The document provides an overview of key provisions related to inbound foreign investment under India's Foreign Exchange Management Act (FEMA). It discusses the structure of FEMA and differences between FEMA and income tax regulations. It then summarizes provisions for foreign direct investment, including prohibited sectors, automatic vs. approval routes, and procedural compliance requirements. Specific policies for sectors like construction, NBFCs, and trading are also outlined.

1. INBOUND INVESTMENT- FEMA PROVISIONS 23 rd October 2008 CA Manoj Shah Shah & Modi Phone :+ 91 22 2512 6399 E-Mail :manoj@shahmodi.com Visakhapatnam Branch of SIRC

9. Inbound Investments FEMA Provisions

13. Inbound Investment – Check Points Investor (Other than citizen & entity of Pakistan) Proposed Activity in India NRI Non-Resident Prohibited Activities Approval Route Automatic Route Mode of Remittance Procedural Compliance at the time of Investment Annual Compliance NRE Inward Remittance

26. Provisions for Certain Specific Sectors _________________________

34. NBFC Sector- 100% under Automatic Route in 18 activities Minimum Capitalization Norms Fund based NBFC Non-Fund based NBFC FDI up to 51% - US$ 0.5 million to be brought upfront. FDI above 51% to 75% - US$ 5 million to be brought upfront. FDI above 75% to 100% - US$ 50 million, of which US$ 7.5 million upfront and balance in 24 months. Minimum US$ 0.5 million

45. Transfer of Shares- without RBI approval/ or any procedure Transferor Transferee Mode of Transfer PROI- other than NRI & OCB PROI (including NRI) Sale or gift (prior approval of Govt., by transferee, in case transferee has previous J/V or technical collaboration in same field) NRI/OCBs NRI Sale or gift (conditions same as above) Note: above conditions not to apply to IT sector & certain international financial institutions/bank.

46. Transfers without any permission/procedural compliance Transferor Transferee Mode of Transfer for shares/C.Deb., of Indian Company PROI Person Res. in India Gift PROI Sell on Recognized Stock Exchange PROI Indian Company Under buy back/ capital reduction scheme (other than financial serv sector)

47. Transfer of security with prior permission Transferor Transferee Mode Person Resident in India NRI Person Resident Outside India (Not being erstwhile OCBs) Non Resident Gift Sale