India Company Incorporation

Press Note 2 (2026 Series), issued by India’s Department for Promotion of Industry and Internal Trade (DPIIT) on 15 March 2026, reformed the blanket FDI restrictions that Press Note 3 imposed in 2020 on investments linked to land border countries (LBCs), principally China. While the UAE is not a land border country, UAE-based investors are far from exempt. Any fund, holding company, or NRI vehicle incorporated in the UAE that carries Chinese beneficial ownership above a 10% threshold now falls within the government approval route. The concept that defines this regulatory architecture, and the one this article examines throughout, is beneficial ownership tracing: the mechanism that determines whether capital routed through Dubai, Abu Dhabi, or any other non-LBC jurisdiction still triggers India’s investment screening framework. Why Does Press Note 2 Affect Investors Who Are Based In The UAE? Beneficial ownership tracing requires India’s regulators to look through the immediate investor entity and identify who ultimately controls or benefits from the capital. A venture capital fund domiciled in DIFC or ADGM with a Chinese limited partner holding more than 10% beneficial ownership will require government approval before investing in India, regardless of the fund’s Emirati registration. This challenge predates Press Note 2. Under the original Press Note 3 (2020), any beneficial ownership by an entity in a land border country triggered mandatory government approval, with no minimum threshold and no defined decision timeline. Between FY 2020-21 and FY 2021-22, investment proposals worth INR 756.91 billion (approximately US$8.1 billion) were submitted under these rules. Authorities approved only INR 136.25 billion (US$1.45 billion), an effective non-approval rate of roughly 82% by value (CRISIL Market Intelligence Report, March 2026, cited in India Briefing). That bottleneck suppressed legitimate global capital flows. Many UAE-domiciled funds carrying even minimal Chinese LP exposure chose to avoid India entirely rather than face an indefinite approval process. How Does Press Note 2 (2026) Change The Rules For Beneficial Ownership? Press Note 2 introduces three structural reforms that directly affect UAE-based investors with LBC exposure. First, it establishes a 10% beneficial ownership threshold. Investments where no single LBC-linked entity holds 10% or more of beneficial ownership may proceed through the automatic route, with no government approval required. The definition of beneficial ownership is anchored in Rule 9(3) of the Prevention of Money Laundering Act (PMLA), 2002, providing statutory precision that was absent under Press Note 3. Second, for investments that do exceed the 10% threshold but involve minority, non-controlling stakes, the framework introduces a 60-day processing timeline for priority sectors. This replaces the open-ended waiting period that characterised Press Note 3 approvals. Third, the FEMA (Non-Debt Instruments) Amendment Rules, codified across three tranches on 1 May, 2 May, and 12 June 2026, embed these changes into enforceable law rather than retaining them as policy guidance alone. Konark Bhandari, Fellow at Carnegie India’s Technology and Society Program, observed in April 2026: “The 10 percent automatic route threshold is modest, the sixty-day processing timeline introduces accountability, and the recognition that ambiguous beneficial ownership rules were deterring legitimate global investment is overdue. The key challenge is implementation” (Carnegie India, April 2026). What Is The Scale Of UAE Investment In India, And Why Does This Matter? The UAE ranked fifth as a source of FDI equity inflow into India during April to December FY 2025-26, contributing US$2.45 billion, roughly 5% of total FDI equity inflow in that period (DPIIT FDI Quarterly Factsheet, 2026). Cumulative Emirati FDI since 2000 stands at US$22.84 billion, placing the UAE among India’s seven largest cumulative investors. Bilateral merchandise trade between the two countries reached US$101.25 billion in FY 2025-26 (Middle East Briefing, 2026), having more than doubled since the Comprehensive Economic Partnership Agreement (CEPA) took effect in May 2022. During Prime Minister Modi’s visit in May 2026, the UAE pledged a headline investment of US$5 billion into India. These figures underscore the stakes. Should beneficial ownership tracing place even a fraction of UAE-sourced capital in regulatory limbo, the consequential cost is measured in billions, not millions. Which UAE Investment Structures Face The Highest Risk? Three categories of UAE-based investors should conduct immediate structuring assessments. Global private equity and venture capital funds domiciled in the UAE with Chinese LPs above the 10% threshold face mandatory government approval. Multi-family offices in Dubai holding pooled capital from diverse nationalities, including Chinese principals, must trace beneficial ownership through every layer of their structure. Sovereign or quasi-sovereign vehicles that co-invest alongside Chinese state-backed entities in joint ventures will need to demonstrate that Chinese beneficial ownership remains below the threshold, or submit to the approval route. Ankur Munjal, India Country Director at Dezan Shira & Associates, noted in 2026: “Investors evaluating eligibility under India’s FDI rules should conduct a detailed beneficial ownership and structuring assessment before entry. Advisory support can help determine automatic route eligibility and manage approval timelines.” King, Stubb & Kasiva, writing in Legal500 in June 2026, characterised the new framework as “simultaneously more open and more sophisticated than what it replaced.” Did Press Note 3 Actually Achieve Its Objectives Before The Reform? The original restrictions succeeded at one narrow objective: limiting Chinese FDI. Total Chinese FDI into India since 2000 amounts to US$2.51 billion, or 0.32% of India’s cumulative equity inflows (Carnegie India, Konark Bhandari, April 2026). Yet India’s trade deficit with China grew from US$85 billion in 2023-24 to an estimated US$116 billion in calendar year 2025. Bhandari noted plainly: “The Press Note 3 restrictions succeeded in keeping Chinese capital out but did nothing to arrest the flood of Chinese goods inwards.” A March 2026 CRISIL market intelligence report projects that under the revised rules, Chinese investment as a proportion of India’s total FDI could gradually return to pre-restriction levels of around 2% (CRISIL, March 2026, cited in India Briefing). For UAE-based funds, this shift is consequential: capital that was previously blocked entirely now has a defined, if narrow, pathway into India. What Should UAE-Based Investors Do Now? Practical next steps centre on beneficial ownership tracing. Every UAE-domiciled entity considering Indian … Read more

FAST-DS 2026 provides a one-time opportunity for taxpayers to come forward and regularise foreign assets or pay taxes on income earned through Employee Stock Option Plans (ESOPs) and Restricted Stock Units (RSUs). These situations often arise from working abroad, maintaining small or inactive foreign bank accounts as a former student, holding overseas savings or insurance policies after returning to India or owning assets acquired during international assignments or deputations. Practical Applications of the FAST-DS 2026 Scheme FAST-DS 2026 is a limited-period scheme designed to help resident small taxpayers voluntarily declare foreign assets and income earned from overseas sources. The applicable tax depends on how and when the asset was acquired, while eligible participants can receive relief from penalties and prosecution under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The scheme will remain available for six months from the date it is officially notified by the Central Government through the Official Gazette. Categories of Taxpayers to be Benefited by FAST-DS 2026 Resident taxpayers who failed to furnish their return of income under section 139 of the Income-tax Act, 1961 (Act). Resident taxpayers who failed to disclose foreign asset disclosure or foreign income in return of income filed under section 139 of Act before commencement of this scheme. Resident taxpayers have foreign assets or foreign income which have income escaping assessment within the meaning of section 147 of Act. The declaration