Cross-Border M&A in India 2026: A Practical FEMA, FDI and CCI Checklist for Foreign Buyers and PE Funds

Cross-border M&A in India changed materially in 2026. Insurance opened to full foreign ownership, the land-border investment restrictions that had constrained fund structures since 2020 were rebuilt around a beneficial-ownership test, the direct tax code was replaced in its entirety, and the Reserve Bank consolidated its NBFC ownership rules. Several of the figures and forms that appear in older guidance are no longer correct.

This guide maps every material approval, filing and drafting checkpoint across the regulatory pillars that govern an inbound acquisition, DPIIT and the FDI policy, RBI and FEMA, the Competition Commission of India, the Companies Act, sector regulators and the tax code, into a single checklist, stated as at August 2026 with the governing instrument named in each case.

Key Facts as at 10 August 2026

• Insurance FDI is 100% under the automatic route. DPIIT Press Note 1 (2026 Series), notified 11 February 2026, following the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025. LIC remains capped at 20%.
• Telecom is 100% under the automatic route, and has been since October 2021.
• The blanket land-border restriction is gone. Press Note 2 (2026 Series), dated 15 March 2026, replaces it with a beneficial-ownership and control test keyed to Section 2(1)(fa) of the PMLA and Rule 9(3) of the PML (Maintenance of Records) Rules, 2005.
• CCI thresholds rose by 150% on 7 March 2024. Parties jointly: India assets above INR 2,500 crore or turnover above INR 7,500 crore.
• A deal value threshold has applied since 10 September 2024: transaction value above INR 2,000 crore plus substantial business operations in India. It overrides the small-target exemption.
• Form FC-GPR reports a fresh issue within 30 days of allotment; Form FC-TRS reports a transfer of existing shares within 60 days. They are different forms with different filers.
• The Income-tax Act, 1961 was repealed on 31 March 2026. The Income-tax Act, 2025 applies from 1 April 2026, and Section 195 is now Section 393(2), Table Serial No. 17.
• The Corporate Laws (Amendment) Bill, 2026 is not yet law. Introduced 23 March 2026; the Joint Parliamentary Committee reported on 3 August 2026.

Deal Types and the Approvals Matrix

How to Use This Matrix

Key takeaway: Two structural points that older checklists get wrong. First, a subscription and a secondary purchase are different reporting events with different forms, deadlines and filers, and the majority of inbound M&A is the second, not the first. Second, a compliant cross-border merger does not require a separate RBI no-objection; see the FEMA and RBI section below.

FDI Policy, Routes, Caps and Press Note 2 (2026)

Foreign investment in non-debt instruments is governed by the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, made by the Ministry of Finance. RBI’s role is the Mode of Payment and Reporting of Non-Debt Instruments Regulations, 2019. Sectoral policy is set by DPIIT through Press Notes amending the Consolidated FDI Policy and then reflected in the NDI Rules. Getting this hierarchy right matters, because a Press Note takes effect for FEMA purposes only when the corresponding NDI amendment is notified.

Sectoral Position on the Sectors That Moved

• Insurance. 100%, automatic route. Press Note 1 (2026 Series), notified 11 February 2026; FEM (Non-debt Instruments) (Second Amendment) Rules, 2026, effective 2 May 2026. Subject to IRDAI approval and verification. At least one of the chairperson, managing director or chief executive officer must be a resident Indian citizen. The 100% limit extends to intermediaries, brokers, reinsurance brokers, corporate agents, third-party administrators, surveyors and loss assessors. LIC is capped at 20%.
• Telecom. 100%, automatic route, since the DPIIT notification of October 2021, subject to the land-border rules.
• Defence. 74% automatic, with government approval beyond 74% where the investment is likely to result in access to modern technology or for other reasons to be recorded.
• Multi-brand retail. 51%, government route, with sourcing and minimum investment conditions.
• Digital and print media. 26%, government route.
• Most other sectors permit 100% under the automatic route, with post-investment reporting only.

Press Note 2 (2026): the Change That Matters Most to Funds

Press Note 3 (2020) required government approval for investment by an entity of a land-bordering country, or where the beneficial owner was situated in such a country. It was jurisdiction-based and undefined, and it made fund structures with any regional exposure difficult to clear.

