The Ministry of Finance vide its notification dated 6th August 2021 has published Foreign Exchange Management (Nondebt Instruments) (Amendment) Rules, 2021 to further amend the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.
Through this amendment, an explanation under rule 23(7)(i)(B) has been inserted.
Rule 23(7)(i) deals with Downstream investment in which the term indirect foreign investment has been defined as follows:
“Indirect foreign investment” means downstream investment received by an Indian entity from-
(A) another Indian entity (IE) which has received foreign investment and (i) the IE is not owned and not controlled by resident Indian citizens or (ii) is owned or controlled by persons resident outside India; or
(B) an investment vehicle whose sponsor or manager or investment manager (i) is not owned and not controlled by resident Indian citizens or (ii) is owned or controlled by persons resident outside India:
Explanation: An investment made by an Indian entity which is owned and controlled by NRI(s), on a non-repatriation basis, shall not be considered for calculation of indirect foreign investment.
Provided that no person resident in India other than an Indian entity can receive Indirect Foreign Investment.
