The article examines the Draft Foreign Exchange Management (Foreign Investment) Rules, 2026 (“Draft FI Rules 2026”), describing them as a concise framework that raises several questions requiring clarification before finalisation. It discusses the proposed definition of “equity”, noting that instruments such as convertible notes and SAFE may not qualify if they do not meet the accounting-standards test. It also highlights the proposed 10% voting-rights threshold within the “control” definition and its potential effect on transaction structuring and downstream investments. On pricing, the article states that the draft requires foreign investment and transfers to be made at the price determined under applicable pricing methodology, potentially reducing flexibility previously available under the 2019 NDI Rules. It further discusses changes to the foreign-owned and controlled company (FOCC) and Indian-owned and controlled company (IOCC) framework, allocation of responsibilities between RBI and DPIIT, and the proposed consolidation of the existing NDI Rules. The article acknowledges that simplicity is welcome but states that key aspects require clarification and suggests that a concise framework could work if these issues are addressed.
Please click here to read the full article by Raj Ramachandran, Partner, published in Taxguru.
Raj specializes in Corporate Commercial, Banking & Finance and Cross Border Investments & Acquisitions.