Say a Dubai-based businessman with no NRI passport, no OCI card, nothing but a foreign residency, wants to buy a stake in a private company one of your clients is raising money for. Two months ago, the honest answer was: sorry, this route isn't really open to you as an individual, we'll have to push this through the standard FDI approval process instead. That's no longer quite true. On 12 June 2026, the Ministry of Finance quietly notified the Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2026, and it changes who actually qualifies as an eligible investor in Indian equity. If you handle any fundraising, cap table, or FDI compliance work, this one's worth ten minutes of your time.

What Actually Changed on 12 June 2026

The amendment revises the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 — the rulebook that governs how non-residents can hold equity in Indian companies. The headline change is in Rule 9, where the phrase "a Non-Resident Indian or an Overseas Citizen of India" has been replaced with simply "an individual." That's a much wider net. Chapter V, which used to be framed entirely around NRIs and OCIs, now covers "an individual person resident outside India including NRI or OCI." In plain terms: any individual living outside India — not just people of Indian origin — can now access this investment route, subject to conditions.

Rule 12 has also been amended to let such individuals purchase or sell equity instruments of a listed Indian company on a repatriation basis, as long as they stay within the limits in Schedule III. Rule 13 lets them transfer those holdings — by sale or by gift — to another person resident outside India.

The Numbers That Actually Matter: 10% and 24%

Schedule III has been revised too, and this is where the real compliance work sits. An individual investor's holding under this route has to stay below 10% of a listed company's equity, and the aggregate holding of all such individual foreign investors together cannot cross 24% of the fully diluted paid-up equity capital. Cross that 24% ceiling and there's no grace period to negotiate — the excess must either be divested within five trading days, or the entire investment gets reclassified as Foreign Direct Investment, which comes with its own approval and reporting obligations. Five trading days is not a lot of runway if nobody's watching the aggregate number in real time.

The Land-Border Safeguard You Can't Skip

Here's the part that trips people up. Rules 12 and 13 now both require prior Government approval where the investment or transfer results in ownership or control of a listed Indian company passing to entities or citizens of countries that share a land border with India, or where the beneficial owner of the investment is a citizen of such a country. The land-border scrutiny itself isn't new to Indian FEMA law, but folding it directly into the individual-investor route means you can't assume a "just an individual, not a company" investor sits outside national security review. The amendment also aligns the definition of "beneficial owner" with the Prevention of Money Laundering Act, 2002 — so the ownership trail you're expected to establish is now the PMLA standard, not a looser FEMA-only reading.

What This Means If You're Bringing In Foreign Money

For a founder or a company secretary, the practical upside is real: the pool of individuals who can invest directly in a listed Indian company without the full FDI approval maze has genuinely widened. A foreign professional, a retired expat, an investor with no Indian heritage at all — they're now within the same framework NRIs and OCIs already used. But don't mistake "wider access" for "less paperwork." You still need to establish, in writing, where the money is coming from and who ultimately controls it — that's exactly what regulators will ask for if the 24% cap gets tested, or if the investor's citizenship touches a bordering country.

One thing worth flagging to clients: these provisions, as drafted, apply specifically to equity instruments of a listed Indian company purchased on a repatriation basis. If you're structuring investment into a private, unlisted company, the analysis is different and the older FDI/NDI framework for unlisted equity still governs — don't assume this amendment opens the same door there.

Before You Onboard a New Foreign Investor

A few habits are worth building into your process right away. Confirm the investor is genuinely "an individual person resident outside India," not a trust, fund, or corporate vehicle — the amendment's benefit doesn't extend to those. Track the aggregate 24% figure across all individual foreign holders, not just the new investor's slice, since breaches are measured in aggregate. Run a citizenship and beneficial-ownership check against the land-border list before money changes hands, not after. And keep the PMLA-aligned ownership documentation on file — auditors and the RBI will expect it later.

How Gadhia Associate Can Help

Foreign investment rules change quickly, and getting the categorisation wrong at the entry stage is far more expensive to fix later than to get right upfront. Our team helps founders and companies structure FEMA-compliant foreign investment, run beneficial-ownership and land-border screening before funds are accepted, and handle the RBI reporting and Form FC-GPR filings that go with it. If you have a foreign investor lined up, or you're unsure whether an existing shareholding still fits within the revised limits, reach out to us before you sign anything — a short review now can save a much longer correction later.