may be filed with respect to foreign assets or foreign income and following amount payable by the taxpayer (declarant) under FAST-DS 2026: Sr. No. Type of assets or income Conditions Amount payable 1 Undisclosed asset located outside India or Undisclosed foreign income The aggregate value of the undisclosed asset located outside India and the undisclosed foreign income does not exceed Rs.1 crore a. 30% tax of the undisclosed value of the asset located outside India as on March 31, 2026. b. 30% tax on the undisclosed foreign income c. 100% of tax determined in above mentioned (a) and (b) 2 Foreign Asset acquired from income accruing / arising outside India by declarant when they were non-resident, but such foreign assets were not disclosed in disclosure of foreign assets in their Income-tax return on becoming resident or Foreign Asset acquired from income offered to tax in India, but disclosure of foreign assets in Income-tax Return were not disclosed by them The value of the asset located outside India does not exceed Rs. 5 crores Fee of Rs.1,00,000/- The following infographic outlines the steps for taxpayers to opt in respect of undisclosed foreign assets or foreign income in their return of income: How FAST-DS 2026 Supports Small Taxpayers? The income or amount of investment in the foreign asset which has been declared under FAST-DS 2026 / Small Taxpayers Scheme shall not be included in the total income of the taxpayer (declarant) for any Assessment year (AY) in Income-tax Return under Act or Black Money Act. This is provided that the declarant makes the payment of tax and fee determined under this FAST-DS 2026 / Small Taxpayers Scheme within an extended period of two months along with simple interest at the rate of 1% for every month. The taxpayer paid tax on foreign income or disclosed foreign assets disclosure scheme under FAST-DS 2026. There will be no rectification or revision of any assessment made under the Act or Black Money Act. Declarant shall not be entitled to claim any set off / relief in any appeal, reference or other proceeding in relation to any such assessment. The taxpayer shall not be entitled to any refund under tax paid under FAST-DS 2026. Upon making a declaration under FAST-DS 2026 and paying the applicable tax or fee, the taxpayer shall be granted immunity from any further levy of tax, penalty, or prosecution under the Black Money Act in respect of the income or assets so declared for FY 2025-26 or any preceding year. The Assessing Officer shall consider the declaration made by taxpayer by opting under FAST-DS 2026 while finalizing the assessments which are pending or ongoing assessment proceedings under Act or Black Money Act. FAST-DS 2026 shall not apply to the following categories: Any person directly or indirectly linked to proceeds of crime in respect of whom proceedings have been initiated or are pending under the Prevention of Money Laundering Act, 2002. Any person in relation to any income or asset relating to an AY for which assessment proceedings have been completed under the Black Money Act. Why Choose India Company Incorporation? Managing foreign asset and foreign income disclosures can often feel overwhelming, especially when reporting requirements have been missed in previous years. At India Company Incorporation, we help taxpayers understand their obligations and take the right steps under FAST-DS 2026. Whether it involves foreign bank accounts, ESOPs, RSUs, overseas investments or other foreign-sourced income, our team provides practical support throughout the disclosure process. Also, we ensure every step is handled with care from assessing eligibility and calculating taxes to preparing documents and filing declarations. Our focus is on making compliance straightforward, helping taxpayers regularise past non-disclosures, and enabling them to benefit from the relief available under the scheme. Conclusion FAST-DS 2026 is a compliance window open for resident individuals to regularize the disclosure of undisclosed foreign assets or income. It enables taxpayers to make payment of the applicable tax and, in doing so, obtain immunity from prosecution and penalty under the Black Money Act.

India and New Zealand signed a Free Trade Agreement (FTA) on April 27, 2026, granting Indian exporters full market access to New Zealand. Earlier, in March 2025, the two countries had announced the launch of negotiations for the agreement, which were concluded by December 2025, making it one of India’s fastest-negotiated FTAs. The agreement reflects a shared commitment to strengthening economic ties and delivering commercially meaningful outcomes within a relatively short timeframe. For foreign entities, the India–New Zealand FTA improves market access and tariff preferences, positioning New Zealand as a potential gateway to the wider Oceania and Pacific Island markets. Beyond trade in goods, the agreement also signals expanding opportunities in services and skilled mobility, further reinforcing India’s position as a reliable source of talent across priority sectors. The agreement will enter into force once both countries complete their respective domestic ratification procedures. In New Zealand, the agreement will be reviewed by the Parliamentary Foreign Affairs, Defence and Trade Committee, which will undertake a national interest assessment and public consultation before submitting its report for parliamentary consideration. This process is expected to take several months before the agreement is formally implemented. Tracing Growth in India-New Zealand Trade Relations India and New Zealand have developed a steadily deepening trade relationship, positioning New Zealand as India’s second-largest trading partner in Oceania and 11th-largest two-way trading partner globally. While bilateral trade remains selective in scale, its strategic importance has grown alongside stronger commercial and demographic linkages between the two economies. Recent trade trends highlight the growing commercial relationship between the two economies. Bilateral trade in goods and services reached approximately USD 2.4 billion in 2024. Merchandise trade alone recorded significant growth, reaching about USD 1.29 billion in FY 2024–25, reflecting strong year-on-year expansion in key export sectors. This growth is reinforced by New Zealand’s profile as a high-income, globally integrated economy, with a per capita income of USD 49,380 and total imports and exports of USD 47 billion and USD 42 billion, respectively, in 2024. For foreign enterprises, this underscores New Zealand’s role as a stable and sophisticated market within the Oceania region. New Zealand’s strong outward investment orientation further strengthens the bilateral dynamic. With nearly 8 per cent of GDP invested overseas annually and total offshore investments valued at USD 422.6 billion as of March 2025, the country represents a meaningful source of global capital and long-term partnerships for emerging markets such as India. Complementing trade and investment flows, a 300,000-strong Indian diaspora, accounting for nearly 5 per cent of New Zealand’s population, acts as a durable economic and cultural bridge. This community supports demand for Indian goods and services while facilitating business continuity, talent mobility, and cross-border collaboration, providing a robust foundation upon which the FTA builds. Key Benefits of India-New Zealand FTA The India–New Zealand Free Trade Agreement delivers a large set of advantages designed to deepen trade, facilitate services, and support cross-border investment. The elements of the FTA not only improve predictability but also improve access, long-term operating viability across both markets. The benefits outlined below frame the core outcomes of the FTA: Tariff Liberalisation The India–New Zealand FTA establishes a calibrated tariff framework that balances full export access with domestic safeguards. Upon implementation of the agreement, 100% of Indian exports will receive duty-free access to the New Zealand market, providing immediate certainty and improved competitiveness for Indian manufacturers and exporters. The agreement will come into effect after both countries complete their respective domestic ratification procedures. India, in turn, has offered market access across 70.03% of its tariff lines, while retaining 29.97% under the exclusion list to safeguard sensitive sectors. The liberalised tariff lines are structured as follows: 30% of tariff lines: Immediate elimination of customs duties, covering products such as wood, wool, sheep meat, and raw leather hides. 