What is FEMA compliance, and who needs it?
Any Indian company or LLP with a non-resident shareholder, partner or lender needs FEMA compliance, and so does any Indian entity that invests abroad. FEMA does not ban foreign investment. It regulates it: most investment is allowed under the automatic route, provided the sectoral cap, pricing rules and reporting timelines are met. In practice, FEMA compliance for companies is a reporting discipline. The RBI keeps a record of who owns what in India through the forms you file, and your Authorised Dealer (AD) bank checks each one before it goes through.
You are in scope if any of these apply:
- A foreign parent or investor holds shares in your Indian private or public company, even one share, even through a Singapore, Mauritius or Netherlands holding company.
- Your LLP has a non-resident partner who contributed capital.
- You borrow from abroad, including an intercompany loan from your parent (an external commercial borrowing).
- Your foreign-owned company invests in another Indian entity (downstream investment).
- You operate a branch, liaison or project office of a foreign company.
- You invest outside India (overseas direct investment) or export goods and services.
NRIs and OCIs investing on a non-repatriation basis are treated as domestic investors for most purposes: such investment is "deemed domestic investment", the pricing guidelines do not apply to it, and a transfer between a non-repatriation holder and a resident does not need FC-TRS. Investment on a repatriation basis is reported like any other foreign investment. See our FEMA rules for NRI investors.
The FEMA & RBI compliance checklist (with deadlines)
Use this as your master list: each row is one obligation, what triggers it and the deadline the RBI's Master Direction on reporting sets. The table above summarises the fee position; this one adds the practical detail.
| # | Obligation | Applies when | Deadline | Practical note |
|---|---|---|---|---|
| 1 | FIRMS entity master | Entity has received or expects foreign investment | Before first SMF filing | Users who will file must be set up too. Delays here are the most common reason a 30-day FC-GPR window is missed. |
| 2 | Entry route and sectoral cap check | Before accepting money | Pre-transaction | Government-route sectors need approval first. So does any investor from, or beneficially owned from, a country sharing a land border with India. |
| 3 | Valuation certificate | Any issue or transfer to or from a non-resident (repatriation basis) in an unlisted company | Not more than 90 days old on the investment date | CA, SEBI-registered merchant banker or practising cost accountant (merchant banker for swaps). |
| 4 | Allot shares | After receiving the money | Within 60 days of receipt | Otherwise refund within 15 days after the 60 days; paying Companies Act interest does not cure the FEMA breach. |
| 5 | Form FC-GPR | Issue of equity instruments counted as FDI | 30 days from issue | Includes bonus/rights, sweat equity, ESOP-exercise shares and convertible-note conversions. |
| 6 | Form PAS-3 (MCA) | Allotment under a private placement | 15 days from allotment (s.42(8), Companies Act 2013) | Different clock from FC-GPR. Diarise both on the allotment date. |
| 7 | Form FC-TRS | Resident/non-resident transfer (repatriation basis) | 60 days from transfer or funds, whichever earlier | With deferred consideration, file on receipt of every tranche. |
| 8 | Form DI | Foreign-owned or foreign-controlled entity invests downstream | 30 days from allotment | 30 days from reclassification if your company becomes foreign-owned after investing. |
| 9 | Form ESOP / Form CN / Form InVi | ESOPs to non-residents; convertible notes; units of an investment vehicle | 30 days | Form CN also applies to transfers of convertible notes. |
| 10 | FDI-LLP (I) / (II) | LLP capital contribution / transfer | 30 days / 60 days from receipt of funds | LLP route only in 100% automatic-route sectors with no FDI-linked conditions. |
| 11 | FLA return | Outstanding FDI or ODI at end-March (current or previous year) | 15 July | Provisional figures allowed; revise with RBI approval after audit. |
| 12 | Form ECB 1 / Revised Form ECB 1 | Raising or changing an ECB | LRN before drawdown / 7 calendar days after month-end of change | Filed through the designated AD bank, never FIRMS. |
| 13 | Form ECB 2 | ECB proceeds received or debt serviced | 7 calendar days after month-end | See the ECB section below on months with no movement. |
| 14 | Form FC, APR, Form OPI | Overseas investment | FC at remittance/commitment; APR 31 December; OPI 60 days after half-year end | Until a reporting delay is regularised, the AD bank will not allow further outward remittances or financial commitments. |
| 15 | Annual Activity Certificate | Branch / liaison / project office | 30 September | With audited accounts incl. receipt and payment account. |
| 16 | LEI | Any FEMA transaction of ₹50 crore or more | Before the transaction | Once obtained, quote it on every transaction. |
| 17 | Export realisation | Exports of goods, software or services | Nine months (twelve for rupee-invoiced exports from 1 October 2026) | Two regimes around 1 October 2026 (see below). |
Want this as a working calendar rather than a table? Our compliance calendar service and the annual FEMA reporting calendar set out the full year, alongside ROC and tax dates in our annual compliance package.
