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The Ministry of Finance (“MoF”) by Notification dated 01.05.2026, notified the Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2026 (“Amendment Rules 2026”)1 to further amend the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (“Principal Rules 2019”).
The salient features of the Amendment Rules 2026 are as follows:
(i) Government route for investors from countries sharing land border with India:
(a) An entity or a citizen of a country which shares land border with India, or where the beneficial owner of an investment into India is a citizen of any such country, or where the beneficial ownership of an investment is vested in any such country, shall now invest only under the Government Route specified in sub-clause (ii) of clause (a) of paragraph (3) of Schedule I.
(b) Investments into India from an investor entity having any direct or indirect ownership by a citizen or an entity of a country sharing land border with India and not requiring prior Government approval under the provisions of this clause, shall be subject to reporting requirements specified by RBI.
(ii) Definition of ‘beneficial owner of an investment into India’:
An explanation has been introduced to define “beneficial owner of an investment into India” as the beneficial owner of the investor entity incorporated or registered in a country other than one sharing a land border with India. It further provides that the term “beneficial owner” shall have the same meaning as assigned to it under the Prevention of Money-Laundering Act, 2002 (“PMLA”), and shall be determined in accordance with the criteria prescribed under sub-rule (3) of rule 9 of the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 (“PML Rules”).
(iii) Deemed vesting of beneficial ownership in a country sharing a land border with India:
An explanation has been introduced to clarify that beneficial ownership shall be deemed to vest in such a country where a citizen or entity from that country, individually or cumulatively, directly or indirectly holds rights or entitlements above the applicable thresholds under the PML Rules, or is able to exercise control or ultimate effective control over the investor or investee entity in any manner.
The Amendment Rules 2026 have come into effect from the date of its publication in the official gazette i.e., 01.05.2026.
Footnote
1. Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2026.
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