35.60% of tariff lines: Gradual duty elimination over periods of 3, 5, 7, and 10 years. This category includes petroleum oils, malt extracts, vegetable oils, selected electrical and mechanical machinery, and peptones. 4.37% of tariff lines: Tariff reductions (instead of full elimination), applicable to products such as wine, pharmaceutical products, polymers, aluminium, and articles of iron and steel. 0.06% of tariff lines: Subject to tariff rate quotas (“TRQs”), including products such as honey, apples, kiwi fruit, and albumins, including milk albumin. India has expressly excluded key sensitive products, including dairy and dairy derivatives, most animal products, select agricultural commodities, sugar, fats and oils, arms and ammunition, gems and jewellery, and certain copper and aluminium products. For foreign enterprises, this structure delivers clear timelines, predictable access, and a balanced liberalisation pathway aligned with long-term trade and sourcing strategies. Mobility and Education The FTA introduces a structured and predictable framework for talent mobility, with direct relevance for companies seeking access to skilled and globally mobile professionals. For the first time, New Zealand has signed an Annex on Student Mobility and Post-Study Work Visas, providing long-term policy certainty. Indian students are permitted to work up to 20 hours per week during studies, with assured post-study work options of up to three years for STEM bachelor’s and master’s graduates and up to four years for doctoral graduates, strengthening the future talent pipeline for employers. In parallel, the agreement establishes dedicated professional pathways, including a quota of 5,000 visas for skilled Indian professionals for stays of up to three years across priority sectors such as IT, engineering, healthcare, education, and construction, alongside recognised Indian professions including AYUSH practitioners, yoga instructors, chefs, and music teachers. Additionally, a working Holiday Visa quota of 1,000 places annually enables short-term mobility and early-career exposure. Collectively, these provisions enhance workforce planning flexibility and support cross-border talent strategies for enterprises operating across India and New Zealand. Services The FTA delivers New Zealand’s most comprehensive services market access offer to date, reinforcing the agreement’s relevance for services-led enterprises. Commitments have been undertaken across 118 service sectors, providing enhanced certainty and non-discriminatory treatment for Indian service providers. In addition, the agreement extends Most-Favoured Nation (MFN) treatment across approximately 139 services sub-sectors, ensuring … Read more

Stamp duty is a statutory levy imposed on specified legal and commercial instruments in India. It is charged on the instrument that records a transaction or creates, transfers, limits, extends, or extinguishes rights and liabilities. The framework is rooted in the Indian Stamp Act, 1899, but rates and procedures vary significantly across states, because many instruments fall within the state’s taxing powers. For businesses, stamp duty plays an important role even at the company incorporation stage. Duties are payable on key incorporation documents such as the Memorandum of Association (MoA) and Articles of Association (AoA), as well as on the authorised share capital. Proper payment of stamp duty is necessary to ensure the legal validity and registration of these foundational documents. The requirement is governed by the Indian Stamp Act, 1899 along with applicable state stamp laws. Indian Stamp Act, 1899 The principal legislation governing stamp duty in India is the Indian Stamp Act, 1899, which lays down the legal framework for instruments chargeable to duty, the manner and timing of stamping, adjudication of proper duty, and penalties for under-stamping. Stamp duty is levied on the instrument evidencing the transaction, rather than on the transaction itself. The Act also includes key compliance provisions covering liability to pay duty, the timing of stamping, impounding of insufficiently stamped instruments, and the possibility of curing deficiencies through payment of duty and penalty. Applicability of Stamp Duty Stamp duty becomes relevant in relation to specific incorporation documents and related corporate instruments. Common situations include: Memorandum of Association (MoA) and Articles of Association (AoA): stamp duty may be payable on these charter documents at the time of incorporation, subject to the applicable state stamp law and the company’s authorised share capital. SPICe+ and linked incorporation forms: where the incorporation process involves electronic filing, the stamp duty component may be collected through the Ministry of Corporate Affairs filing system in accordance with the relevant state or Union Territory rules. Declaration, authorisation, and incorporation-related instruments: certain declarations, authorisations, powers of attorney, or supporting documents executed for incorporation may attract duty if they are independently chargeable under the applicable stamp law. Share capital-linked duty: in many jurisdictions, the amount of stamp duty payable at incorporation is influenced by the authorised share capital stated in the incorporation documents. State-specific applicability: since stamp duty on incorporation documents is governed by state-specific provisions or adaptations, the duty and method of collection can differ depending on the state in which the registered office of the proposed company is situated. Accordingly, for the incorporation of a new company in India, the applicability and amount of stamp duty depend on the nature of the incorporation documents, the authorised share capital, the state or Union Territory linked to the registered office, and the way the documents are executed or filed. How Stamp Duty Is Calculated for Incorporating a New Company in India For a new company incorporation in India, stamp duty is calculated with reference to the incorporation documents and the applicable state or Union Territory rules linked to the proposed registered office. The amount is commonly determined based on the Memorandum of Association (MoA), Articles of Association (AoA), the type of company being incorporated, and, in many cases, the authorised share capital stated in the incorporation package. Not all companies have share capital (e.g., Section 8 entities use fixed rates or subscriber bases), and some states apply flat fees or caps. State or Union Territory of the registered office: the applicable stamp duty depends on the jurisdiction because incorporation-related stamp duty is largely state-specific. Authorised share capital: in many states, duty on the AoA or related incorporation instruments is linked to the authorised share capital, sometimes subject to a minimum amount, slab, or maximum cap. Type of company: the duty treatment may vary depending on whether the entity is a private company, public company, One Person Company, or a company without share capital. Specific incorporation documents: different duty amounts may apply to the MoA, AoA, SPICe+ linked forms, or other supporting instruments that are independently chargeable. A practical way to determine the stamp duty payable at incorporation is to follow these steps: Identify the type of company being incorporated and confirm whether it has share capital. Determine the proposed state or Union Territory of the registered office. Confirm the authorised share capital to be stated in the MoA, if applicable. Check the applicable duty structure for the MoA, AoA, and linked incorporation forms under the relevant state rules. Verify the amount reflected through the MCA filing workflow or the relevant stamping mechanism before final submission. Stamp duty payable at the time of incorporation primarily depends on the registered office jurisdiction, the authorised share capital (if applicable), and the incorporation documents that are chargeable under the relevant state regulations. Since stamp duty on incorporation is state-specific, there is no uniform amount across India. The applicable duty should be verified against the relevant state stamp schedule and the figures generated during the Ministry of Corporate Affairs incorporation filing process to ensure accuracy and avoid delays. For example, stamp duty on incorporation documents for a private limited company varies across states and is generally linked to the authorised share capital stated in the incorporation documents. If a private limited company is incorporated with an authorised share capital of ₹10,00,000, the stamp duty payable would differ depending on the state in which the company is registered. In Maharashtra, the stamp duty payable on the MoA is typically around ₹2,000 and on the AoA around ₹1,000, resulting in an approximate total of ₹3,000. In Karnataka, the duty on the MoA may be around ₹1,000 and on the AoA around ₹500, resulting in an approximate total of ₹1,500. In Delhi, the stamp duty may be comparatively lower, with around ₹200 payable on the MoA and about ₹300 on the AoA, resulting in a total of approximately ₹500. These amounts are indicative examples from a few states. Stamp duty on incorporation documents differs from state to state, as each state … Read more