FEMA compliance calendar: the fixed annual dates
Only a few FEMA dates are fixed in the calendar. Most deadlines run from the date of a transaction, so a calendar alone is not enough.
| Date | Filing | Who |
|---|---|---|
| 31 March | Reference date for the FLA return (positions as at end-March of this and the previous year) | Companies and LLPs with FDI/ODI |
| 15 July | FLA return on FLAIR | Companies and LLPs with outstanding FDI/ODI |
| 30 September | Annual Activity Certificate with audited accounts | Branch and liaison offices |
| 31 December | APR for each foreign entity | Indian entities with ODI |
| 7 calendar days after the relevant month-end | Form ECB 2 (proceeds received / debt serviced) and Revised Form ECB 1 (parameter changes); see the ECB section on cadence | ECB borrowers |
| Half-year end + 60 days | Form OPI | Indian entities with overseas portfolio investment |
Everything else is event-driven. The FC-GPR clock starts on the allotment date, FC-TRS on the transfer or payment date, and Form DI on the downstream allotment date. That is why companies that rely on a once-a-year review miss them.
FC-GPR: how the 30-day filing works
FC-GPR is due within 30 days of issuing shares or other equity instruments to a person resident outside India, and it is filed in the Single Master Form on FIRMS.
- Money in. The investor remits through banking channels; the receiving bank performs KYC and issues a FIRC.
- Valuation. The issue price is at or above fair value on a certificate no more than 90 days old on the investment date.
- Allotment within 60 days of receipt, backed by the board resolution and, for a private placement, the offer letter and the PAS-3 return.
- FC-GPR on FIRMS within 30 days of allotment, with the FIRC, KYC, valuation certificate and the declarations the form requires.
- AD bank review. The bank approves, returns the form for correction, or rejects it. A returned form is still your responsibility. The delay runs until a complete return is filed.
If the money came from someone other than the person who gets the shares (for example, a group treasury company paying for a sister entity), the FC-GPR must also carry KYC of both, the remitter's no-objection letter, an explanation from the beneficial owner and the board resolution approving the arrangement. For a portal walk-through, see how to file FC-GPR on the FIRMS portal and our FC-GPR filing guide; for the difference between the two main forms, FC-GPR vs FC-TRS.
FC-TRS: transfers between residents and non-residents
FC-TRS is due within 60 days of the transfer or of the receipt or remittance of funds, whichever is earlier, and the resident party carries the filing obligation. It covers sales, gifts and other transfers between a non-resident holding on a repatriation basis and a resident, or a non-resident holding on a non-repatriation basis. A buy-back by an Indian company in an NCLT-approved merger, demerger or amalgamation scheme is also reported in FC-TRS. Where part of the price is deferred (escrow, earn-out, holdback), FC-TRS is filed on receipt of every tranche. See our guide to deferred consideration under FEMA and secondary sales of Indian startup shares.
What are the FEMA pricing guidelines and valuation rules?
