Press Note 3 after the 2026 amendment: who needs approval now

Short answer: the government route for investors from a country sharing a land border with India is unchanged. What the 2026 amendment changed, with effect from 2 May 2026, is the test for beneficial ownership when the investor sits elsewhere: it now follows Rule 9(3) of the PML Rules, so land-bordering holdings of up to 10% in the investor, with no control, no longer require approval. Any land-bordering ownership at all still has to be reported on the DPIIT portal before the money arrives.

Who Press Note 3 catches

Press Note 3 (2020 Series), dated 17 April 2020, amended the FDI policy so that an entity of a country sharing a land border with India, or an investment whose beneficial owner was "situated in or is a citizen of" such a country, could invest only under the government route — that is, with prior approval. Neither press note lists the countries; by geography they are China, Pakistan, Nepal, Bhutan, Bangladesh, Myanmar and Afghanistan. Pakistan carries an additional restriction: approval-only, and not in defence, space or atomic energy.

After the 2026 amendment, the rule catches three things:

A multilateral bank or fund of which India is a member is not treated as belonging to any country.

Two points are not settled by the text. First, the 2026 wording speaks of a beneficial owner who is a citizen of a land-bordering country; the 2020 phrase "situated in" does not appear in the new clause. Whether a non-citizen living in a land-bordering country is still caught has not been tested, and we would not rely on its absence. Second, neither press note names Hong Kong or Macau. Both are commonly treated as within scope in practice, and an investor structured through either should plan on that basis.

What changed in 2026, and when it became law

The sequence matters, because much of what is online was written before the change took legal effect.

The operative date is 2 May 2026. An investment completed between March and 1 May was governed by the old text.

A separate amendment, the FEMA (Non-debt Instruments) (Third Amendment) Rules, 2026, notified on 12 June 2026, opened investment in listed Indian companies on the stock exchange to all non-resident individuals, with matching land-border language for that route. It does not change the rule that governs an unlisted company or a foreign parent's investment in its subsidiary.

The beneficial-ownership test, precisely

The amendment did not create a free-standing "10% automatic route". It kept the government route and changed what counts as land-bordering beneficial ownership.

"Beneficial owner" now takes its meaning from Section 2(1)(fa) of the Prevention of Money-laundering Act, 2002 (PMLA) and is determined on the criteria in Rule 9(3) of the PML (Maintenance of Records) Rules, 2005. Those thresholds depend on what the investor is:

Four features of the text decide most cases:

1. The test sits at the investor. It is applied to the investor entity incorporated outside the land-bordering countries — the fund, the holding company — not only to the Indian company's register.
2. It is cumulative. Land-bordering rights are counted "individually or cumulatively", "whether acting together or otherwise". Unconnected land-bordering holders are added together.
3. "In excess of" means exactly 10% is inside. A company investor with 10.0% land-bordering ownership is not above the threshold; 10.01% is.
4. Control overrides percentage. Any land-bordering holding that gives control of the investor, or ultimate effective control of the Indian company, brings the investment back into the government route, whatever its size.

What "control" means — and where it is unclear

The NDI Rules define control as the right to appoint a majority of the directors, or to control management or policy decisions, including through shareholding, management rights, a shareholders' agreement or a voting agreement.

That definition is workable. The difficulty is the third limb of the new test: rights enabling a land-bordering person "to exercise ultimate effective control over the Investee entity in any manner". The phrase is not defined, and "in any manner" is wide. In practice the questions are:

• Board seats. One nominee on a five-member board is not majority appointment, but the SOP asks for every board-appointment right to be disclosed.
• Reserved matters and vetoes. Affirmative-vote rights over the budget, business plan or senior hires can be argued to confer control over policy decisions. Protective rights over, say, changes to share capital are less likely to.
• Fund governance. A land-bordering general partner or investment-committee member may exercise control over the investor even with a small economic interest. The SOP asks for exactly these people by name.

There is no published body of decisions on the phrase yet. Where a term sheet carries land-bordering vetoes or board rights, the conservative course is to treat the question as open until the rights are narrowed or approval is obtained.

Reporting when no approval is needed

This is the obligation most often missed, because it arises only where the answer to the approval question was "no".