Uttar Pradesh has outlined a clear vision to establish itself as a leading destination for Global Capability Centres (GCCs), supported by a policy framework that emphasises innovation, advanced technology services, and high-value research and development. Through a combination of investment-linked incentives, workforce support measures, and infrastructure-related benefits, the state aims to create a competitive environment for both emerging and large-scale GCC operations. For organisations evaluating expansion opportunities in India, the policy presents a structured and potentially cost-efficient platform for long-term growth. Advantages of Uttar Pradesh for GCC Investments Uttar Pradesh offers several structural advantages that strengthen its appeal as a destination for GCC investments. The state benefits from a large and diverse talent pool, with a steady supply of engineering, management, and technical graduates. Its proximity to the National Capital Region, particularly through established business centres such as Noida and Greater Noida, enhances accessibility and business connectivity. Uttar Pradesh also offers relatively competitive real estate and operating costs when compared with more established GCC hubs, while ongoing investments in expressways, airports, and industrial corridors continue to improve physical and commercial infrastructure across the state. Who Can Qualify? The policy classifies eligible units into two categories: Level 1 GCCs and Advanced GCCs. Eligibility depends on the level of capital investment and the number of employees generated, with separate thresholds for Gautam Buddha Nagar and Ghaziabad compared to the rest of the state. Level 1 GCC: Requires a minimum capital investment of ₹20 crore in Gautam Buddha Nagar and Ghaziabad, or ₹15 crore in the rest of Uttar Pradesh. Employment generation thresholds are 200 or more employees in Gautam Buddha Nagar and Ghaziabad, and 100 or more employees in other districts. Advanced GCC: Requires a minimum capital investment of ₹75 crore in Gautam Buddha Nagar and Ghaziabad, or ₹50 crore in the rest of Uttar Pradesh. Employment generation thresholds are 500 or more employees in Gautam Buddha Nagar and Ghaziabad, and 300 or more employees in other districts. Incentives The GCC Policy provides a wide range of incentives covering payroll, capital investment, infrastructure, operations, and talent development. Payroll Subsidy The subsidy will be paid in the form of reimbursement for a period of 03 years, up to a maximum of ₹10 crore per year for a Level-1 unit, and up to a maximum of ₹20 crore for Advanced GCC, towards on-roll employees with continuous enrolment for at least 1 year. Year of Operations GB Nagar & Ghaziabad districts Rest of UP Permissible Payroll Subsidy Percentage Maximum Limit Permissible Payroll Subsidy Percentage Maximum Limit First 35% 35% of the employee’s salary, or a maximum of ₹5 lakh of the total annual salary, whichever is less. 50% 50% of the employee’s salary, or a maximum of ₹7 lakh of the total annual salary, whichever is less. Second 30% 30% of the employee’s salary, or a maximum of ₹4 lakh of the total annual salary, whichever is less. 40% 40% of the employee’s salary, or a maximum of ₹6 lakh of total annual salary, whichever is less. Third 25% 30% of the employee’s salary, or a maximum of ₹3 lakh of the total annual salary, whichever is less. 30% 30% of the employee’s salary, or a maximum of ₹5 lakh of the total annual salary, whichever is less. Fourth – – 25% 25% of the employee’s salary, or a maximum of ₹4 lakh of the total annual salary, whichever is less. Capital Subsidy Capital subsidy of 25% of Eligible Capital Investment (ECI)*, up to INR 10 crore for Level 1 GCCs and INR 25 crore for Advanced GCCs, disbursed over a period of seven years. * Eligible Capital Investment (ECI) refers to the capital investment made by an eligible unit during the policy’s eligible investment period after the policy becomes effective. If a company begins its capital investment after the policy’s effective date, the entire investment will be considered as ECI. However, if the company started investing before the policy came into effect, at least 80% of the total capital investment must be made after the policy’s effective date for it to qualify as Eligible Capital Investment under the policy. Front-end land subsidy Subsidy of 30–50% on land allotted by State Industrial Development Authorities or other State Government agencies, aimed at reducing the initial land acquisition cost for eligible units establishing operations in the state. Land and Office Space Cost Reimbursement Provides 100% exemption or reimbursement on the purchase of land or office space, either through a bank guarantee mechanism or as reimbursement after the commencement of operations by the eligible unit. Interest Subsidy Provides an interest subsidy of 5% on term loans availed by eligible units, capped at INR 1 crore per year, for a maximum period of five years from the commencement of operations. Operational Subsidy 20% subsidy on operating expenses, including on Lease rentals, Bandwidth expenses, Power Charges & Data Centre/ Cloud Service Costs, up to Rs 40 Cr per annum to Level 1 GCCs and up to a maximum of Rs 80 Cr per annum to Advanced GCCs, for five years. Fresher’s recruitment subsidy Provides a recruitment subsidy of INR 20,000 per fresher with UP domicile graduating from UP-based institutions, for companies hiring at least 30 such employees annually, available for five years. EPF Reimbursement 100% reimbursement for EPF contributions for women, SC/ST, transgender, and Divyangjan employees, up to Rs 1 Cr annually for three years. Talent Development & Skilling: Subsidies for internships of at least 2-months @50% subject to a maximum Rs 5000 per student per month, capped to a maximum 50 interns in a year, for a period of three years. Skill Development Subsidy Rs50,000 per employee for course fee or 50% of the cost of conducting training programs, for a maximum of 500 employees with a cap of Rs 50 lakh per annum for a period of three years. R&D and Innovation Incentives Grants of maximum Rs 10 Cr. for setting up Centres of Excellence, support for startup ideation, and academic partnerships, as per IIEPP-2022. Startup Ideation … Read more

