In 2025, India’s foreign direct investment (FDI) policy is marked by significant changes to corporate tax and rules for the space sector. These reforms aim to make India a more attractive destination for global investors by reducing tax burdens and liberalizing key, high-tech industries.
Corporate Tax Changes
India has streamlined its corporate tax structure to be more competitive globally. Key tax reforms have been in place since 2019, but their full impact is becoming more evident in 2025 as new policies are implemented to improve ease of doing business.
Lower Rates: The country’s corporate tax rates are now among the most attractive in Asia. Domestic companies can pay as little as 22%, while new manufacturing ventures benefit from an even lower rate of 15%.
Reduced Tax for Foreign Companies: The corporate tax rate for foreign companies and their branches in India was reduced from 40% to 35%. This change is meant to make it easier for international companies to expand their operations in the country.
Digitized Processes: India has introduced a more digital and streamlined tax system, with features like “faceless assessments” and online appeals. This reduces human intervention, minimizes delays, and builds greater confidence and transparency for foreign companies.
Angel Tax Relief: The government has provided relief to startups from the “angel tax” on investments, making it easier for foreign investors to fund early-stage Indian companies.
Space Sector Reforms
India has liberalized its space sector FDI policy to attract foreign investment, technology transfer, and collaborative research. This is part of the country’s broader goal to increase its share of the global space economy. The changes, approved by the Union Cabinet in early 2024, have now been fully implemented.
FDI in the space sector is now categorized into three areas with different investment limits and entry routes:
Manufacturing and Operation of Satellites: FDI is permitted up to 100%. Up to 74% is allowed via the automatic route (without prior government approval), while anything beyond that requires the government route.
Launch Vehicles and Spaceports: Up to 49% FDI is permitted via the automatic route for the creation of launch vehicles and spaceports. Any investment beyond this limit requires government approval.
Manufacturing of Components and Sub-systems: A 100% FDI limit is now permitted through the automatic route for the manufacturing of components and sub-systems for satellites, ground segments, and user segments.
These reforms aim to attract major global players like SpaceX and Blue Origin and enable Indian private companies to move beyond being just suppliers to the government’s space program.
