Foreign investment and joint ventures in India: a practical primer

By Trilegient Knowledge TeamPublished 26 October 2026Reviewed 26 October 202611 min readJurisdiction: India

In short: Foreign direct investment in India is regulated mainly by FEMA, the Non-Debt Instruments Rules, 2019 and the Consolidated FDI Policy. Most sectors are open under the automatic route. Investors connected with countries sharing a land border with India need government approval. Every investment is followed by reporting to the RBI within fixed deadlines.

The framework in brief

FEMA sets the overall rules for cross-border capital flows. The Non-Debt Instruments Rules, 2019 govern equity investment by non-residents. The Department for Promotion of Industry and Internal Trade (DPIIT) publishes the Consolidated FDI Policy and issues changes through press notes. The Reserve Bank of India administers reporting, which is made through authorised dealer banks on the FIRMS portal.

Choosing a vehicle

Automatic route, government route and Press Note 3

In most sectors, foreign investment of up to 100% is allowed under the automatic route, without prior approval. Some sectors carry caps or conditions (for example, insurance, defence and broadcasting), some need government approval, and a few, such as lottery, gambling, chit funds and real estate business, are closed to FDI.

Press Note 3 (2020) adds a rule based on the investor rather than the sector: investment by an entity of a country sharing a land border with India, or where the beneficial owner is situated in or a citizen of such a country, needs government approval. This applies to investors connected with China, among others, and should be considered for indirect and future changes in ownership too.

Pricing and reporting

Shares issued to a non-resident must be priced at no less than fair value, determined by an internationally accepted pricing methodology and certified by a chartered accountant, SEBI-registered merchant banker or practising cost accountant. Transfers between residents and non-residents follow similar pricing guidelines.

Late filings can usually be regularised by paying a late submission fee, but repeated or significant delays can hold up later transactions.

Joint venture terms that matter most

• Purpose and scope: what the joint venture will and will not do, and whether partners may compete with it.
• Capital and funding: initial contributions, future funding calls, and what happens if a partner does not fund.
• Board and reserved matters: who appoints directors, and which decisions need both partners' consent.
• Deadlock: escalation to senior management, mediation, and, as a last resort, buy-sell or exit mechanisms.
• Transfer restrictions: lock-in, right of first refusal, tag-along and drag-along rights.
• Exit: put and call options, IPO, or sale. FEMA permits options for non-residents but not an assured return, so exit pricing must follow the pricing guidelines.
• Intellectual property and brand: who owns what, and what happens to licences on exit.
• Dispute resolution: seat, rules and governing law for arbitration.

In an Indian private company, these rights should also be written into the articles of association. Following V.B. Rangaraj, restrictions that appear only in a shareholders' agreement may not bind the company.

Repatriation and exit

Dividends, sale proceeds and capital reductions can generally be repatriated after applicable taxes, subject to the pricing guidelines and any sector conditions. Tax treaty benefits, withholding tax and the general anti-avoidance rules all affect the net return, so tax advice should form part of the structure from the start.