Maharashtra has historically been the industrial powerhouse of India, contributing significantly to the country’s manufacturing output, exports, and employment generation. To further strengthen this position and attract large-scale domestic and international investments, the Government of Maharashtra introduced the Maharashtra Industries, Investment and Services Policy 2025. This policy provides a comprehensive framework of incentives, financial assistance, and regulatory support designed to encourage new industrial investments, promote advanced manufacturing technologies, and generate employment across the state. By offering targeted benefits for industries located in less-developed regions and prioritizing high-technology sectors, the policy aims to create a balanced and sustainable industrial ecosystem. Why Maharashtra Remains a Preferred Investment Destination The state offers several structural advantages, including: Strategic geographic location with access to major domestic and international markets Well-developed industrial infrastructure, including industrial corridors, logistics hubs, and ports Large skilled workforce and strong educational institutions Robust supply chain networks across multiple sectors Proximity to financial institutions and capital markets Cities such as Mumbai, Pune, Nashik, Nagpur, and Aurangabad have become major industrial and technology hubs, attracting investments in sectors such as automobiles, pharmaceuticals, electronics, and information technology. The new policy builds on these advantages while addressing regional disparities in industrial development. Vision of the Policy The policy focuses on building a future-ready industrial ecosystem centred on smart manufacturing, sustainability, inclusivity, and regional balance. Key long-term objectives include Increasing the industry’s share of Gross Value Added (GVA) from 25% in 2024 to 30% by 2047. Supporting the registration of 1 crore MSMEs. Driving higher per capita income growth across the state These targets reflect the state’s ambition to position Maharashtra as a global manufacturing and innovation hub. Eligibility Criteria for Incentives To qualify for incentives under the policy, businesses must satisfy several key requirements. 1. Eligible Units The policy applies to: New manufacturing units starting operations after 31 December 2025, or Existing units expanding capacity with at least 25% additional Fixed Capital Investment (FCI). 2. Location Requirements The unit must be located in eligible talukas in Maharashtra, categorised as: A/B – Developed regions C/D/D+ – Less developed or backward regions Projects located in less developed districts may receive higher incentives. A division-wise summary of these classifications across Maharashtra districts is provided in the table below, which outlines the broad distribution of developed and underdeveloped regions for ease of reference. Division Key Districts (Examples) Notable Classification Insight Konkan Mumbai, Thane, Palghar, Raigad, Ratnagiri, Sindhudurg Mumbai fully in Group A; mix of MMR and non-MMR regions Pune Pune, Solapur, Satara, Sangli, Kolhapur PMR-based classification (@ within PMR, $ outside PMR) Nashik Nashik, Ahmednagar, Dhule, Nandurbar, Jalgaon Mostly Group B & C spread, with rural-heavy districts Chhatrapati Sambhajinagar Aurangabad, Jalna, Beed, Latur, Nanded Includes No Industry District: Hingoli Amravati Amravati, Akola, Washim, Buldhana, Yavatmal Predominantly Group C & D regions Nagpur Nagpur, Bhandara, Gondia, Wardha, Chandrapur, Gadchiroli Nagpur urban in Group A; No Industry District: Gadchiroli 3. Employment Requirement At least 80% of direct employees must be residents of Maharashtra. 4. Investment and Employment Commitment Companies must maintain the committed investment levels and employment generation throughout the incentive eligibility period. 5. Application Process Applications for incentives are submitted through the MAITRI single-window portal, simplifying approvals and compliance processes. Classification of Industries Under the Policy The policy classifies projects based on investment size and employment generation, ensuring appropriate incentives for businesses of different scales. MSME Classification (Manufacturing)* The maximum FCI needed is ₹125crs for all the Taluka Groups. *MSMEs (Manufacturing): Micro: Investment ≤₹2.5 crore. Small: Investment > ₹2.5 crore to ₹25 crore. Medium: Investment > ₹25 crore to ₹125 crore Special LSI Criteria* (*In INR crore) Taluka Group Min FCI needed Min Jobs needed A/B 750 1000 C 500 750 D 350 500 D+ 250 200 Vidarbha/etc. 200 150 No-Industry/etc.** 150 125 *Special LSI stands for Special Large-Scale Industries. These are strategically important manufacturing projects exceeding MSME thresholds (post-2025 MSMED Act updates, i.e., FCI above ₹125 Cr max) but below Mega thresholds, qualifying for enhanced incentives like 40-100% FCI cap over 7-9 years based on location. Mega/Ultra-Mega Criteria* (*In INR crore) Taluka Group Mega Min FCI needed Mega Min Jobs needed Ultra Mega Min FCI needed Ultra Mega Min Jobs A/B 1500 2000 4000 4000 C 1000 1500 3000 3000 D 750 1000 1500 2000 D+ 500 750 1250 1500 Vidarbha/etc. 350 500 1000 1000 No-Industry/etc.** 200 350 750 750 *Mega and Ultra-Mega industries are defined as transformative, high-capital investment projects that receive customised incentive packages approved by a Cabinet Sub-Committee. These projects are categorised     based on Fixed Capital Investment (FCI) and Direct Employment Generation. Service sector criteria- Minimum Direct Jobs Taluka Group MSME Large Mega Ultra- Mega A/B 350 750 1500 3000 C 250 500 1000 2000 D 150 350 750 1500 D+ 125 200 500 1000 Vidarbha/etc. 100 150 350 400 No-Industry/etc.** 50 125 250 350 *There is no minimum FCI needed for services, unlike the Manufacturing sector. The eligibility is only based on the minimum number of jobs generated. ** No Industrial Area refers to designated, highly underdeveloped districts or regions lacking established industrial infrastructure. These typically include the least industrialised parts of Maharashtra, such as areas in the Vidarbha, Marathwada, and parts of the North Maharashtra regions. Incentives Available Under the Policy The policy offers a wide range of fiscal and operational incentives to encourage investments. 1. Incentives for MSMEs Eligible MSMEs receive Industrial Promotion Subsidy (IPS) on 100% of gross SGST for first sales within Maharashtra. Additional incentives include: 50% subsidy on technology upgrades (up to ₹25 lakh) 50% subsidy for energy and water audits 50% subsidy for energy efficiency equipment Support for quality certifications and ZED certification Stamp duty exemption Electricity duty exemption Power tariff subsidy (₹1 per unit for 3 years) EPF reimbursement up to 50% for 5 years 2. Incentives for the Service Sector Although the policy mainly focuses on manufacturing, certain service sectors such as R&D centres and Global Capability Centres (GCCs) are also eligible. Service sector benefits include: Rental subsidy (up to 50%) EPF reimbursement and skilling incentives R&D cost reimbursement up to 50% … Read more

India and New Zealand signed a Free Trade Agreement (FTA) on April 27, 2026, providing Indian exporters with full market access to New Zealand. Earlier, in March 2025, the two countries had announced the launch of negotiations for the agreement, which were concluded swiftly by December 2025, marking one of India’s fastest-negotiated FTAs. The agreement reflects a shared intent to deepen economic ties and deliver commercially meaningful outcomes within a short timeframe. For foreign entities, the India–New Zealand FTA enhances market access and tariff preferences, positioning New Zealand as a strategic entry point into the wider Oceania and Pacific Island markets. Beyond goods trade, the agreement signals growing opportunities in services and skilled mobility, reinforcing India’s role as a reliable source of talent across priority sectors. The FTA also lays the foundation for future collaboration in emerging and specialised areas, including AYUSH, wellness, and services such as Yoga instruction, culinary expertise, and creative professions. Collectively, it underscores India’s evolving trade strategy, one that aligns market access with services, skills, and long-term economic cooperation. Tracing Growth in India-New Zealand Trade Relations India and New Zealand have developed a steadily deepening trade relationship, positioning New Zealand as India’s second-largest trading partner in Oceania and 11th-largest two-way trading partner globally. While bilateral trade remains selective in scale, its strategic importance has grown alongside stronger commercial and demographic linkages between the two economies. In 2023–24, total bilateral trade reached USD 1.75 billion, reflecting sustained engagement across goods and services. This growth is reinforced by New Zealand’s profile as a high-income, globally integrated economy, with a per capita income of USD 49,380 and total imports and exports of USD 47 billion and USD 42 billion, respectively, in 2024. For foreign enterprises, this underscores New Zealand’s role as a stable and sophisticated market within the Oceania region. New Zealand’s strong outward investment orientation further strengthens the bilateral dynamic. With nearly 8 per cent of GDP invested