as per any internationally accepted pricing methodology for valuation on an arm’s length basis, duly certified by a Chartered Accountant or a SEBI registered Merchant Banker or a practicing Cost Accountant.
Transfer from a non-resident to resident - Price should not be more than	The price worked out in accordance with the relevant SEBI guidelines	The fair value as per any internationally accepted pricing methodology for valuation on an arm’s length basis, duly certified by a Chartered Accountant or a SEBI registered Merchant Banker.

The pricing guidelines shall not be applicable for investment by a person resident outside India on non-repatriation basis.

Q.19: What is meant by FDI linked performance conditions ? +

Answer: FDI linked performance conditions are the sector specific conditions stipulated in regulation 16 of FEMA 20(R) for companies receiving foreign investment