Foreign money can come in at fair value or above and leave at fair value or below; for an unlisted company, fair value comes from a certificate that is no more than 90 days old.
| Transaction | Price rule | Who can certify (unlisted) |
|---|---|---|
| Issue of shares to a non-resident | Not less than fair value | CA, SEBI-registered merchant banker or practising cost accountant |
| Transfer resident → non-resident | Not less than fair value | Same |
| Transfer non-resident → resident | Not more than fair value | Same |
| Convertible instruments, warrants | Price or formula fixed upfront; conversion not below fair value at issue | Same |
| Swap of equity instruments | Valuation required irrespective of amount | SEBI-registered merchant banker, or investment banker registered abroad |
| Subscription to the MoA on incorporation | At face value | Not required |
| LLP capital contribution / profit share | Not less than fair price (inbound); not more (outbound) | CA, practising cost accountant or approved valuer |
| Investment on a non-repatriation basis | Pricing guidelines do not apply | — |
Two common misconceptions: a CA-certified valuation is acceptable under FEMA for an unlisted company (the merchant-banker requirement is for swaps), and a put option cannot guarantee the non-resident an assured exit price. They exit at the price prevailing at the time. More detail: FEMA share issuance pricing rules and valuation report under FEMA.
Downstream investment: Form DI and the auditor certificate
If your Indian company is foreign-owned or foreign-controlled, every investment it makes in another Indian entity is indirect foreign investment, and it must file Form DI within 30 days of allotment. "Ownership" means more than 50% of the equity; "control" means the right to appoint a majority of directors or to control management or policy decisions. A company that is either is a FOCC. Conditions that trip companies up:
- The investee must itself meet the entry route, sectoral cap, pricing and performance conditions as if the investment were direct FDI.
- The funds must come from abroad or from internal accruals (post-tax profits transferred to reserves), not from money borrowed in India.
- The downstream investment needs board approval and, if there is one, must follow the shareholders' agreement.
- The first-level company must obtain an annual certificate from its statutory auditor confirming compliance down the chain, and mention it in the directors' report. A qualified certificate must be reported to the RBI regional office.
- If your company becomes foreign-owned or controlled after investing, the earlier investment becomes downstream investment from that date and must be reported in Form DI within 30 days of the reclassification.
See how to report downstream investment.
The FLA return: 15 July, not 31 July
The annual return on Foreign Liabilities and Assets is due on 15 July every year for every company and LLP with outstanding FDI or ODI at end-March of the reporting year or the year before. Several websites still quote a 31 July date or a fixed 30 September date for the revised return. The RBI's current texts do not. Its reporting Master Direction and its FLA FAQ (updated 1 July 2026) both say 15 July. If the audit is not finished, file on provisional figures by 15 July. After the audit, you request permission on the FLAIR portal and file the revised return. The FAQ asks entities to revise as soon as audited accounts are available, whatever the size of the difference. No financial statements are attached; the return is filed online on FLAIR. A late FLA return attracts the flat ₹7,500 Late Submission Fee. More: FLA return deadline, process and penalties.
ECB reporting: Form ECB 1, Revised Form ECB 1 and Form ECB 2
Borrowing from a foreign parent or lender needs a Loan Registration Number (LRN) before any money is drawn, and returns afterwards through your designated AD Category-I bank. The Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 (Notification FEMA 3(R)(5)/2026-RB, 9 February 2026) set out three forms:
- Form ECB 1 gives the ECB details and obtains the LRN. The borrower may draw down only after the LRN is allotted.
- Revised Form ECB 1 reports any change in the reported ECB parameters within seven calendar days from the end of the month in which the change took effect.
- Form ECB 2 reports "receipt of ECB proceeds and debt servicing, within seven calendar days from the end of the month in which the proceeds were received or debt servicing was undertaken", and "any event or transaction that alters the outstanding borrowing under an LRN".