Press Note 2 (2026 Series), dated 15 March 2026, following Cabinet approval on 10 March 2026, restructures the regime:

• New Para 3.1.1(c) defines “beneficial owner” by reference to Section 2(1)(fa) of the Prevention of Money-Laundering Act, 2002, determined under Rule 9(3) of the PML (Maintenance of Records) Rules, 2005, importing an established materiality standard, broadly a 10% dividing line.
• The trigger narrows from a beneficial owner “situated in” such a country to one who “is a citizen of” such a country.
• Approvals in specified manufacturing focus sectors, capital goods, electronic capital goods, electronic components, polysilicon and ingot-wafer, are to be decided within 60 days, under a revised standard operating procedure dated 4 May 2026.
• Pakistan is treated separately: a citizen of Pakistan or an entity incorporated in Pakistan may invest only under the government route, and not at all in defence, space, atomic energy or prohibited sectors.
• Transfers, direct or indirect, resulting in beneficial ownership falling within the restricted category remain caught, so secondaries, exits and restructurings are within scope.
• Investments with land-border-country ownership that do not require approval are subject to a reporting obligation in the form and manner specified by RBI.

For a fund with layered offshore feeders, the practical effect is that the analysis is now capable of a definite answer, and therefore a wrong answer is a contravention rather than a difference of view. Look-through to beneficial ownership should be run at term-sheet stage, not at closing.

Pricing

Capital instruments issued or transferred to a non-resident must be priced at or above fair market value, determined on an arm’s-length basis using an internationally accepted methodology, certified by a chartered accountant, a SEBI-registered merchant banker or a practising cost accountant. On a transfer from a non-resident to a resident, the constraint reverses: the price must not exceed fair market value.

Track the Corporate Laws (Amendment) Bill, 2026, tracked by PRS Legislative Research. It proposes to designate the Insolvency and Bankruptcy Board of India as the Valuation Authority responsible for registering and recognising valuers, which would change the institutional basis on which these certificates are issued.

FEMA and RBI, Reporting, Cure and Cross-Border Mergers

The Two Forms

Form FC-GPR reports the issue of capital instruments to a non-resident. Filed by the Indian investee company on the FIRMS portal within 30 days of allotment, running from allotment, not from receipt of funds.

Form FC-TRS reports the transfer of existing capital instruments between a resident and a non-resident, in either direction. Filed within 60 days of the date of transfer or the date of receipt or remittance of consideration, whichever is earlier, by the resident party. Where consideration is paid in tranches, the clock runs from the first receipt.

Also relevant: Form DI for downstream investment, within 30 days of allotment in the downstream investee; Form PAS-3 with the Registrar of Companies within 30 days of allotment under the Companies Act; and the annual FLA return by 15 July. A mismatch between the PAS-3 date and the FC-GPR allotment date is among the most common reasons an AD bank returns a filing.

Late Filings: the Three-Year Window

A delayed filing can be regularised by paying a Late Submission Fee under RBI A.P. (DIR Series) Circular No. 16 dated 30 September 2022:

LSF = INR 7,500 + (0.025% × A × n), where A is the amount involved and n the years of delay, capped at 100% of A.

The facility is available for three years from the due date. Beyond that, the only route is compounding. In diligence, the question is therefore not whether filings are complete but which gaps have already passed the three-year mark, those convert from an administrative fee into a compounding proceeding and a recorded contravention.

Compounding

The Foreign Exchange (Compounding Proceedings) Rules, 2024, notified 12 September 2024, superseded the 2000 Rules; RBI’s Directions on Compounding followed on 1 October 2024. The application fee is INR 10,000 plus GST, payable electronically. RBI officers’ competence was raised, Assistant General Manager up to INR 60 lakh, Deputy General Manager up to INR 2.5 crore, General Manager up to INR 5 crore, Chief General Manager above that. Disposal is within 180 days. Where a contravention is compounded before adjudication, no inquiry under Section 16 may be initiated or continued.

Rule 9 lists what cannot be compounded: where the amount is not quantifiable; where foreign exchange, foreign securities or immovable property outside India was acquired in contravention of FEMA; where the Enforcement Directorate considers the contravention serious with suspicion of money laundering or terror financing; where a penalty has already been imposed; or where further investigation is needed to quantify the amount. Section 3(a) contraventions sit with the ED, not RBI.

Penalties on adjudication under Section 13 of FEMA run to up to three times the amount involved. Where foreign assets exceeding INR 1 crore are held in contravention of Section 4, the ED may seize property of equivalent value within India under Section 37A.

