India’s FDI policy decides how much a foreign investor can own, in which sector, and whether government approval is needed before money moves. The law sits in the FEM (Non-Debt Instruments) Rules 2019 under FEMA; the policy narrative sits in DPIIT’s Consolidated FDI Policy Circular of 2020, amended piecemeal by press notes. This guide maps the full framework as it stands in 2026 – routes, the current sectoral caps table, the prohibited list, and the changes (insurance at 100%, the relaxed land-border regime) that most summaries still miss.
The legal architecture in one table
| Layer | Instrument | What it does |
|---|---|---|
| Statute | FEMA 1999 + FEM (Non-Debt Instruments) Rules 2019 | The operative law: who can invest, in what instruments, at what price, in which sectors. Amended three times in 2026 alone |
| Policy | Consolidated FDI Policy Circular 2020 (DPIIT) | Still the latest consolidation – read it with every later press note, not alone |
| Amendments | DPIIT Press Notes | Announce changes; they take legal effect only when the matching NDI Rules amendment is gazetted |
| Operations | RBI Master Direction – Foreign Investment (updated Jan 2025) + FIRMS portal | Reporting, pricing mechanics, downstream rules |
Two routes – automatic and government
Under the automatic route no prior approval is needed: invest, then report (FC-GPR within 30 days of allotment). Under the government route the competent ministry must approve first, via the National Single Window System. Investors from land-border countries face the government route regardless of sector – except non-controlling stakes below 10% after the 2026 relaxation. The full process, timelines and documents are covered in our automatic vs approval route guide.
Sectoral caps table (2026)
The caps below are the ones foreign companies and NRIs actually ask about. Where a cap says 100% automatic, a wholly-owned subsidiary works with no approval at all.
| Sector | Cap & route | Key conditions |
|---|---|---|
| IT, software, ITeS / most services | 100% automatic | The GCC / foreign subsidiary default |
| Manufacturing | 100% automatic | May sell wholesale and retail (including e-commerce) without approval; land-border investors in electronics, capital goods and solar get a 60-day fast track |
| E-commerce | 100% automatic – marketplace only | Inventory-based e-commerce is prohibited; no ownership of sellers’ inventory; single-vendor concentration limits |
| Single-brand retail | 100% automatic | Beyond 51%: 30% local sourcing requirement, averaged over first 5 years |
| Multi-brand retail | 51% government | Conditions heavy; effectively dormant |
| Insurance (companies & intermediaries) | 100% automatic – new 2026 | Chair/MD/CEO must be a resident Indian citizen; LIC capped at 20% |
| Private banks | 74% (automatic to 49%) | RBI ownership norms apply |
| Telecom | 100% automatic | DoT licence conditions; land-border rule applies |
| Defence | 74% automatic; beyond via approval | Industrial licence + security clearance |
| Pharma | Greenfield 100% automatic; brownfield 74% automatic | Beyond 74% brownfield: approval; non-compete restrictions |
| Print media (news) | 26% government | Digital news media also 26% |
| Space | Satellites 74% / launch vehicles 49% / components 100% | 2024 liberalisation; IN-SPACe guidelines |
| Civil aviation (scheduled) | 100% (automatic to 49%; NRIs 100% automatic) | Foreign airlines capped at 49% in Indian carriers |
The prohibited list – where FDI cannot go
- Lottery (including online), gambling and betting, casinos;
- Chit funds (exception: NRIs/OCIs on non-repatriation basis) and Nidhi companies;
- Trading in Transferable Development Rights;
- Real estate business and farmhouse construction – but township/built-up infrastructure development is permitted, and REITs are open;
- Manufacturing of cigars, cigarettes and tobacco substitutes;
- Atomic energy and railway operations (non-private sectors).
What counts as FDI – instruments and pricing
Only equity instruments qualify: equity shares, fully-and-mandatorily convertible preference shares (CCPS) and debentures (CCDs), share warrants, and – for DPIIT-recognised startups – convertible notes. Anything optionally convertible is debt and falls under the ECB framework. Issue and transfer prices follow Rule 21 valuation rules. The full instrument-by-instrument breakdown, with the pricing floors and caps, is in the FDI instruments guide.
Indirect FDI – when your Indian company invests onward
If a company is majority foreign-owned or foreign-controlled (an FOCC), its investments into other Indian entities count as indirect foreign investment and must obey the same caps, conditions and pricing – with Form DI reporting within 30 days. This catches holding-company structures, acquisitions by GCC arms and startup group restructures more often than founders expect.
Structuring an investment into India?
We confirm the sector position, route and conditions before the money moves – and handle the filings after.
Talk to My Cloud AccountantFrequently asked questions
Is there a general limit on how much a foreigner can invest in India?
No single limit – the cap depends on the sector. Most services and manufacturing sectors allow 100% foreign ownership under the automatic route with no approval; regulated sectors carry caps (banking 74%, print media 26%) or conditions.
Which is the latest Consolidated FDI Policy?
The Consolidated FDI Policy Circular of 2020 (effective 15 October 2020) remains the latest consolidation as of 2026. Every change since – telecom 100%, space, insurance 100%, the land-border relaxation – lives in individual press notes and NDI Rules amendments, so the 2020 circular must always be read together with them.
Do NRIs get any special treatment under the FDI policy?
Yes, two big ones: NRIs can invest on non-repatriation basis (Schedule IV) which is treated as domestic investment with no caps or pricing rules; and in specific sectors like scheduled airlines NRIs can hold 100% where other foreign investors face lower caps.
What happens if FDI comes into a sector beyond its cap?
The investment breaches FEMA – consequences run from compulsory unwinding/divestment to penalties under section 13 (up to three times the amount involved) and compounding. Caps are checked at filing (FC-GPR) and at approval stage for government-route sectors.
Based on the FEM (NDI) Rules 2019 as amended to June 2026, Consolidated FDI Policy 2020 and DPIIT press notes through Press Note 2 of 2026. Last reviewed: July 2026.