Two points of practice. First, the reporting rules in the 2026 amendment also apply to loans that already had an LRN before it came into force. The old terms of those loans continue, but reporting follows the new rules. Second, readers will find both "monthly return" and "file only for months with a drawdown or repayment" descriptions of Form ECB 2. The regulation ties the deadline to the month of the event, and the RBI's reporting form refers to receipts and payments "during the reporting period". We confirm the expected cadence with your AD bank for each LRN rather than assume either way. A borrower that fails to submit its returns for four consecutive quarters or more after the quarter in which a drawdown or repayment was scheduled, and that the AD bank then cannot reach or find operating at its registered office, is treated as an untraceable borrower and reported to the RBI and the Directorate of Enforcement. For the wider framework (limits, maturity, cost), see the 2026 ECB framework and lending from a parent to an Indian subsidiary.
The FIRMS portal, the Single Master Form and the LEI
FIRMS (Foreign Investment Reporting and Management System, firms.rbi.org.in) is where inbound-investment forms are filed; nothing can be filed until the entity master is in place. The Single Master Form brings together FC-GPR, FC-TRS, DI, ESOP, CN, the LLP forms and InVi. Your AD bank verifies each submission and the RBI's system records it. ECB returns and the FLA return are not on FIRMS. Glossary: FEMA reporting through the SMF on FIRMS.
The Legal Entity Identifier is a separate requirement. Under A.P. (DIR Series) Circular No. 20 of 10 December 2021, from 1 October 2022 AD banks must obtain an LEI from resident non-individual entities for any FEMA capital or current account transaction of ₹50 crore or more per transaction. An entity that already has an LEI must report it on all its transactions. A large funding round, acquisition or loan can therefore stall at the bank if the LEI is missing, so we check it during the health check.
Late Submission Fee or compounding: which applies, and what does it cost?
A filing that is up to three years late can usually be regularised by filing it with a Late Submission Fee. Beyond three years, or for problems other than late reporting, the route is compounding. The LSF matrix is in Part XIII of the RBI's reporting Master Direction, introduced by A.P. (DIR Series) Circular No. 16 of 30 September 2022 and amended by Circular No. 25 of 30 March 2026:
- Flat ₹7,500 for returns that do not capture flows: the FLA return, the APR / Form ODI Part II, Form OPI, and (since the 2026 amendment) Form ECB 1 and Revised Form ECB 1.
- ₹7,500 + (0.025% × A × n) for transactional returns: FC-GPR, FC-TRS, Form ESOP, the LLP forms, Form CN, Form DI, Form InVi, Form ODI Parts I and III, Form FC and Form ECB 2. A is the amount involved (for Form ECB 2, the gross inflow or outflow including interest and charges, whichever is more). n is the years of delay, rounded up to the nearest month and expressed to two decimals. The fee is per return (each delayed Form ECB 2 now counts separately), and it is capped at 100% of A.
- The RBI issues an advice for the fee. If it is not paid within 30 days the advice lapses, and a later request is calculated from the new date. The LSF option lasts three years from the due date; after that you are exposed to penal action unless you compound.
Worked example
A Delaware parent subscribes ₹4 crore of equity in its Indian subsidiary. The company allots the shares on time but files FC-GPR 5 months and 10 days after the 30-day deadline.
- Delay rounded up to the nearest month: 6 months, so n = 0.50.
- Variable part: 0.025% × ₹4,00,00,000 × 0.50 = ₹5,000.
- LSF = ₹7,500 + ₹5,000 = ₹12,500.
The same delay discovered at three and a half years is outside the LSF window. Under the RBI's compounding guidance note, a reporting contravention on an amount between ₹1 crore and ₹10 crore is indicated at a fixed ₹10,000 plus ₹50,000 per year, taken proportionately. That is about ₹1,85,000, plus the ₹10,000 application fee and GST, and months of process. The RBI can vary the amount with the facts of the case, but the difference is why we look for gaps early.
| Situation | Route | What you do |
|---|---|---|
| Reporting delay, under 3 years from due date | Late Submission Fee | File the return, pay the LSF against the RBI's advice within 30 days |
| Reporting delay, over 3 years | Compounding | File the pending return (administrative action), then apply to compound |
| Shares allotted or money refunded after the 60-day window | Compounding | Complete allotment/refund, then compound (matrix row 3) |
| Pricing breach, route or cap breach, unapproved transaction | Compounding (if eligible) | Obtain approvals or unwind, then compound (matrix row 5) |
| Amount not quantifiable, s.37A cases, or an adjudication order already passed | Not compoundable by the RBI | Adjudication / appeal route |
How does FEMA compounding work?
