Foreign Direct Investment

The equity instruments are equity shares, convertible debentures, preference shares, depository receipts issued outside India, the underlying of which is a security issued by a person resident in India and share warrants issued by the Indian company.

“Indirect foreign investment” means downstream investment received by an Indian entity from,- (A) another Indian entity (IE) which has received foreign investment and (i) the IE is not owned and not controlled by resident Indian citizens or (ii) is owned or controlled by persons resident outside India; or (B) an investment vehicle whose sponsor or manager or investment manager (i) is not owned and not controlled by resident Indian citizens or (ii) is owned or controlled by persons resident outside India: Indian entity which has received indirect foreign investment shall comply with the entry route, sectoral caps, pricing guidelines and other attendant conditions as applicable for foreign investment.

Permissible FDI can be made under “Automatic route” or “Government route”. “Automatic route” means the entry route through which investment by a person resident outside India does not require the prior approval of the Reserve Bank of India or the Central Government.Foreign investment is permitted up to 100% on the automatic route, subject to applicable laws/rules/regulations.

 “Government Route” means the entry route through which investment by a person resident outside India requires prior Government approval and foreign investment received under this route shall be in accordance with the conditions stipulated by the Government in its approval. Besides the entry conditions on foreign investment, the investment/investors are required to comply with all relevant sectoral laws, regulations, rules, security conditions, and state/local laws/regulations.

FP Investment is any investment made by a person resident outside India in equity instruments where such investment is (a) less than 10 percent of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company or (b) less than 10 percent of the paid-up value of each series of equity instruments of a listed Indian company and the total holdings of all FPIs put together should not exceed 24 per cent of paid-up equity capital on a fully diluted basis or paid up value of each series of debentures or preference shares or warrants.

FPI is a person registered in accordance with the provisions of Securities Exchange Board of India (SEBI) (Foreign Portfolio Investors) Regulations, 2014, as amended from time to time.

It is the sum total of direct and indirect foreign investments.

It is the sum total of direct and indirect foreign investments.

Proposals for foreign investment in sectors/activities requiring Government approval as per the Consolidated FDI Policy and Foreign Exchange Management (Non-Debt Instrument) Rules, are required to be filed online through the Foreign Investment Facilitation Portal (FIFP) https://www.fifp.gov.in as per the guidelines and requirements prescribed under Standard Operating Procedure (SOP) for processing FDI proposals, as amended from time to time available at http://fifp.gov.in/Forms/SOP.pdf.

FDI is currently prohibited in:

1. a) Lottery Business including Government/private lottery, online lotteries, etc.
2. b) Gambling and Betting including casinos etc.
3. c) Chit funds
4. d) Nidhi company
5. e) Trading in Transferable Development Rights (TDRs)
6. f) Real Estate Business or Construction of Farm Houses ‘Real estate business’ shall not include development of townships, construction of residential /commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014.
7. g) Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
8. h) Activities/sectors not open to private sector investment e.g.

(I) Atomic Energy and (II) Railway operations (other than permitted activities mentioned in permitted sectors). Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business, Gambling and Betting activities. 15. Are there any restrictions/provisions related to FDI from

1) The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in NRE/ FCNR(B)/ Escrow account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

Explanation:The amount of consideration shall include:

(i) Issue of equity shares by an Indian company against any funds payable by it to the investor

(ii)Swap of equity instruments.

(2) Equity instruments shall be issued to the person resident outside India making such investment within sixty days from the date of receipt of the consideration.

(3) Where such equity instruments are not issued within sixty days from the date of receipt of the consideration the same shall be refunded to the person concerned by outward remittance through banking channels or by credit to his NRE/ FCNR (B) accounts, as the case may be within fifteen days from the date of completion of sixty days.

(4) An Indian company issuing equity instruments under this Schedule may open a foreign currency account with an Authorised Dealer in India in accordance with Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2016.

(1) The sale/ maturity proceeds (net of applicable taxes) of equity instruments or units or disinvestment proceeds of a LLP shall be credited only to the NRO account of the investor, irrespective of the type of account from which the consideration was paid;

(2) The amount invested in equity instruments of an Indian company or the consideration for contribution to the capital of a LLP and the capital appreciation thereon shall not be allowed to be repatriated abroad.

A. Mode of payment

(1) The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in a foreign currency account and/ or a Special Non-Resident Rupee (SNRR) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

(2) Unless otherwise specified in these regulations or the relevant Schedules, the foreign currency account and SNRR account shall be used only and exclusively for transactions under this Schedule.

B. Remittance of sale/ maturity proceeds

The sale/ maturity proceeds (net of taxes) of the securities may be remitted outside India or may be credited to the foreign currency account or a Special Non-resident Rupee Account of the FVCI.

