外商投资（“FI”）| 外商直接投资（“FDI”）

With growth of the economy and issuance of various other policies related to globalisation and liberalisation, Cross border investment has become very usual.  Cross country investment can be made through various channels such as sale or purchase of Immovable property, investment in securities issued by various corporate entities, Borrowing or lending of money, mergers etc.

All transactions which increase/decrease assets or liabilities in India of a person resident outside India is considered as “Capital Account transactions” under Foreign Exchange Management Act (“FEMA”). All capital account transactions are prohibited unless specifically approved. Therefore, all cross border investments are prohibited unless specifically permitted.

Among various other routes, Investment through securities (Equity Shares, Preference shares, Debentures, share warrant etc.) of any company or capital contribution in a Limited Liability partnership firm is one of the commonly adopted models of investment. Investments through securities or capital contribution are denominated as “Foreign Investment”/Foreign Direct Investment “FDI”/Foreign Portfolio Investment (FPI) under FEMA with technical differentiations.

Other forms of investment such as sales or purchase of Immovable Property, Merger and Acquisition, Lending or borrowing money etc. are technically not covered under “Foreign Investment”/FDI/FPI.

1. Regulatory Framework for Foreign Investment in India

For all capital Account transactions, the Reserve Bank of India (“RBI”) was regulatory authority, i.e., RBI was having the right to prepare and prescribe rules, regulations, restrictions and prohibitions in relation to capital account transactions. However, with effect from 17.10.2019, the Central Government became the regulatory authority of Capital Account Transactions except for debt instruments.

Therefore, few regulations issued by RBI got superseded and the Central Government prescribed new Foreign Exchange Management (Non-Debt Instrument) Rules, 2019 (“FEM (Not Debt) Rules”) w.e.f. 17th October, 2019 for regulations of Foreign Investment. However, regulations issued by RBI and still not repelled by the Central Government continue to remain valid.

Though, for foreign investment in India, the Central Government is a regulatory authority. However, RBI is still empowered to determine policy and procedures for mode of payment, remittance of sales proceeds and reporting documents. Accordingly, RBI has issued FEM (Mode of Payment and reporting of Non-Debt Instrument) Regulations, 2019.

Apart from above mentioned regulations, while making Investment In India, following regulations are to be keep in India:

1. 2013 年公司法
2. 1992 年印度证券交易委员会法及印度证券交易委员会（SEBI）条例
3. 1961 年所得税法

For other capital account transactions, different regulations are prescribed such as:

1. 2015 年外汇管理（印度境外不动产的取得与转让）条例；
2. 2000 年外汇管理（外汇借贷）条例；
3. 2000 年外汇管理（卢比借贷）条例；
4. 2018 年外汇管理（跨境并购）条例。
5. 2015 年外汇管理（货币进出口）条例

2. Foreign Investment (FI)/Foreign Direct Investment (FDI)/Foreign Portfolio Investment (FPI”)

FEM (Non-Debt) regulations has defined three following forms of investment:

1. “投资”指认购、取得、持有或转让由印度居民发行的任何证券或单位。
2. “外国投资”指印度境外居民以可汇回方式对印度公司权益工具或有限责任合伙企业资本所进行的任何投资。“以可汇回方式投资”是指其投资、销售或到期收益有资格汇出印度境外的投资。
3. “FDI”或“外国直接投资”指印度境外居民通过权益工具对非上市印度公司进行的投资；或对上市印度公司进行投资，且持股比例达到完全稀释后发行后实收股本的 10% 或以上；
4. “外国证券投资”指印度境外居民通过权益工具进行的任何投资，且该投资低于上市印度公司完全稀释后发行后实收股本的 10%，或低于上市印度公司每一系列权益工具实收价值的 10%。

*“equity instruments” means equity shares, convertible debentures, preference shares and share warrants issued by an Indian company.

3. Advantages of Foreign Investment in India

1. 促进经济发展：外国直接投资能够刺激目标国家的经济发展，为您作为投资者创造更具吸引力的环境，并使当地产业受益。

2. 便利国际贸易：每个国家都有自己的进口关税，这也是贸易往来较为困难的原因之一。此外，某些行业通常需要进入国际市场，以确保其销售目标和业务目标的全面实现。

3. 增加就业与经济增长：当资金投入到另一个国家时，会创造就业机会、催生新公司并带动工厂/建筑的建设。这为当地居民带来了新的机遇，并能进一步刺激经济增长。

4. 人力资本资源的开发：外商直接投资（FDI）带来的一个重大优势是人力资本资源的开发，由于其效果并非立竿见影，这一点往往被低估。人力资本是指具备劳动能力的人员所拥有的技能和知识，也就是我们常说的劳动力。

5. 税收优惠：降低企业所得税税率每年可为大型企业节省数十亿美元。这就是为什么像苹果公司这样的大型企业会利用复杂的手段将资金转移到国际子公司。

6. 资源转移：外商直接投资能够促进资源转移和其他知识交流，使各国能够获取新技术和新技能。

7. 缩小收入与成本之间的差距：外商直接投资可以缩小收入与成本之间的差距。通过这种方式，各国能够确保生产成本保持一致，从而使产品更易于销售。

8. 提高生产力：外国投资者提供的设施和设备可以提高目标国家劳动力的生产力。

4. 对印度境外居民在印投资的限制

根据《外汇管理（非债务）条例》第3条规定，禁止印度境外居民在印度进行投资。然而，如果能提供充分理由，印度储备银行（RBI）可在咨询中央政府后，批准印度境外居民的投资。

