Before anything else: is your sector actually open to you?

On the automatic route you do not ask anyone first. You incorporate, bring the money in, issue the shares and report the investment to the Reserve Bank afterwards. On the government route you apply before investing, through the Foreign Investment Facilitation Portal, and the application is routed to the ministry that administers your sector. Most sectors are automatic; the practical difference is weeks against months, so establishing which one you are in is the first piece of work, not an afterthought.

Lottery of any kind, gambling and betting including casinos, chit funds, Nidhi companies, trading in transferable development rights, real estate business and the construction of farm houses, and the manufacture of cigars, cheroots, cigarettes and tobacco substitutes. Activities not open to private investment at all, such as atomic energy, are closed by the same logic. Note the wording on real estate: the prohibition is on the real estate business, not on construction and development projects, which are open — that distinction catches a lot of people.

Through a marketplace, yes. Holding your own stock in India and selling it to consumers, generally no. Foreign investment is permitted in a marketplace that provides a platform on which independent sellers transact, but not in an inventory-based model where the entity owns the goods it sells to consumers. A foreign-owned marketplace also cannot own or control the inventory on it, and there are limits on how much of any one seller's sales may come through the group. Business-to-business selling is a different question and is generally open.

Wholesale and cash-and-carry trading to businesses is open to 100% foreign ownership on the automatic route. Retail is where it narrows: single-brand retail is open but carries local-sourcing conditions once foreign ownership passes a threshold, and multi-brand retail is on the government route with conditions, with several states not permitting it at all. Exporting out of India is generally unrestricted and needs an Import Export Code.

A performance condition is a strings-attached requirement rather than a cap — minimum local sourcing in single-brand retail, or a lock-in and minimum capitalisation in construction development. They matter disproportionately because foreign investment in an LLP is only permitted where the sector allows 100% FDI on the automatic route *and* has no performance conditions. A sector that is fully open but conditional rules an LLP out and points you to a company.

The position changed in 2026 and most guidance online has not caught up. Press Note 3 of 2020 required prior government approval for any investment traceable to a country sharing a land border with India, at any percentage. Press Note 2 of 2026 relaxed that, and the amendment to the non-debt instruments rules notified on 2 May 2026 gave it legal force. An investor that is itself resident in or a citizen of such a country still needs approval. What is now permitted on the automatic route is an indirect interest: where the beneficial interest held in the investing entity by such a person is less than 10% and gives no control, the investment does not need prior approval. A 60-day processing timeline was also introduced for applications in certain manufacturing sectors.

It is a look-through test applied at the level of the investing entity, not at the immediate shareholder. Beneficial ownership is determined using the definition in the money-laundering rules, which sets the threshold at 10% or 15% depending on the type of entity. Two things have to hold for the automatic route: the interest must be below the threshold, and it must confer no control — neither control of the investing entity nor ultimate effective control of the Indian company. Because it looks through the chain, a Singapore or Mauritius holding company does not by itself solve the problem, and cumulative interests are added together rather than taken one by one.

In practice advisers have treated entities in Hong Kong as falling within the rule, on the basis that it is part of a country sharing a land border with India, and applications have been made accordingly. The press notes refer to countries sharing a land border rather than listing jurisdictions, so this is a point to confirm for your specific chain rather than assume — and after the 2026 amendment the question that matters is usually the beneficial-ownership percentage and control, not the label on the holding company.

The rule follows the ownership, not the moment of incorporation. A later transfer that gives a person resident in or a citizen of such a country a controlling or above-threshold beneficial interest needs approval before it happens, and that includes a change further up the chain in your own foreign parent. It is worth testing at the term-sheet stage of any funding round, because discovering it after signing is expensive.

Through the Foreign Investment Facilitation Portal, which is the single online entry point administered by the Department for Promotion of Industry and Internal Trade. The application is forwarded to the ministry that administers your sector, and where security is engaged it also goes for clearance. Timelines vary by sector and by how complete the application is; a 60-day timeline now applies to certain manufacturing proposals. Most rejections and delays we see are incomplete ownership disclosure rather than the merits.

If your Indian company — itself foreign owned — invests in another Indian company, that second investment carries your foreign ownership with it and is treated as indirect foreign investment. It has to satisfy the route and cap that apply to the second company's sector, be made out of funds that are not borrowed domestically for the purpose, and be reported to the Reserve Bank in Form DI within 30 days. Groups that set up a second Indian entity for a new line of business regularly miss this.

Deliberately not. Sectoral caps and conditions are amended by press note several times a year — insurance, defence, space and telecom have all moved recently — and a page listing percentages goes stale quietly, which is worse than not listing them. We confirm the current cap and conditions for your specific activity against the consolidated policy at the time you ask, which takes very little time and is the only version worth relying on.