India’s Press Note 3 Amendment: what European investors need to know

Anyone investing in India has to navigate complex regulations. One of the most critical regulatory frameworks is “Press Note 3” (PN3). Since its introduction in 2020, this rule has caused significant delays for foreign businesses. Since March 2026, updates bring much-needed clarity for European companies entering or expanding in India.

In March 2026, the Indian government relaxed Press Note 3, the rule governing foreign investment from India’s border countries since 2020. Deals with less than 10% indirect ownership from a border country can now use the fast-track automatic route, and strategic sectors that still need approval get a fixed 60-day decision deadline. Below, we look at what qualifies for the automatic route, why the Ultimate Beneficial Owner (UBO) still matters, and what your India team should check now.

What is Press Note 3?

In 2020, the Indian government introduced Press Note 3 with a clear objective: to protect strategic Indian sectors from opportunistic takeovers by countries sharing a land border with India, most notably China.

The regulation dictated that any investment directly or indirectly linked to these border countries required explicit prior approval from the Indian government. In practice, this became a major roadblock for European companies for several reasons:

• Even a minuscule indirect stake held by a Chinese investor in a European parent company could stall an entire Indian investment.
• There was no definitive threshold for what constituted an Ultimate Beneficial Owner (UBO).
• The approval process lacked fixed timelines, leaving critical capital injections stuck in bureaucratic limbo for months.

Press Note 3: what’s changed in 2026

The latest amendment to Press Note 3 brings welcome relief. The Indian government has softened the regulation to accelerate legitimate foreign investments.

Investments can now bypass the lengthy government approval process and use the fast-track automatic route, provided they meet two crucial criteria:

1. The ultimate beneficial ownership (direct or indirect) held by an investor from a restricted border country remains under 10%.
2. The investor in question does not hold any voting or controlling rights within your company.

Additionally, for strategic sectors that still require government scrutiny (such as electronics, capital goods, and solar energy), a strict 60-day decision timeline has been introduced. This finally gives European companies the predictability required for effective business planning.

Ultimate Beneficial Owner (UBO) still under close scrutiny

While the rules have become more flexible, Indian regulatory and tax authorities scrutinise transparency more closely than ever. European businesses should not assume they can bypass these rules simply by routing investments through a holding company in the Netherlands, Germany, Singapore, or Dubai.

The Indian authorities look straight through these intermediate corporate layers to identify the Ultimate Beneficial Owner (UBO).

A practical example: when Press Note 3 still applies

Imagine that your European entity wants to inject capital into a wholly-owned subsidiary in India. Your European entity is 20% funded by a local venture capital fund. If that VC fund has, in turn, raised capital from an investor based in a restricted border country, your investment in India could still trigger Press Note 3. The result? You will have to go through the formal government approval process, which causes serious delays for your business planning.

Press Note 3 compliance: your action checklist

At IndiaConnected, we consistently see that compliance in India is not just an administrative task for the back office: it needs to be a strategic priority from day one. If you are planning a joint venture, an acquisition, or setting up your own legal entity in India, ensure the following steps are integrated into your roadmap:

• Conduct a top-level UBO check: Map out your company’s entire ownership structure. Who are the investors in your holding company or who is backing your VC funds? Ensure that any indirect ownership from restricted countries stays strictly below 10%.
• Review your funding timelines: If your Indian operation urgently requires capital to purchase machinery or hire staff, account for potential approval timelines so your local subsidiary does not face a sudden working capital crunch.
• Screen your partners: If entering into a joint venture, ensure your Articles of Association (AoA) are watertight and that your Indian partner’s UBO structure is fully transparent.

Doing Business in India: preparation is key

India offers immense opportunities, provided you understand the rules of the game. The amendment to Press Note 3 signals that India remains open to foreign capital, but demands transparency in return. The success of your Indian expansion depends not just on what you invest, but on how your legal and financial corporate structure is designed.

Do you have questions about structuring your Indian entity, navigating UBO requirements, or funding your Indian subsidiary? Feel free to reach out to the experts at IndiaConnected for practical advice and local expertise.