overseas annually and total offshore investments valued at USD 422.6 billion as of March 2025, the country represents a meaningful source of global capital and long-term partnerships for emerging markets such as India. Complementing trade and investment flows, a 300,000-strong Indian diaspora, accounting for nearly 5 per cent of New Zealand’s population, acts as a durable economic and cultural bridge. This community supports demand for Indian goods and services while facilitating business continuity, talent mobility, and cross-border collaboration, providing a robust foundation upon which the FTA builds. Key Benefits of India-New Zealand FTA The India–New Zealand Free Trade Agreement delivers a large set of advantages designed to deepen trade, facilitate services, and support cross-border investment. The elements of the FTA not only improve predictability but also improve access, long-term operating viability across both markets. The benefits outlined below frame the core outcomes of the FTA: Tariff Liberalisation The India–New Zealand FTA establishes a calibrated tariff framework that balances full export access with domestic safeguards. From Entry into Force, 100 % of Indian exports receive duty-free access into New Zealand, providing immediate certainty and competitiveness for Indian manufacturers and exporters. India, in turn, has offered market access across 70.03% of its tariff lines, while 29.97% remain in the exclusion list to protect sensitive sectors. Of the liberalised lines, 30% will see immediate duty elimination, covering products such as wood, wool, sheep meat, and raw leather hides. A further 35.60% of tariff lines will be phased out over 3, 5, 7, and 10 years, including petroleum oils, malt extracts, vegetable oils, selected electrical and mechanical machinery, and peptones. An additional 4.37% of products will be subject to tariff reductions, spanning wine, pharmaceutical products, polymers, aluminium, and iron and steel articles, while 0.06% will fall under tariff rate quotas, including honey, apples, kiwi fruit, and albumins such as milk albumin. India has expressly excluded key sensitive products, including dairy and dairy derivatives, most animal products, select agricultural commodities, sugar, fats and oils, arms and ammunition, gems and jewellery, and certain copper and aluminium products. For foreign enterprises, this structure delivers clear timelines, predictable access, and a balanced liberalisation pathway aligned with long-term trade and sourcing strategies. Mobility and Education The FTA introduces a structured and predictable framework for talent mobility, with direct relevance for companies seeking access to skilled and globally mobile professionals. For the first time, New Zealand has signed an Annexe on Student Mobility and Post-Study Work Visas, providing long-term policy certainty. Indian students are permitted to work up to 20 hours per week during studies, with assured post-study work options of up to three years for STEM bachelor’s and master’s graduates and up to four years for doctoral graduates, strengthening the future talent pipeline for employers. In parallel, the agreement establishes dedicated professional pathways, including a quota of 5,000 visas for skilled Indian professionals for stays of up to three years across priority sectors such as IT, engineering, healthcare, education, and construction, alongside recognised Indian professions including AYUSH practitioners, yoga instructors, chefs, and music teachers. Additionally, a Working Holiday Visa quota of 1,000 places annually enables short-term mobility and early-career exposure. Collectively, these provisions enhance workforce planning flexibility and support cross-border talent strategies for enterprises operating across India and New Zealand. Services The FTA delivers New Zealand’s most comprehensive services market access offer to date, reinforcing the agreement’s relevance for services-led enterprises. Commitments have been undertaken across 118 service sectors, providing enhanced certainty and non-discriminatory treatment for Indian service providers. In addition, Most-Favoured Nation treatment has been extended across 139 sectors, ensuring that any future liberalisation offered to other trading partners is automatically available to India. Investment and Market Access Gains The FTA is anchored by a long-term investment commitment, with New Zealand set to invest USD 20 billion in India over a 15-year period, reinforcing confidence in India’s growth trajectory and operating environment. For foreign enterprises, this commitment signals deeper capital integration and expanded opportunities across manufacturing, infrastructure, and services-led sectors. On market access, New Zealand has offered immediate zero-duty access on 100 per cent of its tariff … Read more

India has become a global hub for Global Capability Centres (GCCs), with multinational companies establishing technology and business service hubs across the country. Karnataka leads this ecosystem due to its strong technology base and skilled workforce, prompting the Government of Karnataka to introduce the Karnataka GCC Policy 2024-29. Understanding Global Capability Centres Under the Karnataka GCC policy, a Global Capability Centre (GCC) is a fully owned hub set up by multinational corporations to manage global functions such as R&D, IT, and business services. In Karnataka, many GCCs have evolved from back-office roles into innovation-driven centres for product development, digital transformation, and advanced research. Key Highlights of the Policy 1. First Dedicated GCC Policy: Karnataka became the first Indian state to introduce a dedicated policy for Global Capability Centres, launched in November 2024 at the Bengaluru Tech Summit. 2. Target of 1,000 GCCs: The policy aims to attract 500 new GCCs and increase the total number in the state to around 1,000 by 2029. 3. Employment Generation: It is expected to create about 3.5 lakh new jobs in technology, analytics, engineering, and digital services. 4. Economic Output Goal: The GCC ecosystem is projected to generate around $50 billion in economic output by 2029. 5. Focus on Emerging Technologies: The policy promotes GCCs working in AI, machine learning, deep tech, semiconductor design, data science, and advanced analytics. 6. Industry-Academia Collaboration: Partnerships between universities, research institutions, and GCCs are encouraged to strengthen innovation and skill development. Vision of the Policy The policy aims to position Karnataka as a global GCC hub by promoting innovation, high-value operations, and skill development. It also encourages investments beyond Bengaluru in cities such as Mysuru, Mangaluru, Hubballi-Dharwad–Belagavi, Tumakuru, Shivamogga, and Kalaburagi to support balanced regional growth and employment. Eligibility Criteria The policy in Karnataka supports new GCC setups and existing GCC expansions meeting minimum investment and employment thresholds. Eligible sectors include: Technology, IT, and IT-enabled services Business and financial services Retail and consumer industries Manufacturing and engineering R&D Healthcare and life sciences Shared services such as HR, procurement, and legal operations Artificial intelligence, data science, and advanced analytics Deep-tech research, including semiconductors and advanced engineering Innovation labs and centres of excellence Technology and digital transformation hubs Certain programs also extend to startups and industry associations to promote innovation and ecosystem development during the policy period, i.e., 2024-29. Incentives for GCCs To attract global companies and encourage innovation-led operations, the Karnataka GCC Policy offers a wide range of incentives. A. For any new or existing GCCs in the state 1. Internship and Talent Development Support Talent development is a key focus in Karnataka. The government reimburses 50% internship stipends up to ₹5,000 per month for 3 months, covering 15% of a GCC’s workforce (max 100 interns annually). It also reimburses 20% of skilling costs, up to ₹36,000 per graduate and ₹18,000 per diploma holder annually. 2. Innovation and R&D Support Innovation is a key pillar of the policy in Karnataka. GCCs in Bengaluru can receive 40% capital expenditure support (up to ₹5 crore) for innovation labs and Centres of Excellence. The policy offers 100% reimbursement up to ₹40 lakh for startup collaborations and funds public service innovation challenges up to ₹1.5 crore per project. 