Notification no. S.O. 2174(E); Dated: 01.05.2026
The Government has notified the Foreign Exchange Management (Non-Debt Instruments) (Amendment) Rules, 2026. An amendment has been made to Rule 6 relating to ‘Investments by a person resident outside India’. As per the amended norms, any subsequent change in beneficial ownership now requires prior government approval. The term ‘beneficial ownership’ has been clearly defined in the explanation & shall have the same meaning as assigned under the PMLA and shall be determined as per the criteria specified under the (Maintenance of Records) Rules, 2005. Also, reporting norms have been prescribed.
The key amendments are as follows:
1. Any Subsequent Change in Beneficial Ownership Requires Prior Government Approval
As per the amended policy, any subsequent change in beneficial ownership now requires prior Government approval. Earlier, the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, only required government approval for any such change. The amendment now clarifies that prior approval is mandatory.
2. The Term ‘Beneficial Ownership’ Has Been Clearly Defined
The term ‘beneficial ownership’ has been clearly defined in the explanation to the rules. It shall have the same meaning as assigned to it under the PMLA, 2002 and must be determined in accordance with the criteria specified under Rule 9(3) of the PML (Maintenance of Records) Rules, 2005, made under the said Act.
However, this is subject to a condition that beneficial ownership of the investment must be deemed to be vested in a country sharing a land border with India where citizens of such a country and/or entities incorporated or registered in such a country have the ability to directly or indirectly, individually or cumulatively, independently or collectively with any another citizen or entity, whether acting together or otherwise, hold rights/entitlements:
(a) In excess of the applicable thresholds prescribed under Rule 9(3) of the PML Rules over an investor entity that is incorporated or registered in a country other than a country sharing a land border with India, or
(b) That enable such citizens and/or entities to exercise control over the investor entity or
(c) that enable such citizens and/or entities to exercise ultimate effective control over the Investee entity in any manner.
Further, an explanation 3 has been added to the Rule 6(a) which states that an issue or transfer of ‘participating interest or right’ in oil fields by Indian companies to a person resident outside India would be treated as foreign investment and must comply with conditions specified in Schedule I of the Rules.
3. Revision in Government Approval Criteria for Investments Linked to Land-Border Sharing Countries
The amended Rule 6 (a) revises the Government approval framework for investments linked to countries that share a land border with India. Under the earlier provision, approval was required where the investing entity was from a land-border sharing country, or where the beneficial owner of the investment into India was situated in or was a citizen of such country.
Under the amended provision, government approval will be required where the beneficial owner of an investment into India is a citizen of a country sharing a land border with India, or where the beneficial ownership of the investment is vested in such a country.
4. Reporting Requirements for Certain Investments
Earlier, Rule 6 did not prescribe any specific reporting obligations for investments into India. However, the amended rules now prescribe reporting requirements for certain specified investments.
Accordingly, investments into India from an investor entity having any direct or indirect ownership by a citizen or entity of a country sharing a land border with India and not requiring prior Government approval, shall be subject to reporting requirements as may be specified by the Reserve Bank.
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