Cross-Border Mergers

Section 234 of the Companies Act, 2013 and Rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 permit mergers between Indian companies and foreign companies in notified jurisdictions, subject to NCLT approval.

Do cross-border mergers require specific RBI approval? Regulation 9(1) of the FEM (Cross Border Merger) Regulations, 2018 provides that a transaction undertaken in accordance with those Regulations is deemed to have the prior approval of the Reserve Bank for Rule 25A purposes. There is no separate RBI no-objection process for a compliant scheme. What is required is a certificate from the managing director or whole-time director and the company secretary, confirming compliance, filed with the NCLT application. Guidance that budgets eight to twelve weeks for an RBI clearance in a compliant cross-border merger is describing a process that does not exist.

Overseas Investment by the Target

Where the Indian target holds or makes overseas investments, the Foreign Exchange Management (Overseas Investment) Rules and Regulations, 2022 apply, with reporting on Form FC and an Annual Performance Report. Round-tripping structures beyond the permitted layers require prior RBI approval. Note that “Overseas Corporate Bodies” ceased to be a recognised investor class in 2003 and is not a live reporting category.

Competition Commission of India, Thresholds and Notification Strategy

Thresholds

Following the Ministry of Corporate Affairs notification of 7 March 2024, raising the Section 5 values by 150%:

Do foreign buyers need CCI approval for acquisitions of Indian targets in 2026? In most material inbound acquisitions, yes. The statutory limbs are “parties jointly” and “group”. Analyses framed around a “combined entity” versus “individual enterprise” split are not applying Section 5.

Small-Target Exemption and the Deal Value Threshold

A combination is exempt where the target has assets of not more than INR 450 crore in India or turnover of not more than INR 1,250 crore in India, under the Competition (Minimum Value of Assets or Turnover) Rules, 2024. But Section 5(d), inserted by the Competition (Amendment) Act, 2023 and in force from 10 September 2024, requires prior approval where the transaction value, including direct, indirect, immediate and deferred consideration, exceeds INR 2,000 crore and the target has substantial business operations in India, assessed under Regulation 4 of the CCI (Combinations) Regulations, 2024 by reference to India’s share of global users, gross merchandise value or turnover, with a 10% share test and INR 500 crore India-value floors on the GMV and turnover limbs.

Warning: The small-target exemption is lost where the deal value threshold is met. A platform or technology target with modest Indian revenue but meaningful Indian usage, bought at a high multiple, can sit below every Section 5 figure, appear exempt, and still be notifiable.

Timing and Gun-Jumping Risk

The CCI must form a prima facie opinion within 30 days of a complete notice. The 2023 Amendment reduced the outer review limit from 210 to 150 days. The regime is suspensory: a combination cannot be consummated, in whole or in part, before clearance.

Penalty under Section 43A is up to 1% of the total turnover or assets, or the value of the transaction, whichever is higher. The CCI may also direct reversal under Section 31.

Green channel filings deserve particular care. Where there are no horizontal, vertical or complementary overlaps in India, notification produces deemed approval on filing. Where the no-overlap declaration proves wrong, the CCI has repeatedly declared the notice and the deemed approval void ab initio and imposed a Section 43A penalty, leaving the parties with an unnotified, prematurely consummated combination. For a PE acquirer, the overlap analysis must run across the whole portfolio, not just the acquisition vehicle.

Companies Act, 2013 and the Corporate Laws (Amendment) Bill, 2026

Share and Asset Transfer Mechanics

A share purchase of an unlisted Indian company requires board approval of the transfer, compliance with any pre-emption or right of first refusal in the articles or shareholders’ agreement, and stamping of transfer forms. The share purchase agreement should require the seller to procure waivers before the long-stop date.

Where an asset transfer amounts to the sale, lease or disposal of the whole or substantially the whole of an undertaking, Section 180(1)(a) requires a special resolution, “undertaking” being defined in the Explanation to Section 180 by reference to net worth and income tests. Section 180(1)(c) concerns borrowing beyond paid-up capital and free reserves and has no application to asset transfers.