3. Intellectual Property and Quality Certification Support Recognising the importance of innovation and global standards, the policy offers financial support for intellectual property creation and quality certifications. Companies can receive 50% reimbursement of domestic patent filing fees, up to ₹2 lakh. Similarly, the government reimburses 50% of certification costs, up to ₹6 lakh, to encourage companies to adopt international quality standards. 4. Infrastructure and Operational Support The policy improves regulatory processes and infrastructure to address operational challenges. Applications for connectivity infrastructure such as cable laying, towers, and antennae will be processed within 30 working days. The Government of Karnataka will also establish a GCC Incentive Clinic as a dedicated helpdesk to support GCC operations. B. Incentives for Beyond Bengaluru Regions Companies establishing innovation labs or centres of excellence in Beyond Bengaluru clusters can receive up to 75% funding of capital expenditure, capped at ₹3 crore. Additional incentives include: 30% reimbursement of property tax for three years 50% reimbursement of patent filing fees up to ₹3 lakh 80% reimbursement of quality certification cost up to ₹8 lakh These incentives are designed to encourage companies to consider emerging cities as viable alternatives for expansion. C. For any new or existing GCCs in the Beyond Bengaluru area with minimum 100 employees 1. Recruitment and Rental Assistance Companies can receive reimbursement of recruitment expenses, capped at 50% of total costs, up to ₹7 crore. Rental assistance is also available based on the scale of operations: GCCs with 100+ employees can receive up to ₹50 lakh in rent reimbursement. GCCs with 500+ employees can receive up to ₹2 crore in rent reimbursement. These incentives are available to a limited number of companies each year, ensuring targeted support for high-impact investments. D. For Real Estate entities The government reimburses vacant co-working seat costs for up to three years, based on the number of unoccupied seats. E. Additional Operational Incentives New GCCs in Beyond Bengaluru regions may also receive additional operational support, including: EPF contribution reimbursement of up to ₹3,000 per employee per month for two years Reimbursement of 25% of internet expenses, up to ₹12 lakh over three years 100% reimbursement of electricity duty and the option to shift from commercial to industrial power tariffs The Karnataka GCC Policy 2024–29 represents more than a government initiative, it is a deliberate, high-stakes bet on Karnataka’s ability to compete at the forefront of global innovation. By combining targeted financial incentives, industry-academia partnerships, and a conscious push toward regional cities beyond Bengaluru, the policy addresses both ambition and equity. If its targets are met, Karnataka will not only cement its status as India’s undisputed technology capital but also redefine what a Global Capability Centre can achieve, shifting the narrative from cost-efficient back-office operations to world-class innovation and R&D. For multinational corporations evaluating their next strategic hub, … Read more

Introduction India’s software sector supports the digital economy, driving growth in areas like fintech, ecommerce, manufacturing, and services. With the rise of SaaS, cloud computing, and customized software, understanding GST on software transactions is essential to ensure compliance, correct pricing, and eligibility for input tax credit. What Is GST on Software Services in India? The Goods and Services Tax (GST) is a destination-based indirect tax levied on the supply of goods and services. Software is taxable under GST because it qualifies as a “supply,” but its treatment depends on how it is delivered. Classification of Software for GST Purposes The classification of GST software depends mostly on the nature of the transaction and model of licensing.  Software is treated as goods when:  Software is treated as service when:  Pre-developed and standardized  Sold off-the-shelf  Provided via download or physical media  Supplied with a perpetual license  Custom development  License or subscription-based models  SaaS platforms  Cloud‑based software access  HSN Code for Software Services What Is an HSN Code? The Harmonised System of Nomenclature (HSN) is a global standard of nomenclature of goods identification. In the case of services, India makes use of Service Accounting Codes (SAC). Comply with GST and its reporting on returns, it is a requirement to specify the right HSN or SAC on invoices. Relevant HSN and SAC Codes There are multiple SAC / HSN codes with respect to supply software as a service or goods depending on the nature of supply. Some commonly used codes are listed below: GST Portal ‘Search HSN Code’ Link – https://services.gst.gov.in/services/searchhsnsac The classification should be done based on the nature of the transaction and not the description of the products.  GST on software  GST on Software as a good  GST on Software as a Service  Classification  Packaged or off-the-shelf software classified as goods  Software services, including SaaS subscriptions, are classified as service  Rate  18%  18%        Example  Custom Software Development.  Project fee: ₹ 5,00,000  GST @ 18 %: ₹ 90,000  Total invoice value: ₹5,90,000  SaaS Subscription  Subscription fee: ₹ 1,00,000  GST @ 18 %: ₹ 18,000  Total invoice value: ₹ 1,18,000  Place of Supply Rules for Software Place of supply determines whether CGST & SGST / UGST or IGST applies. GST Compliance Requirements The software businesses should be registered when: Invoicing Requirements Filing GST Returns   *Companies under Quarterly Return Monthly Payment (QRMP) are also allowed to submit quarterly returns subject to conditions. * Software companies are entitled to ITC on GST that has been paid on business inputs like: GST Issues Specific to Software Companies Export of Software Services Export of service can be done with payment of tax or without payment of tax. If the taxpayer selects without payment of Tax, LUT application needs to be made on GST portal and the LUT number shall mandatorily be mentioned on the Invoice. Place of Supply in Cross‑Border SaaS SaaS can be treated as OIDAR service under the IGST Act. The place of supply rules differ for B2B and B2C transactions:  B2B (Business to Business)  B2C (Business to Consumer)  Place of supply = Location of recipient. If recipient is outside India → treated as export of service (zero-rated).  Place of supply = Location of recipient (as per OIDAR rules). If service is provided by a foreign supplier to an Indian consumer → GST payable by supplier.  RCM: If an Indian business receives SaaS from a foreign supplier → GST payable under Reverse Charge Mechanism (RCM).  Withholding Tax vs GST GST and Withholding Tax (TDS under Income Tax) are separate and independent compliances. GST is a transaction-based tax on the supply of goods or services, while withholding tax is deducted on specified payments and relates to income tax. Payment of GST does not eliminate income tax liability both may apply simultaneously to the same transaction, and businesses must ensure compliance under each law.  Common Mistakes to Avoid   Conclusion GST on software in India depends on whether it’s treated as a product or a service. Most transactions, especially SaaS and development services are taxed at 18% under SAC 998314. Proper classification, invoicing, and return filing are key for compliance and maximizing input tax credit, while global operations require careful attention to export rules and place-of-supply provisions.  Frequently Asked Questions (FAQs) 1. What is the GST rate on software services? Most software services and SaaS subscriptions attract 18% GST. 2. Which code applies to SaaS? SAC 998314 is generally used for SaaS and software development services. 3. Is GST registration required for exporting software? Yes, exporters must obtain GST registration even though exports are zero-rated. 4. How do I classify custom vs packaged software? Custom software is treated as a service, while packaged software is treated as goods. 5. What is the difference between SAC and HSN? HSN is used for goods, while SAC is used for services.

