Before 12 June 2026, a foreign national who wanted to buy shares of an Indian listed company in their own name and later take the money home had two options. They could qualify as an NRI or OCI, or they could invest through a structure registered with SEBI as a Foreign Portfolio Investor. A British engineer, a Singaporean business owner or an Emirati family with no Indian ancestry had no direct individual route.
That changed with the Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2026. Foreign individual investment in India’s listed shares is now open to any individual resident outside India, on a repatriation basis, without FPI registration. The Reserve Bank of India followed a day later with amended payment and reporting regulations that bring in a new account requirement: the designated repatriable rupee account.
This guide explains who can invest, the limits that apply, how the money has to move, and the compliance points that trip investors up.
What Changed on 12 June 2026
The Ministry of Finance notified the amendment as S.O. 3030(E), and it took effect the same day. The drafting change is small. In Rules 9 and 12 of the NDI Rules, 2019, the words “non-resident Indian or overseas citizen of India” were replaced with “an individual”. Rule 12(1) now allows “an individual person resident outside India”, including an NRI or OCI, to buy and sell equity instruments of a listed Indian company on a recognised stock exchange on a repatriation basis under Schedule III.
The practical effect is large. Schedule III used to be a route reserved for people of Indian origin. It is now a general portfolio route for foreign individuals.
Who Can Invest Under the New Route
Any individual resident outside India qualifies, subject to the land-border condition discussed below. This includes:
- Foreign nationals with no Indian citizenship or ancestry
- NRIs and OCIs, who keep their existing access with higher limits
- High-net-worth individuals and family office principals who want direct exposure to specific Indian companies rather than a pooled fund
The route covers individuals only. Companies, trusts and funds still need the FPI or FDI route.
Investment Limits for Foreign Individuals in Indian Listed Shares
The amendment replaced the old NRI/OCI caps with a new structure.
| Before June 2026 (NRI/OCI only) | After June 2026 (all individuals resident outside India) | |
|---|---|---|
| Single investor | 5% of paid-up equity | Less than 10% of paid-up equity, fully diluted |
| All such investors together | 10% | 24% |
| FPI registration needed | No (for NRI/OCI) | No |
The same thresholds apply to each series of debentures, preference shares and share warrants.
Two points need attention. First, the 24% aggregate is now shared by a much larger group of investors, so headroom in popular stocks may fill faster than it did for NRIs alone. Second, holdings are cross-aggregated. If you hold shares of the same company through an FPI vehicle under Schedule II and also personally under Schedule III, both count towards one 10% ceiling.
What Happens If You Cross 10%
If a trade takes your holding to 10% or above, the rules give you two choices:
- Sell the excess within five trading days from the settlement date of the trade that caused the breach.
- Let the holding be reclassified as FDI. The entire investment in that company is then treated as foreign direct investment, and you can no longer make portfolio investments in that company under Schedule III.
The designated authorised dealer bank, the depositories and the company must be informed. A breach during this divestment or reclassification window is not treated as a FEMA contravention, as long as the prescribed steps are followed.
The Land-Border Condition
The amendment writes India’s Press Note 3 screening directly into Rule 12 for the first time. Prior Government approval is required where the investment:
- results in a transfer of ownership or control of the listed company to entities or citizens of a country that shares a land border with India, or
- has a beneficial owner who is a citizen of such a country.
“Beneficial owner” is defined by reference to Section 2(1)(fa) of the Prevention of Money-Laundering Act, 2002, applied through the 10% ownership or control test in the PML (Maintenance of Records) Rules, 2005. Anyone investing through layered structures, family trusts or nominee arrangements should get this analysis done before money is remitted. Banks will ask for it.
How the Designated Repatriable Rupee Account Works
The RBI’s Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) (Amendment) Regulations, 2026 set out how funds move. On 15 June 2026 the RBI confirmed that authorised dealer banks may open repatriable rupee accounts for overseas individuals investing in listed Indian companies.
Funding the investment. You can pay for shares through:
- inward remittance from abroad through normal banking channels, or
- funds already held in a repatriable deposit account maintained under the FEMA Deposit Regulations, 2016 (an NRE account, for example, in the case of an NRI).
One account, one purpose. You must designate a repatriable rupee account to be used exclusively for Schedule III investments. It works as the single channel through which your purchases and sales are tracked.
Sale proceeds. Net sale proceeds, after applicable taxes, can be remitted outside India or credited back to the designated repatriable rupee account.
Reporting. Your authorised dealer bank reports every purchase and transfer to the RBI in a new format, Form LEC (IFI), where IFI stands for Individual Foreign Investor. This replaces the older NRI/OCI-focused reporting. The bank files the form, but you have to give it accurate, complete information for the filing.
Steps to Invest as a Foreign Individual
- Check eligibility. Confirm you are resident outside India under FEMA and that no land-border ownership or beneficial-ownership link applies.
- Open the designated repatriable rupee account with an AD Category-I bank and complete KYC.
- Open a demat and trading account with a SEBI-registered broker linked to that bank account.
- Fund the account by inward remittance or transfer from an eligible repatriable account.
- Trade on a recognised Indian stock exchange and track your holding in each company against the 10% ceiling.
- Plan tax and repatriation. Capital gains and dividends are taxed in India, with tax deducted at source. A tax residency certificate may let you claim relief under the relevant Double Taxation Avoidance Agreement.
Transfers by Sale or Gift
A foreign individual holding equity instruments of an Indian company may transfer them by sale or gift to another person resident outside India. Government approval is still needed where the company is in a sector under the approval route, or where the transfer moves ownership or control to a land-border country or its citizens.
Common Mistakes to Avoid
- Mixing funds. Using the designated account for unrelated transactions can cause problems with the bank’s reporting.
- Forgetting cross-aggregation. Investors who hold through an FPI entity and personally often track the two separately and breach 10% without realising it.
- Assuming the old NRI limits still apply. NRIs and OCIs now have a single cap just under 10%, and they share the 24% aggregate with every other foreign individual.
- Leaving the beneficial-ownership review until after investing. If a land-border link exists, approval is needed first.
How A. Agarwalla & Co. Can Help
The new route is simpler than setting up an FPI, but it carries real FEMA, PMLA and tax obligations. The FEMA practice at A. Agarwalla & Co. advises foreign individuals, NRIs and OCIs on eligibility checks, beneficial-ownership analysis, setting up the designated repatriable rupee account, limit monitoring and repatriation planning. Our FEMA lawyers also handle Government approval filings where a land-border link applies, and advise on what to do if a holding crosses the 10% limit.
FAQs
Can a foreign national buy Indian shares directly after June 2026?
Yes. Any individual resident outside India can buy and sell shares of listed Indian companies on a recognised stock exchange on a repatriation basis under Schedule III, without registering as an FPI.
What is a designated repatriable rupee account?
It is a repatriable rupee account with an authorised dealer bank that the investor designates for Schedule III investments only. Purchases are paid from it, and sale proceeds can be credited back to it or sent abroad.
What is the investment limit for foreign individuals in an Indian listed company?
Each individual must hold less than 10% of the company's paid-up equity capital on a fully diluted basis. All individual investors resident outside India together are capped at 24%.
Do NRIs still use the Portfolio Investment Scheme?
NRIs and OCIs remain covered by Schedule III. Their individual limit has gone up from 5% to just under 10%, and their transactions are now reported through Form LEC (IFI).
Who needs government approval?
Investors whose investment would pass ownership or control to a land-border country or its citizens, or whose beneficial owner is a citizen of such a country, need prior Government approval.