How Can Foreigners Invest in India A Complete Guide for NRIs & Global Investors

India has become one of the world’s top investment destinations, attracting over $1.14 trillion in FDI since 2000 and projected to receive a record $90 billion in FY 2025–26. Foreigners, NRIs, OCIs, and global businesses can invest in India through Foreign Direct Investment (FDI) for business ownership or Foreign Portfolio Investment (FPI) for stock market access. Most sectors—including IT, manufacturing, renewable energy, pharma, logistics, and insurance—allow up to 100% foreign ownership under the automatic route without prior government approval. NRIs can also invest directly in Indian stocks through NRE/NRO accounts and the PIS route, with Budget 2026 increasing investment limits further. Foreign investors can set up Indian companies remotely within 15–30 days, benefit from India’s low operating costs, fast-growing economy, government incentives like PLI schemes, and tax relief through DTAAs with 90+ countries, making India one of the most attractive global markets for long-term investment and expansion.

 

Table of Contents

Why is everyone investing in India right now?

Before we get into the “how,” let’s quickly answer the “why.”

India is the world’s fastest-growing major economy, with GDP growth consistently above 6.5%. It has a working-age population (15–64 years) of over 900 million people, manufacturing wages roughly one-third of China’s, and a government that has been aggressively simplifying rules for foreign investors year after year.

For businesses from the US, Europe, the Middle East, or Southeast Asia, India offers something rare: scale + cost advantage + a growing consumer market, all in one place. IT services, manufacturing, pharmaceuticals, renewable energy, retail — across almost every sector, India is open for foreign investment, and the paperwork to get in has never been simpler.

For NRIs and Overseas Citizens of India (OCIs), the story is even better. Budget 2026 introduced a brand-new direct equity access route, allowing persons resident outside India to buy shares directly on Indian stock exchanges — no complex pooled fund structures needed.

 

Who can invest in India from outside?

There are three main categories of foreign investors in India:

Non-Resident Indians (NRIs) are Indian citizens living outside India. They get the widest range of investment options — stocks, real estate, mutual funds, fixed deposits, and direct business investment.

Overseas Citizens of India (OCIs) are foreign nationals of Indian origin holding OCI cards. For most investment purposes, OCIs are treated on par with NRIs.

Foreign Nationals and Foreign Companies/Businesses who have no Indian background can also invest in India through Foreign Direct Investment (FDI) or by registering as a Foreign Portfolio Investor (FPI) with SEBI. The process is more formal, but entirely possible in most sectors.

 

The Two Main Ways to Invest in India

1. Foreign Direct Investment (FDI) — For Business & Long-Term Investors

FDI is when you invest directly into an Indian company — either by starting a new business or buying a significant stake (10% or more) in an existing one. This is the go-to route for businesses looking to set up operations in India.

The Automatic Route covers the majority of sectors. Under this route, you don’t need prior permission from the Indian government or the Reserve Bank of India (RBI). You invest, comply with FEMA (Foreign Exchange Management Act) regulations, and report the transaction. Sectors like IT, manufacturing, single-brand retail, and hospitality typically fall under this route with 100% FDI allowed.

The Government Approval Route applies to sensitive sectors like defence, telecom, print media, and multi-brand retail. Here you need prior approval from the relevant ministry before investing. It’s a longer process, but these sectors still welcome foreign capital.

Key sectors currently open to 100% FDI under the automatic route include IT and software, manufacturing, logistics, renewable energy, pharma (under certain conditions), and e-commerce infrastructure. The insurance sector was recently raised to 100% FDI, reflecting India’s continued liberalisation push.

One important rule to note: if you are from a country that shares a land border with India — such as China — your investment requires prior government approval regardless of the sector (as per Press Note 3, 2020, with a January 2025 update for multilateral institutions).

2. Foreign Portfolio Investment (FPI) — For Stock Market & Financial Investments

FPI covers investments in listed Indian equities where you hold less than 10% of a company’s paid-up capital. This is the route for investors who want exposure to India’s booming stock markets without running a business here.

To invest via FPI, you need to register with the Securities and Exchange Board of India (SEBI) and meet eligibility criteria. Once registered, you can invest in listed equity shares, debt securities, exchange-traded funds (ETFs), and derivatives.

For NRIs specifically, the Portfolio Investment Scheme (PIS) is your dedicated channel. You link your NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account to a SEBI-registered broker and start investing. As of Budget 2026, individual NRI investment ceilings have been doubled — you can now hold up to 10% of a listed company, up from 5%, with the aggregate NRI cap raised to 24%. The RBI is also rolling out simplified digital onboarding under the PIS from June 2026.

 

Banking Setup For Foreign Investment in India

Getting your banking right is Step 1 for any foreign investor in India.

NRE Account (Non-Resident External): This is for income earned outside India, converted to Indian Rupees. Both principal and interest are fully repatriable (you can send the money back abroad freely). Interest earned is tax-free in India. This is the primary account for stock market investments.

NRO Account (Non-Resident Ordinary): This holds income earned within India — rent, dividends, pensions. It is partially repatriable, up to $1 million per financial year after paying applicable taxes.

FCNR Account (Foreign Currency Non-Resident): A term deposit maintained in foreign currency (USD, GBP, EUR, etc.). Fully repatriable and tax-free. Good for those who want to park money in India without currency risk.