An Indian company issuing equity instruments to a person resident outside India and where such issue is reckoned as Foreign Direct Investment, defined under the rules, shall report such issue in Form FC-GPR, not later than thirty days from the date of issue of equity instruments. Issue of ‘participating interest / rights’ in oil fields shall be reported in Form FC-GPR.

1. Create Entity User:

What is Entity User:

An Entity User is an individual authorized by the entity (company/ LLP/startup) to carry out the registration process within the Entity Master of the FIRMS application. . The designated Entity User holds the exclusive responsibility for entering and updating foreign investment information for an Entity in the Entity Master, ensuring data accuracy. . Each entity is limited to a single Entity User, who serves as the sole authorized representative for that entity’s foreign investment reporting. It is possible for an individual to serve as the Entity User for multiple entities. However, this requires separate registrations for each entity, as the registration is specific to each entity’s reporting requirements.

Creation of Entity User:

To create an Entity User on the RBI FIRMS portal, follow these steps:

1. Visit the RBI FIRMS portal.
2. Locate the designated section for creating an Entity User account.
3. Click on the provided link to access the Entity User registration page.
4. Input the necessary information as prompted in the registration form.
5. Ensure all mandatory attachments are appropriately attached to the registration form.
6. Complete the registration process by submitting the form.
7. Once submitted, the system will generate and confirm the creation of your Entity User account.

2. Filling of Entity Master:

After successfully creation of your Entity User account, the next step involves logging in using the provided Entity User credentials provided by RBI. During your initial login, it is essential to modify the default password that was generated by the RBI. Replace it with a new password of your choice. Subsequently, access the portal using the updated credentials and commence the process of filling in your Entity Master details.

Please follow the following steps to fill out Entity Master:

1. After logging in successfully, navigate to the “Master Setup” section in the menu. From there, select “Entity Master” and then click the “ADD” button.
2. The screen will display various tabs. Proceed to fill in the required information within each tab.
3. Once all mandatory details have been provided, the “Submit” button will become active. Click on the “Submit” button.
4. Upon successful submission of the company’s details, you will find the information available on the Entity Master page. Please note that there will be no email acknowledgment sent for the submission in the Entity Master.

Note:
• Ensure accurate and consistent completion of all information in a single instance.
• To ensure accurate details are filled in the tabs, kindly refer to the user manual provided on the RBI FIRMS portal for guidance.
• Please note that once submitted, Entity Master information cannot be edited.
If any correction needs to be done to the Entity Master details, it will be done through mail to both fedsupport@rbi.org.in and helpfirms@rbi.org.in This email should be dispatched from the registered email address of the respective entity.

3. Create Business User:

What is Business User:

A Business User (BU) is an authorized individual designated by the Reporting Company to report transactions to the RBI using the Single Master Form on the FIRM’s Portal. A BU’s login credentials are specific to the entity that has granted them authorization to report transactions. BU credentials are limited to the entity they are assigned to.

Creation of Business User:

To create a Business User on the RBI FIRMS portal, follow these steps:

1. Visit the RBI FIRMS portal.
2. Locate the designated section for creating a Business User account.
3. Click on the provided link to access the Business User registration page.
4. Input the necessary information as prompted in the registration form.
5. Ensure all mandatory attachments are appropriately attached to the registration form.
6. Complete the registration process by submitting the form.
7. Once submitted, the system will generate and confirm the creation of your Business User account.

Documents Required:

1. Authority Letter for Business User (Format given in User Manual provided on RBI Firms portal)
2. PAN Card of Authorised Signatory/Business User

4. File return using Single Master Form (SMF):

1. Upon successful creation of the Business User, you will receive the default credentials for the Business User account from RBI.
2. Log in to the account using the provided credentials and proceed to change the default password.
3. After changing the password, access the portal using the updated Business User credentials.
4. Once logged in, proceed to the “File Return” section within the portal.
5. In the “File Return” section, choose the relevant (FC-GPR, FC-TRS etc.) option under the specified “File Return” type.
6. Click on “Add new Return” to initiate the process of filing the FC-GPR form, and follow the subsequent steps accordingly.

SMF has been introduced by RBI with the objective of integrating the extant reporting structures of various types of foreign investment in India, subsuming all the existing reports.

What is FIRMS Portal?

FIRMS (Foreign Investment Reporting and Management System) is an online application which provides the SMF on which reporting for various FDI transactions can be done online.

Following are the specified sectoral caps and entry routes under the FDI Policy (subject to applicable laws/regulations; security and other conditionalities):

1. Registered Name of the Remitter / Investor (Name, if the investor is an Individual)
2. Registration Number (Unique Identification Number in case remitter is an Individual)
3. Registered Address (Permanent Address if remitter is Individual)
4. Name of the Remitter’s Bank
5. Remitter’s Bank Account No.
6. Period of banking relationship with the remitter