Ministry of Finance issues notification amending Foreign Exchange Management (Non-debt Instruments) Rules, 2019

In brief

The Ministry of Finance (Department of Economic Affairs) has notified¹ the Foreign Exchange Management (Non‑debt Instruments) (Amendment) Rules, 2026 dated 1 May 2026, amending rule 6 of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (FEMA NDI Rules) to operationalise Press Note 2 (2026 Series) issued earlier this year in March by the Department for Promotion of Industry and Internal Trade of India on investments from countries sharing land borders with India (land-border countries or LBCs). The amended rule 6 clarifies the below.  

• Aligns the ‘beneficial owner’ test for Foreign Direct Investment (FDI) with the Prevention of Money‑laundering Act, 2002 (PMLA) and the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 (PML Rules) thresholds. 
• Codifies when beneficial ownership is deemed to be vested in an LBC.
• Introduces a mandatory prescribed reporting requirement for certain investments having direct or indirect LBC ownership but not requiring prior government approval.