India Widens the Portfolio Investment Route

On 12 June 2026, the Central Government notified the FEMA (Foreign Exchange Management) (Non-Debt Instruments) (Third Amendment) Rules, 2026.The amendment changes the investment framework under the existing FEMA (Non-Debt Instruments) Rules, 2019.Earlier: Schedule III mainly covered NRIs and OCIs.Now: It covers any eligible individual person resident outside India, including an NRI or OCI.

Who Can Invest Now?

The investment route is no longer limited only to persons of Indian origin.
An eligible foreign individual who is:

• resident outside India;
• not an Indian citizen;
• not an NRI; and
• not an OCI,

can also invest under Schedule III, subject to FEMA, SEBI, KYC and banking requirements.Example: An eligible US, UK or Japanese individual residing outside India can now use this route, even without Indian citizenship or OCI status.

How Can the Investment Be Made?

An eligible overseas individual can purchase or sell equity instruments of a listed Indian company on a recognised Indian stock exchange.The investment must be made:

• on a repatriation basis;
• through a designated branch of an Authorised Dealer bank;
• through inward remittance from abroad or funds held in a permitted repatriable deposit account; and
• using a designated repatriable rupee account exclusively for Schedule III investments.

Repatriation basis means the net sale proceeds, after applicable taxes, can be remitted outside India or credited to the designated rupee account.

Investment Limits Still Apply

The investment must remain a portfolio investment.Individual limit:
The total holding of one overseas individual must remain below 10% of the listed company’s fully diluted paid-up equity capital.Aggregate limit:
The combined holding of all overseas individuals under Schedule III must not exceed 24%.Holdings across Schedule II, Schedule III and other applicable routes are considered while checking the individual 10% limit. If the 10% limit is breached:

• the excess must be divested within five trading days from settlement; or
• the individual’s entire investment in that company will be treated as FDI.

The breach must be reported through the designated bank to the depositories and concerned company within seven trading days.

Regulatory Safeguards Continue

The amendment widens access but does not remove regulatory controls.The following requirements continue:

• KYC and anti-money-laundering checks;
• identification of the beneficial owner;
• monitoring of individual, aggregate and sectoral limits;
• reporting by the designated Authorised Dealer bank in Form LEC (IFI); and
• compliance with FEMA and SEBI requirements.
• Prior Government approval is required where the investment or transfer results in ownership or control of the listed Indian company passing to entities or citizens of a country sharing a land border with India, or where the beneficial owner is a citizen of such country.

Key Takeaway
India has opened the listed-equity portfolio investment route to a wider group of overseas individual investors while retaining investment limits, banking supervision, AML checks and national-security safeguards.