What the 2026 Bill Actually Contains

The Bill was introduced in the Lok Sabha on 23 March 2026 and referred to a Joint Parliamentary Committee, which reported on 3 August 2026. It is not in force. Its deal-relevant provisions are:

• Decriminalisation of several offences under the Companies Act and the LLP Act, replacing imprisonment or fine with civil penalty, reducing directors’ personal exposure for routine procedural default.
• Fast-track mergers: for schemes involving small companies, or a holding company and its wholly-owned subsidiaries, the shareholder threshold moves from 90% of total shares to a majority of members present and voting holding at least 75% of shares among those present and voting; the creditor threshold moves from 90% to 75%.
• IBBI as Valuation Authority, registering and recognising valuers and recommending valuation standards.
• Employee compensation schemes extended beyond stock options to restricted stock units and stock appreciation rights, relevant to management rollover.
• Buy-back flexibility for prescribed classes of company beyond the 25% ceiling.
• Small company thresholds rising to INR 20 crore paid-up capital and INR 200 crore turnover; CSR net profit trigger rising from INR 5 crore to INR 10 crore.
• NFRA powers expanded.

Reporting on the Committee’s recommendations indicates refinements including dissenting shareholder exit rights in fast-track mergers. Those are recommendations; check the enacted text on the eGazette before relying on it. The Bill does not alter Section 180.

Sector Regulator Consents

An approvals matrix that stops at DPIIT, RBI and the CCI is incomplete. Two consents catch foreign buyers most often.

NBFCs

RBI issued the Reserve Bank of India (Non-Banking Financial Companies, Acquisition of Shareholding or Control) Directions, 2025 on 28 November 2025, effective from the date of issue and replacing the 2015 framework, as part of a wider consolidation of Master Directions. Prior written RBI approval is required for:

1. Any takeover or acquisition of control, whether or not it results in a change of management.
2. Any change in shareholding, including progressive increases over time, resulting in acquisition or transfer of 26% or more of paid-up equity capital, subject to a carve-out for buy-back or court-approved capital reduction, which must instead be reported within one month.
3. Any change in management resulting in a change of more than 30% of directors, excluding independent directors.

Applications are made through the PRAVAAH portal, and a public notice must be issued at least 30 days before the transfer, in one national and one vernacular newspaper. The Directions also restrict investors from FATF non-compliant jurisdictions, who may not acquire significant influence: new investment must remain below 20% of existing voting power and below 20% of existing and potential voting power, with grandfathering for holdings predating the jurisdiction’s classification.

Note that control is not purely a percentage test. An acquirer taking 25% with board appointment rights can trigger the approval requirement without crossing 26%.

Insurance

Foreign investment up to 100% is automatic but remains subject to IRDAI approval and verification, and to the resident-Indian officer requirement.

Tax Checkpoints

A new statute applies. The Income-tax Act, 1961 stood repealed on 31 March 2026. The Income-tax Act, 2025 is in force from 1 April 2026, together with the Income Tax Rules, 2026, and introduces a single “Tax Year” concept. Section numbering has changed throughout: the withholding obligation on payments to non-residents formerly in Section 195 is now Section 393(2), Table Serial No. 17. Forms 15CA and 15CB are replaced by Forms 145 and 146. Periods before 1 April 2026 continue to be governed by the 1961 Act, so transitional transactions require both references.

Indirect Transfer

An offshore share transfer can be taxable in India where the shares derive their value substantially from Indian assets. Any acquisition of an offshore holding company with Indian operations must be tested against the indirect transfer provisions before structuring, and the reporting obligations that attach to the Indian entity should be diligenced.

Treaty Position

The India–Mauritius protocol signed on 7 March 2024, introducing a revised preamble and a Principal Purpose Test, has not yet entered into force. It takes effect on the later of the two notifications. The Mauritian Cabinet agreed to ratify on 17 July 2026. CBDT Circular No. 01/2025 dated 21 January 2025 clarifies that grandfathered investments remain outside the PPT and continue to be governed by the specific terms of the treaty. Structures relying on Mauritius should be built on the assumption that the PPT will apply prospectively once notified, and substance, local directors, genuine decision-making, commercial rationale, should be capable of withstanding a principal-purpose enquiry as well as a beneficial-ownership one. A Tax Residency Certificate alone is unlikely to be sufficient.

Stamp Duty

Following the Indian Stamp (Amendment) Act, 2019, in force from 1 July 2020, duty on transfer of securities is levied at uniform national rates and collected through depositories and clearing corporations, it no longer varies by state for dematerialised securities. Duty on conveyance of immovable property and business undertakings does vary by state and can be commercially significant in a slump sale. Model both against the share-versus-asset decision.

