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Last updated: 11 September 2026 — prepared by AU Corporate's taxation and regulatory compliance practice.
Every foreign investment into an Indian company enters through one of two routes under India's FDI framework: the Automatic Route, where no prior government sign-off is needed and the investment is simply reported to RBI afterwards, or the Government Route, where DPIIT approval is required before the investment can be made. Which route applies is determined by sector — and, since 2020, in some cases by the investor's country of origin — not by deal size. This guide covers the legal framework behind that split, the DPIIT approval process under the revised 2026 SOP, the land-border-country rules under Press Note 3, and the current sector-by-sector caps, including the recent liberalisation in insurance.
Next: Company FormationMost foreign investors use the Automatic Route due to faster processing and reduced bureaucracy.
Required for multi-brand retail, print media, defence beyond 74%, and any investment linked to a country sharing a land border with India.
FDI in India runs on three layers of law working together. The Foreign Exchange Management Act, 1999 (FEMA) is the primary statute. The Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (the “NDI Rules”) set out the sector-wise conditions, caps and entry routes under FEMA. And the Consolidated FDI Policy — updated not by full reissue but through individual DPIIT Press Notes as changes are made — is the practical rulebook investors and their advisors actually work from day to day.
Two regulators split the work: DPIIT (the Department for Promotion of Industry and Internal Trade, under the Ministry of Commerce and Industry) sets and administers FDI policy and decides Government Route approvals, while the Reserve Bank of India (RBI) administers the FEMA reporting side once an investment is made — the Form FC-GPR, Form FC-TRS and Annual FLA filings covered in detail in our company registration guide. In short: DPIIT decides whether and how an investment can be made; RBI is where it gets reported and monitored afterwards, regardless of which route it entered through.
“Automatic” refers only to the absence of prior approval — it does not mean the investment goes unreported. Post-investment RBI/FEMA filing, principally Form FC-GPR within the prescribed window from share allotment, is still mandatory on the Automatic Route, and a missed deadline still has to be regularised through RBI's compounding process. See our company registration guide for the full FEMA reporting sequence.
DPIIT issued a revised Standard Operating Procedure (SOP) for Government Route processing in May 2026. It formally extended the overall disposal target from 10 to 12 weeks — a more realistic figure than the SOP it replaced — while moving the filing itself to a fully paperless FIFP/NSWS-only process, with defined timelines at each stage:
Submit the proposal entirely online through the Foreign Investment Facilitation Portal (FIFP), now integrated with the National Single Window System (NSWS). The May 2026 revised DPIIT SOP made this filing fully paperless — no physical documents are required.
DPIIT checks the application for completeness and confirms the correct nodal ministry for the sector (2-3 weeks).
The relevant sector ministry reviews the proposal for approval; for sensitive sectors, or any investment with a link to a land-border country under Press Note 3, the Ministry of Home Affairs runs a separate security clearance in parallel (3-4 weeks).
Final approval is issued by DPIIT, following inter-ministerial consultation wherever more than one ministry has a stake in the sector (2-3 weeks).
Once approved, the same post-investment FEMA reporting applies as under the Automatic Route — Form FC-GPR filed via the FIRMS portal within the prescribed window from share allotment (1-2 weeks).
Since April 2020, Press Note 3 (2020 Series) has required prior government approval — regardless of sector or investment size — for any investment originating from, or beneficially owned by an entity situated in, a country that shares a land border with India: China, Pakistan, Bangladesh, Bhutan, Nepal, Myanmar and Afghanistan. This overrides the sector's normal Automatic Route eligibility: an investment that would otherwise qualify for 100% automatic entry on its sector alone still needs DPIIT clearance if it originates from one of these jurisdictions, or if a beneficial owner in the ownership chain is based there.
In March 2026, the Union Cabinet approved the first substantive relaxation of this rule since it was introduced: investments carrying no more than 10% Chinese beneficial ownership can now proceed via the Automatic Route, and a 60-day expedited approval track was introduced for seven manufacturing sub-sectors. Direct investment from a Chinese- or Hong Kong-registered entity, however, still requires full Government Route approval — the 2026 changes ease the rule for minority stakes inside diversified fund structures, not for direct Chinese ownership itself. Any proposed investment with a Chinese, Pakistani or other land-border-country link anywhere in the ownership chain is worth checking against Press Note 3 before assuming Automatic Route eligibility on sector grounds alone.
Tell us about your sector and investment structure and our FEMA and regulatory team will confirm the applicable route and timeline.
Sectoral caps and conditions are amended regularly through individual DPIIT Press Notes rather than a single periodic update, so it is worth confirming the current position for your specific sector before relying on a cap quoted elsewhere. The table below reflects the current position, including the February 2026 insurance liberalisation and the 2026 e-commerce export relaxation.
Single brand: 100% Automatic Route. Multi-brand: Government Route only, capped at 51%, with a minimum $100 million investment and at least 50% of that directed into backend infrastructure within 3 years of the first tranche.
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Since February 2026 (DPIIT Press Note 1, 2026 Series), 100% FDI is permitted under the Automatic Route for insurance companies and insurance intermediaries, up from the earlier 74% approval-gated cap. LIC remains capped at 20% Automatic Route. At least one of the chairperson, managing director or CEO must be a resident Indian citizen.
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100% FDI is permitted overall — 49% under the Automatic Route, with the balance up to 100% requiring Government Route approval.
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Construction-development activity: 100% Automatic Route, subject to project-level conditions. NRIs face fewer restrictions than other foreign investors; trading in land without development remains outside the FDI framework entirely.
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Up to 74% total — 49% under the Automatic Route, with the balance up to 74% requiring Government Route approval. Public sector banks are governed by separate statutory limits.
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Marketplace model: 100% Automatic Route, subject to conditions preventing the platform from controlling seller inventory or influencing sale prices. Inventory-based model: still prohibited for domestic B2C sales; since 2026 (Press Note 3, 2026 Series) FDI-funded entities may use an inventory model exclusively to export goods manufactured or produced in India.
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Up to 74% Automatic Route for companies holding a new industrial licence (raised from the earlier 49% cap). Investment beyond 74% requires Government Route approval and is permitted only where it is likely to result in access to modern technology.
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26% cap on news and current-affairs publications, via Government Route only, with editorial-control conditions attached regardless of the source of capital.
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