不过，如果某项投资在2019年10月17日之前已经存在，且符合当时颁布的法规，那么该投资在《外汇管理（非债务）条例》下依然有效。

同样，根据《外汇管理（非债务）条例》第4条规定，除非另有许可或获得印度储备银行的特别批准，否则任何印度公司、投资工具或其他机构不得记录印度境外居民的投资。

5. 在印度进行外商直接投资的许可

印度境外居民进行的任何投资均须遵守这些规则中规定的准入途径、行业上限或投资限额，以及此类投资的其他条件。

6. 禁止外商直接投资的行业

有少数行业严格禁止任何形式的外商直接投资。这些行业包括：

1. 不对私人投资开放的活动或行业，如原子能发电、铁路运营
2. 任何赌博或博彩业务，包括赌场
3. 彩票（在线、私人、政府等）
4. 互助基金（Chit Funds）投资
5. Nidhi公司
6. 房地产业务或农舍建设。房地产业务不包括城镇开发、住宅或商业场所建设等。
7. 可转让发展权（TDR）交易
8. 雪茄、香烟或任何相关烟草制品的制造

7. 印度实体外商投资的准入途径

根据《外汇管理（非债务）条例》附表一，以下是印度外商投资的可能准入途径。非居民进入印度的外商直接投资通过两条途径进行监管——自动审批途径和政府审批途径。自动途径适用于限制较少的行业和投资水平。另一方面，在审批途径下，政府机构会对外国投资进行监管和审查，并予以批准。

7.1 印度外商直接投资的自动途径

自动途径代表着限制较少或更为自由化的监管。在自动途径下，印度境外居民在印度进行任何投资无需获得印度储备银行或印度中央政府的任何批准。综合外商直接投资政策中指定的各类行业和活动均允许通过自动途径进行投资。

7.2 印度外商直接投资的审批途径/政府途径

在审批途径或政府途径下，外国投资者或印度公司必须事先获得印度中央政府的批准。通过此途径进行的投资须遵守政府在批准时规定的条件。

In case where all of the following conditions are satisfied, there will be no requirement of government approval or compliance of sectoral conditions:

1. Where aggregate foreign investment is made upto 49% of paid-up capital on a fully diluted basis or the sectoral or statutory cap, whichever is lower, and
2. Investment does not result in transfer of ownership and control from resident Indian to person resident outside India.

8. Conditions for Foreign Investment in equity instruments

Following are the conditions need to be fulfilled for making foreign investment in equity instruments:

1. Sectoral Cap for total foreign investment: for some sectors, FEM (Non-Debt) instrument specifies maximum limit of foreign investment in equity instruments.
2. Foreign investment is subject to applicable laws in India as provided in Schedule I of FEM (Non-Debt) Rules.
3. 100% FDI is permitted through an automatic route where in those sectors where no sectoral caps are given, government approval is not required and which are not covered under prohibited sectors.
4. Foreign investment in Financial services requires prior approval of the central Government. However, as per S. No. F of Schedule I, following investments are automatically approved in financial services:
   1. 100% FDI in ARCs
   2. 49% in Private Banks under automatic route
   3. 20% in public sector banks with government approval,
5. Foreign investment in investing companies, other than NBFC or CIC (“Core Investment Company”) requires specific approval.
6. 100% FDI is permitted in NBFC through automatic route.
7. Foreign investment can be made in existing companies where an automatic route is available and the Indian entity has not made any downstream investment.
8. Burden of compliance such as sectoral or statutory caps shall lie on the company receiving the investment.
9. 100% foreign investment in NBFC under automatic route allowed.
10. Burder of compliances with respect to Sectorial or statutory cap is on the company receiving such foreign investment.

9. Different types of FDI

Foreign direct investment or FDI is an investment made by a foreign entity (an individual or a company) into a business based in another country. FDI is characterized by a notion of direct control and is not simply the transfer of monetary funds. A lasting interest differentiates foreign direct investment from foreign portfolio investment.

There are mainly two types of FDI- Horizontal and Vertical:

1. Horizontal Investment: Under this type of Investment, a business expands its inland operations to another country. The business undertakes the same activities but in a foreign country.
2. Vertical Investment: in this case, a business expands into another country by moving to a different level of the supply chain. Thus, business undertakes different activities overseas, but these activities are related to the main business.

10. Reporting requirements specified by RBI for FDI

1. Foreign currency -Gross Provisional Returns (FC-GPR)
2. Annual Return on Foreign Liabilities and Assets (FLA Return)
3. Form Foreign currency – Transfer of shares (FC-TRS)
4. Form Employees stock options (ESOP)
5. Reporting for issue of capital instruments
6. Reporting on conversion of ECB into equity
7. Reporting of ADR/GDR Issues
8. Reporting of investment in LLP
9. Reporting on issue or transfer of convertible notes by startups
10. Reporting of foreign portfolio investments by NRI/OCI and others
11. Downstream Investments
12. Investment by foreign venture capital investor