Private Equity Structuring

• Direct investment from the offshore fund. Simplest, but exposes the fund directly to Indian tax on dividends and gains, and to the treaty questions above.
• Intermediate holding company. Provides exit flexibility, but must be substance-tested against beneficial ownership, GAAR and, once notified, the Principal Purpose Test. Substance means local directors, real decision-making and a commercial rationale that predates the tax outcome.
• Domestic AIF. A SEBI-registered Category II AIF can pool capital onshore. This does not remove FEMA analysis: where the sponsor or manager is not Indian-owned and controlled, downstream investment by the AIF is treated as indirect foreign investment under Schedule VIII of the NDI Rules.
• Joint venture. Where co-investing with a strategic partner, an Indian company with a detailed shareholders’ agreement covering governance, reserved matters, exit, drag and tag rights and deadlock.

Conditions Precedent Worth Building In

Rather than boilerplate, calibrate the conditions to the specific regulatory profile of the deal. At minimum, address:

1. Government-route approval, where the sector or the Press Note 2 beneficial-ownership analysis requires it, on terms satisfactory to the buyer.
2. CCI clearance, filing within a defined period of signing, with closing conditional on approval or expiry of the statutory period, and expressly covering the deal value threshold as well as the Section 5 thresholds.
3. Sector regulator approval, RBI under the 2025 NBFC Directions, IRDAI, or as applicable, with the 30-day public notice period built into the timetable.
4. Historical FEMA compliance, a warranty that all reportable transactions have been reported on the correct form and within time, and specifically that no contravention falls within Rule 9 of the Compounding Rules, which is the line between a quantifiable exposure and an open-ended one.
5. Pricing compliance, that consideration meets the FEMA floor, supported by a valuation certificate from an eligible professional.
6. Interim governance, preserving the target’s independent commercial decision-making between signing and CCI clearance.
7. Indemnity architecture, separating exposure that is curable by Late Submission Fee, exposure that is compoundable, and exposure that is neither. The third category does not belong behind a capped escrow.
8. Post-closing responsibility, naming who files FC-TRS or FC-GPR, by when, and requiring evidence of the AD bank acknowledgement.

Drafting must be settled by transaction counsel against the actual structure, sector and filing history. Clause language lifted without that analysis tends to produce indemnities that do not respond to the exposure that materialises.

Indicative Timelines

Conclusion

Cross-border M&A in India in 2026 demands a level of regulatory co-ordination that has no parallel in most other markets, and the rules themselves have moved substantially within the year. From DPIIT’s Press Note 2 rebuild of the land-border regime, through RBI’s FEMA reporting machinery and the CCI’s higher thresholds and deal value test, to the Companies Act mechanics awaiting the 2026 Bill and the wholesale replacement of the income-tax code, each approval has its own timeline, forms and enforcement consequences, and its own currency date. The checklists, tables and clauses in this guide are designed to give deal teams, whether acting for multinational corporates or PE funds, a reliable, dated starting framework for structuring an India acquisition that closes on time and survives post-closing scrutiny. For a bespoke review tailored to your specific transaction, consult a qualified cross-border corporate advisory lawyer experienced in Indian regulatory approvals.

This article is general information current as at 10 August 2026. It is not legal advice and no lawyer-client relationship arises from it. Indian regulatory positions in this area change frequently, and specific transactions require advice on their own facts.

Sources

1. Reserve Bank of India (RBI), FEMA Regulations & Circulars, Compounding Directions and NBFC Master Directions
2. Department for Promotion of Industry and Internal Trade (DPIIT), Consolidated FDI Policy, Press Note 1 and Press Note 2 (2026 Series)
3. Competition Commission of India (CCI), Merger Control, Section 5 Thresholds and Combination Regulations, 2024
4. Ministry of Corporate Affairs (MCA), Companies Act 2013, Section 5 Notification and Corporate Laws (Amendment) Bill, 2026
5. PRS Legislative Research, Corporate Laws (Amendment) Bill, 2026, Joint Parliamentary Committee Report
6. Securities and Exchange Board of India (SEBI), Takeover & Listing Regulations, AIF Regulations
7. Insurance Regulatory and Development Authority of India (IRDAI)
8. Government of India, Gazette of India / eGazette
9. Income Tax Department, Income-tax Act, 2025 and CBDT Circulars