Arete Consultants

Entry Strategies for Foreign Investor

Strategies for Entry into India

Project Office

A representation of a foreign company handling a specific project in India. Permitted Activities Limited to tasks directly related to the execution of the designated project.

Liaison Office

Functions as a communication bridge between the parent company and Indian entities. Permitted Activities Restricted to liaison and representation tasks; revenue-generating activities are not permitted.

Branch Office

An extension of a foreign enterprise in India. Permitted Activities - only specific activities are typically allowed.


A foreign company wishing to establish operations in India can register as a Wholly Owned Subsidiary or a Joint Venture, offering limited liability and full control. Permitted Activities Subject to Foreign Direct Investment (FDI) regulations, there are usually no significant restrictions. Limited Liability Partnership (LLP): A partnership with its own legal identity and limited liability. Permitted Activities are subject to FDI regulations, LLPs generally have no major restrictions. Investment Routes in India All cross-border transactions involving foreign exchange in India are regulated by the Foreign Exchange Management Act, 1999. Foreign Direct Investment (FDI) by non-residents in India can take place through either of the following routes:

Investment Routes - Approvals required for Business

Depends on industrial sectors and have ceiling for some specific sectors.

Automatic Route

Allows FDI into India without requiring approval from the government or RBI, within sectoral caps outlined in the FDI Policy.

Approval Route

Also known as the government route, requires prior approval from the government or RBI for FDI.

Funding Options

Company Equity Share Capital

Represents ownership in a company, subject to sectoral caps and valuation norms.

Preference Share Capital

Offers preferential rights over equity shares, including fixed dividends and priority in liquidation.

External Commercial Borrowings (ECBs)

Debt raised from overseas sources, subject to compliance with exchange control regulations.

Domestic Borrowings

Companies can raise funds domestically through banks, financial instruments, or securitized debt instruments.

Repatriation of Funds

Foreign capital invested in India can generally be repatriated along with any capital appreciation, after payment of applicable taxes. Repatriation is permitted if the investment was made on a repatriation basis according to exchange control regulations and is not subject to any lock-in conditions.

Repatriation of Capital

Can occur through secondary sale, share buyback, capital reduction, or liquidation, subject to regulatory laws and applicable taxes.

Repatriation of Dividend

Dividends distributed by an Indian company are freely repatriable, with the Indian company liable for withholding tax. Repatriation by LLP: Partners of an LLP can withdraw their capital without restrictions, subject to applicable taxes.

Repatriation of ECB and Interest

Indian companies can repay ECBs subject to regulatory restrictions, with interest payments freely repatriable after deducting taxes.