- Most services sectors, including IT and ITeS, allow up to 100% FDI under the automatic route.
- Lottery, gambling, chit funds, Nidhi companies, real estate business and tobacco manufacturing are closed to FDI.
- More than 90% of FY 2025-26 equity inflows came through the automatic route.
- Allotment of shares to a foreign investor must be reported on FC-GPR within 30 days.
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What counts as FDI under Indian rules?
Equity, in the right place. The RBI Master Direction on Foreign Investment defines FDI as investment through equity instruments by a non-resident in an unlisted Indian company. In a listed company, the stake must reach 10% or more of post-issue paid-up capital on a fully diluted basis. Below that is portfolio investment.
Equity instruments include equity shares, compulsorily convertible debentures and preference shares, and share warrants. Your parent subscribing to shares in a new Indian subsidiary is FDI from day one.
The sector decides the rest. Each sector carries a cap and an entry route, explained in our automatic route vs government route entry. Investors from countries sharing a land border with India need government approval under Press Note 3 (2020), eased in March 2026 for non-controlling holdings up to 10%.
How much FDI does India attract?
A lot.
| Year | Total FDI inflows | FDI equity inflows |
|---|---|---|
| FY 2024-25 | US$81.04 billion | About US$50 billion |
| FY 2025-26 | US$94.52 billion | US$58.85 billion |
DPIIT released the FY 2025-26 figures in June 2026, with computer software and hardware drawing the largest sector share of equity and Singapore and the United States leading the sources. IBEF’s summary of DPIIT data tracks the series.
Watch the labels. Some reports call US$58.85 billion the “total”. It is the equity figure.
Do you need FDI to hire in India?
No. You need FDI to own an Indian business, and you can hire without one.
Through an employer of record, you invest nothing in India. The EOR’s own Indian company employs your team and invoices you for the service. No shares change hands, so there is no FC-GPR, no annual foreign liabilities return and no resident director to appoint.
An entity is the right answer when you want to own assets or contracts in India, sell to Indian customers, or run a team large enough to justify the overhead. Then FDI into a wholly owned subsidiary is the usual route. An LLP works only in sectors with 100% automatic FDI and no performance conditions. Our guide to doing business in India compares the options.
How does Remunance fit into your FDI plans?
Many clients start with Remunance as their employer of record, test the market, then invest once the team is proven. We have hired 1,200+ employees for clients across 34 Indian cities on that model. When the numbers justify an entity, our India subsidiary formation service sets it up and moves your EOR staff across. Get a side-by-side EOR vs entity plan before you commit capital.
What else do people ask about FDI in India?
Is 100% FDI allowed in India?
Yes, in most sectors. IT, ITeS and most services allow 100% under the automatic route, while defence, media and some financial services carry caps or need approval.
Which sectors are prohibited for FDI in India?
Lottery, gambling and betting, chit funds, Nidhi companies, TDR trading, real estate business, farm houses, and cigarette or cigar manufacturing. Atomic energy and railway operations are also closed.
What is the difference between FDI and FPI?
FDI is a lasting stake: any equity in an unlisted company, or 10% or more of a listed one. FPI is a smaller, portfolio holding in listed securities.
Planning a hire in India?
Our founding team has run payroll and hiring in India for 22+ years, first as Remunance Systems, which was later acquired by ADP.