Special Non-Resident Rupee Account (SNRR Account): A person who is resident outside India, having business interest in India, may open a Special Non-Resident Rupee Account (SNRR account) with an authorised dealer in India or its branch outside India to facilitate the handling of the permissible current and capital account transactions with a person resident in India under the Act, rules and regulations framed there under the Act, and for handling any transaction with a person resident outside India.

Source: RBI Website

Foreign nationals who are not NRIs/OCIs will need to work through an authorised dealer bank in India for their investment-related remittances. To know more about this, how you can open your bank account in India- you can  click here.

 

How to start a company in India as a Foreigner or NRI?

Setting up a business in India has become significantly easier. Here’s the simplified path:

The most popular structure is a Private Limited Company..It allows 100% FDI under the automatic route in most sectors, offers limited liability protection, and is ideal for startups, SMEs, and subsidiaries of foreign corporations. The entire incorporation process — from Digital Signature Certificate (DSC) to Ministry of Corporate Affairs (MCA) filing — can be completed in 15 to 30 days, and the foreigner does not need to be physically present in India.

One mandatory requirement: every Indian company must have at least one director who is an Indian resident (someone who has stayed in India for at least 182 days in the prior financial year). Other directors can be foreign nationals or NRIs.

After incorporation, you must file an FC-GPR form with the RBI within 30 days of share allotment to foreign investors, and comply with FEMA for all cross-border transactions. Foreign companies can also set up a Branch Office or Liaison Office or Project Office in India with RBI approval, though a Private Limited Company is generally preferred for full-scale operations.

For NRIs specifically, the process is even smoother since many already hold PAN cards and Aadhaar, reducing documentation requirements.

 

What Can You Invest In? Key Sectors for 2026

Based on current FDI data from DPIIT and the government’s policy direction, these are the highest-opportunity sectors for foreign investors in 2026:

Technology & IT Services continue to attract the largest FDI volumes. Computer software and hardware accounts for 16% of cumulative FDI equity inflows. India’s English-speaking, technically skilled workforce makes it the world’s back-office and product engineering capital.

Manufacturing is the government’s biggest priority. The Production Linked Incentive (PLI) scheme offers cash incentives to foreign manufacturers in electronics, semiconductors, pharmaceuticals, automobile components, and textiles. FDI in manufacturing rose 18% in FY 2024–25.

Renewable Energy is wide open. India has set ambitious clean energy targets, and the sector offers strong long-term returns with government-backed policy support.

Pharmaceuticals — India is literally the “Pharmacy of the World,” supplying over 50% of global vaccine demand. Cost advantages in R&D and manufacturing make it extremely attractive.

Financial Services & Insurance saw major liberalisation recently, with 100% FDI now permitted in the insurance sector.

 

Tax & Compliance: What Foreign Investors Must Know

Taxes on your Indian investments will depend on your investment type, holding period, and the tax treaty between India and your country of residence.

Short-term capital gains on equity investments are currently taxed at 20%, while long-term capital gains exceeding ₹1.25 lakh per year are taxed at 12.5%. Dividends received from Indian companies are taxable in the hands of the investor.

India has Double Taxation Avoidance Agreements (DTAAs) with over 90 countries, which can reduce your tax liability. For example, NRIs and foreign investors from treaty countries may be able to claim relief to avoid being taxed twice on the same income.

A key compliance requirement under FEMA: all inbound and outbound remittances must go through authorised dealer banks, and investment transactions must be reported to the RBI. Non-compliance can attract penalties, so professional guidance is essential.

For NRIs returning to India permanently, NRE accounts must be converted to resident accounts within a reasonable time.

 

Common Mistakes Foreign Investors Make (and How to Avoid Them)

Investing in Indian stocks through a regular NRE account without a PIS arrangement — this gets transactions rejected. Always set up the PIS link with your bank first.

Ignoring FEMA reporting requirements — forgetting to file FC-GPR or the Annual Return on Foreign Liabilities and Assets (FLA) is a compliance failure that attracts RBI penalties.

Not checking sectoral caps before committing capital — some sectors still have foreign investment limits (e.g., 74% in private banking). Always verify the current FDI policy for your specific sector on the DPIIT or Invest India website before proceeding.

Assuming all sectors allow repatriation freely — returns from NRO accounts have an annual repatriation cap of $1 million, while NRE account returns are freely repatriable.

 

Ready to Invest in India?

India’s window of opportunity is wide open — but navigating FEMA, RBI guidelines, SEBI registrations, and DPIIT approvals without expert support is a costly mistake.

Contact Mercurius and speak with our  FDI and advisory team. We’ll handle the technical complexity so you can focus on the opportunity.

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How Mercurius Can Help

At Mercurius, we help NRIs, foreign founders, global investors, and multinational companies enter India the right way—from strategy to execution, we offer end-to-end support across:

Whether you are a first-time investor exploring India or a multinational looking to establish a full subsidiary, our team of 400+ professionals ensures you are compliant, tax-efficient, and strategically positioned from day one.

Mercurius is a PCAOB-registered (USA) and ISO 9001:2015 certified Chartered Accountancy firm with offices in New Delhi, Noida, Gurugram, Dubai, Tokyo, UAEand  USA.

Sources: DPIIT FDI Factsheet (December 2025), Business Standard (April 2026), IBEF, Invest India, RBI Guidelines, Chambers & Partners (2025), Budget 2026 announcements.

This blog is for informational purposes only and does not constitute legal or financial advice. Regulations are subject to change — always consult a qualified advisor before making investment decisions.