India’s financial regulatory landscape continues to evolve as the Reserve Bank of India (‘RBI’) introduces reforms aimed at improving access to global capital, simplifying compliance, and strengthening liquidity management. Recent changes include revisions to the External Commercial Borrowing (‘ECB’) framework and updates to ECB reporting formats.  These developments are particularly relevant for foreign lenders, multinational groups, and overseas investors engaged in financing Indian entities. This article provides an overview of the key regulatory changes and their implications.  Revised ECB Framework: In February 2026, the RBI notified amendments to the Foreign Exchange Management (Borrowing and Lending) Regulations to streamline the ECB framework and improve access to overseas financing.  These amendments were issued via Notification No. FEMA 3(R)(5)/2026-RB, dated February 9, 2026, and came into force upon publication in the Official Gazette on February 16, 2026.  Key changes The new framework has introduced new definitions for key terms such as arm’s length basis, benchmark rate, and control.   One of the most significant reforms is the insertion of Regulation 3A, outlining a comprehensive list of prohibited end-uses for borrowed funds. Borrowers can no longer utilise ECB proceeds for:  Chit fund or Nidhi company investments  Real estate business (with defined exceptions for affordable housing and infrastructure development)  Agricultural or plantation activities (excluding specified value-chain infrastructure)  Trading in Transferable Development Rights (TDRs)  Acquisition of equity instruments in the capital market (except for strategic M&A or restructuring transactions approved by competent authorities)  Repayment of restricted domestic loans  Schedule I, which governs ECB, has been comprehensively substituted. The salient provisions include:  Simplified maturity requirements: The minimum average maturity period (MAMP) is generally 3 years, although certain sectors may access shorter-tenor borrowings under specific thresholds. Higher borrowing limits: Under the revised rules, eligible Indian borrowers can now raise ECB up to the higher of: USD 1 billion or  300% of the borrower’s latest audited net worth  This replaces the earlier fragmented threshold approach based on sectoral exceptions.  Cost of borrowing: The new ECB regulations make borrowing costs more flexible and market-driven, replacing the earlier tightly controlled approach. The key changes are: Cost of borrowing – ECB borrowing costs now align with market conditions, unlike earlier Master Directions that followed fixed pricing benchmarks. ECBs with maturity below three years For ECBs with maturity under three years, costs must follow the trade credit ceiling, and for fixed-rate loans, the floating rate plus swap spread cannot exceed this limit. Currency Flexibility: ECBs can be raised in foreign currency or INR, broadening the funding base for Indian corporates.  Conversion Provisions: Borrowings can be converted into equity or other non-debt instruments in line with the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, thus facilitating smoother debt-equity restructuring.  Security and Guarantees: Explicit permission is now included for both domestic and cross-border guarantees, subject to RBI guidelines and compliance with FEMA provisions.  Receipt of ECB proceeds: An eligible borrower shall drawdown ECB only after obtaining the LRN.  Potential implications   Encourages high-quality, productive inbound debt and prevents misuse of foreign borrowings for speculative or circular transactions.  Greater Access to Capital: Higher ECB borrowing limits allow foreign lenders to provide larger loans, enabling Indian companies to raise more funds and support bigger investment projects.  Market-based borrowing costs: Interest rates align with the market rather than fixed benchmarks, making returns more realistic and commercially viable.   Simplified security process: Easier creation of security over assets without prior AD bank approval speeds up investment execution.  Enhanced market confidence: By codifying previous circulars into one cohesive regulation, the RBI has improved predictability for foreign lenders, investors, and credit agencies evaluating Indian exposure.  ECB Reporting Requirements The RBI has formalised processes for borrower classification and compliance monitoring. Borrowers are now required to report ECB transactions using updated Forms ECB 1 and ECB 2 through their designated Authorised Dealer (‘AD’) Category I banks.  Borrowers missing reporting compliances for 4 consecutive quarters from scheduled event/timeline will be classified as untraceable borrowers and after further diligence AD bank to report it to the RBI and Directorate of Enforcement. Potential implications   Enhanced transparency: The revised Form ECB 1 and updated Form ECB 2 ensure that all ECB transactions, including drawdowns, repayments, and modifications, are accurately recorded and visible.  Regulatory compliance: Foreign lenders must submit reports through AD banks on time to remain compliant and avoid penalties.  Improved monitoring: The updated forms make it easier for foreign companies to track ECB utilization and assess borrower performance.  Conclusion The recent RBI reforms relating to the ECB framework and reporting requirements enhances regulatory clarity and operational flexibility for foreign investors. By streamlining compliance, improving transparency, and expanding investment opportunities, these measures contribute to a more robust and investor-friendly environment in India’s debt and capital markets. The changes also provide investors with greater predictability and control over their investments, including flexible exit options and standardized reporting formats, enabling more informed decision-making. For businesses seeking seamless entry and compliance support, partnering with a Company registration consultant in India further simplifies the process and ensures adherence to evolving regulatory norms.