Para 3.1.1(d) of the FDI Policy applies where the investor entity has any direct or indirect ownership by a land-bordering citizen or entity and the investment does not need approval. There is no minimum. Under the SOP:

One point is loose. The gazetted rule describes this as reporting "specified by the Reserve Bank", while the press note and SOP route it to DPIIT. The SOP says the reporting is governed by the RBI's reporting regulations and visible to the RBI. We have not found a separate RBI prescription; confirm the position with your authorised dealer (AD) bank before remitting. The FC-GPR sequence that follows is in capital infusion and FC-GPR.

Transfers that trigger approval later

Under the amended rule, where a transfer of any existing or future FDI in an Indian entity, directly or indirectly, results in beneficial ownership falling within the restriction, that change needs prior government approval.

Situations that reach this:

• A secondary sale of the Indian company's shares to a land-bordering buyer, or to a fund whose land-bordering interest exceeds the threshold. The pricing and reporting side of such a transfer is covered in share transfers between residents and non-residents.
• A change upstream: a new land-bordering investor in the foreign parent that lifts the cumulative interest above 10%, or acquires board or veto rights over it.
• A new round in which a land-bordering investor takes control rights, even without a large stake.

The upstream case is the dangerous one, because nothing happens at the Indian company and its board may not know. A foreign parent's shareholder changes feed into the Indian company's significant beneficial owner records as well; see SBO declarations for a foreign parent.

When approval is needed: timeline and the file

Applications go online through the foreign investment facilitation portal. DPIIT assigns each one to the ministry responsible for the sector, and circulates it to the RBI and the Ministry of External Affairs. Applications under the land-border rule also need security clearance from the Ministry of Home Affairs.

The listed sectors are capital goods, electronic capital goods and components, polysilicon and ingot-wafers, advanced battery components, rare-earth permanent magnets and rare-earth processing. The Cabinet announcement named only the first three groups; the SOP's list is wider and is the operative one.

Stated timelines and actual timelines have diverged before. Approvals under the 2020 regime frequently took six months or more. Plan the transaction on that basis rather than on the SOP figure.

The application file, per Annexure I of the SOP, includes:

• A summary of the proposal, with beneficial ownership, the business model and the policy provision relied on
• Pre- and post-transaction shareholding, a fund-flow chart and a group structure chart with places of incorporation
• Land-bordering beneficial ownership in full: every upstream shareholder, director, general partner, limited partner, investment-committee member and key manager from a land-bordering country, up to the ultimate beneficial owner, with control and veto rights
• The Indian company's significant beneficial owners under the Companies Act
• Constitutional documents, board resolutions and last audited accounts of both investor and investee (drafts where the Indian company is not yet incorporated, with finals due within 60 days of approval)
• Signed investment, shareholders' or transfer agreements and a valuation certificate where FEMA pricing applies
• Past approvals or rejections, and past FEMA reporting
• An undertaking that no party is on a sanctions or debarment list, and a notarised affidavit
• The Home Ministry security clearance form

Foreign documents need apostille or consular attestation, and English translation where applicable. Assembling the land-bordering disclosure is usually the long pole, because it depends on information the fund manager has to collect from its own investors.

How to approach an investment with land-bordering exposure

1. Map the chain to individuals, with citizenship, for every holder above a nominal level, and every general partner and committee member.
2. Add up the land-bordering interest at the investor level, cumulatively.
3. Read the rights, not only the percentages — board seats, vetoes, reserved matters, side letters.
4. Decide: above the line or with control, apply for approval; at or below it with no control, report before remitting.
5. Diarise the upstream risk, so that a later change in the foreign shareholder's own investors is caught before it closes.

Where this sits in the wider entry sequence is set out in setting up a company in India as a non-resident, and the choice between a subsidiary and a branch or liaison office — which are approved under a separate set of FEMA regulations — in the entry-route comparison. Our foreign subsidiary work starts from this analysis.

This note sets out Press Note 3 as amended by Press Note 2 (2026 Series), the FEMA (Non-debt Instruments) (Amendment) Rules, 2026 and the DPIIT SOP of 4 May 2026, as at 23 September 2026. It is not a legal opinion on any structure. The phrase "ultimate effective control", the reporting channel and the treatment of Hong Kong and Macau are not settled, and the SOP can be revised without a change in the rules. Confirm the current text and your investor's complete ownership and rights before remitting funds or signing a transfer.