Author: CS Raina Shah
Published in: Taxmann
Downstream investment occurs when an Indian entity that has received foreign investment makes an investment in another Indian company. Such investments are regulated under the Foreign Exchange Management Act (FEMA) and must comply with sectoral caps, entry routes, and other foreign direct investment (FDI) conditions applicable to the sector. The concept is particularly relevant when the investing company is foreign owned or controlled, as the investment is then treated as indirect foreign investment. In such cases, regulatory reporting requirements become applicable, including filing Form DI within the prescribed timeline. Proper compliance with these requirements is essential to ensure transparency and adherence to India’s foreign investment regulations.
