Vodafone operates in India through various subsidiaries.
It has been trying for their merger since 2012 before launching its initial public offer in India.
"Vodafone has deposited Rs. 2,000 crore as directed by the Supreme Court. Following this, the DoT has given clearance to merger of its four entities into Vodafone Mobile Services," an official source told PTI.
The Indian arm of British telecom major Vodafone Plc needed to pay Rs. 6,678 crore to the government under various heads for the merger to go through. The due includes payment of a one-time spectrum charge, the spectrum usage charge and computation of the adjusted gross revenue.
The Supreme Court last month asked Vodafone Mobile Services Ltd (VMSL) to pay Rs. 2,000 crore to the government in pursuance of the proposed merger of licenses of its four entities into itself.
With this clearance, Vodafone can now move to various courts approval of scheme to amalgamate four units - Vodafone East, Vodafone South, Vodafone Cellular and Vodafone Digilink with Vodafone Mobile Services.
As per the process, Vodafone now needs approval of the High Court for amalgamation of its entities and then complete the process by informing registrar of companies.
Vodafone Group CEO Vittorio Colao in October said the company has started preparatory work for an initial public offer (IPO) of Vodafone India despite its ongoing Rs. 20,000 crore tax dispute.
Vodafone is India's second-largest wireless mobile operator with a market capitalisation of about 9.3 billion pound, and an enterprise value of 11.4 billion pound, according to analysts at Citi.
The Indian division's earnings before interest, taxes, depreciation and amortisation reached GBP 1.28 billion on sales of GBP 4.3 billion in 2014-15.
The business, which has more than 180 million customers, accounts for 10 percent of Vodafone's total revenue.
Vodafone is also in process to merge its other two units - Vodafone West and Vodafone Spacetel - with Vodafone Services.
An official source said that Vodafone will need to submit about Rs. 1,950 crore to merger these two entities.
Vodafone India spokesperson declined to comment as the matter is sub-judice.