The person, who declined to say how much Snapdeal would be valued after the investment, said the deal could be finalised within a few days at the earliest though it may also take weeks.
Online tech publication Re/code first reported the investment on Sunday citing multiple sources, saying the deal had already concluded.
The move is a show of faith from three of Asia's - and the world's - biggest technology companies in fast-growing Snapdeal.
The Indian firm competes with Flipkart Online Services Pvt Ltd and the local subsidiary of Inc in the country's online shopping market, which Morgan Stanley estimates will be worth $102 billion by 2020.
Snapdeal and SoftBank were not available for immediate comment. Alibaba and Foxconn declined to comment. The person was not authorised to disclose the matter and so declined to be identified.
The deal represents Chinese e-commerce firm Alibaba's first direct investment in India. Alibaba affiliate Ant Financial Services Group in February agreed to buy 25 percent of Indian payment services provider One97 Communications.
In October, Snapdeal, which connects small businesses with customers in an online marketplace, secured a $627 million investment from Japan's SoftBank, itself an early backer of Alibaba.
Alibaba was in direct funding talks with Snapdeal in March, but opted to instead invest together with SoftBank and Foxconn, the person familiar with the $500 million investment said.
Foxconn founder Terry Gou told shareholders at an annual meeting two months ago that India is a key market this year for his group.
In March, Snapdeal Chief Executive Kunal Bahl said his company was not looking to raise money immediately and was well capitalised for the next couple of years.