The Ministry of Finance, Department of Economic Affairs, has notified the Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2026 (“Amendment Rules”) vide notification dated 1 May 2026, thereby operationalizing the changes introduced through Press Note 2 of 2026 with respect to investments involving entities or beneficial owners connected with countries sharing land borders with India. The Amendment Rules have come into effect from 1 May 2026.
| Key Points | Amendments |
|---|---|
| Government approval requirement | Investments into India by following entities or persons shall be permitted only under the Government approval route:
Further, investments by a citizen of Pakistan or an entity incorporated in Pakistan, shall be permitted only in sectors or activities other than defence, space, atomic energy and such other sectors or activities where foreign investment is prohibited |
| Meaning of “beneficial owner” | The expression “beneficial owner” shall have the meaning assigned under Section 2(1)(fa) of the Prevention of Money-laundering Act, 2002 (‘PMLA’) and shall be determined in accordance with Rule 9(3) of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 (‘PML Rules’) |
| Beneficial ownership criteria | Beneficial ownership of an investment shall be construed to be vested in a country sharing a land border with India where a citizen or entity of such country has the ability, directly or indirectly, individually or collectively, to:
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| Transfer of ownership | Any direct or indirect transfer of ownership of existing or future Foreign Direct Investment in an Indian entity resulting in the beneficial ownership falling within the prescribed land-border restrictions shall also require prior Government approval |
| Reporting requirements | Investments involving any direct or indirect ownership by a citizen or entity of a country sharing a land border with India may attract reporting obligations prescribed by the Reserve Bank of India, even where prior Government approval is not required |
| Exemption for multilateral institutions | A multilateral bank or fund of which India is a member shall not be treated as an entity of a particular country, and no country shall be regarded as the beneficial owner of investments made by such multilateral institution into India |
| Participating interests in oil fields | Issuance or transfer of “participating interest or right” in oil fields by Indian companies to person residents outside India shall constitute foreign investment subject to Schedule I conditions specified in the Non-Debt Investment Rules |