Compounding lets you admit a contravention and settle it with the RBI for a sum, instead of facing adjudication. Under the Master Direction on Compounding of Contraventions (22 April 2025) the RBI must pass its order within 180 days of a complete application.
- Apply physically or through the RBI's PRAVAAH portal, with the ₹10,000 application fee plus GST, the transaction details (Annex II) and an undertaking about Directorate of Enforcement proceedings (Annex III).
- Complete the corrective action first. That means pending filings, approvals, valuation certificates, or unwinding the transaction. The RBI will not process the application until it is done.
- Pay the compounded sum within 15 days of the order. If you do not, it is treated as though you never applied.
- A similar contravention committed within three years of one already compounded cannot be compounded again.
- April 2025 changes: the 50% uplift for re-applying after not paying an earlier order was deleted (Circular No. 02 of 22 April 2025). For "all other non-reporting contraventions" (row 5 of the matrix), the compounding authority may cap the amount at ₹2,00,000 per regulation or rule contravened (Circular No. 04 of 24 April 2025). This cap is discretionary and does not apply to reporting delays.
More: RBI compounding of FEMA contraventions, FEMA penalties and the compounding process and the ten most common FEMA violations.
Export realisation: two regimes either side of 1 October 2026
If your Indian entity exports software or services to its parent, FEMA requires the full export value to be realised and repatriated within a set period. The rules change on 1 October 2026.
- Exports up to 30 September 2026: nine months from the date of export, under the Master Direction on Export of Goods and Services (updated 17 July 2026). SOFTEX declarations continue under this regime.
- From 1 October 2026: the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 replace the 2015 regulations. As amended by Notification FEMA 23(R)(1)/2026-RB of 22 September 2026, the period is nine months from shipment (goods) or from the invoice date (services), and twelve months where the export is invoiced or settled in Indian rupees. Project exports follow the contract. The AD bank can extend the period on a reasoned request.
- Also from 1 October 2026, service and software exporters declare exports on the Export Declaration Form (EDF) within 30 days from the end of the month in which the invoice was raised. One EDF can cover all recipients billed that month, and exporters of services other than software may instead file it on or before the date payment is received. For software, the AD bank or STPI is the specified authority in the domestic tariff area; SEZ units file with the Development Commissioner.
An intercompany receivable that sits unpaid past the period is a FEMA issue as well as a transfer-pricing one. See RBI export and import regulations 2026 and SOFTEX form.
Branch, liaison and project offices; overseas investment
A branch or liaison office's main annual FEMA filing is the Annual Activity Certificate, due with audited accounts by 30 September. It goes to the designated AD Category-I bank, with a copy to the Director General of Income Tax (International Taxation), New Delhi. Where there are several offices, a nodal office files a combined certificate. See branch office vs liaison office and closing a liaison or branch office.
If your Indian company invests abroad, report the investment in Form FC at the time of remittance or commitment, whichever comes first. The APR for each foreign entity is due by 31 December under the Overseas Investment framework, and disinvestment is reported within 30 days of receiving the proceeds. Until a reporting delay is regularised, your AD bank will not allow further outward remittances or financial commitments towards a foreign entity. See APR for ODI.
Country notes for foreign parents
- United States: US parents often fund through a Delaware entity and assume their US accounting firm covers India. It does not. FC-GPR, FLA and FC-TRS are Indian filings made by the Indian company, and the 30-day and 15-July clocks run whatever the US reporting cycle. See a US SaaS subsidiary case.
- United Kingdom, Canada, Australia: the reporting is identical. What differs is the treaty position on dividends and interest leaving India, which needs a Tax Residency Certificate and Form 41 (formerly Form 10F). See our DTAA guide.
- Singapore and Mauritius holding companies: the holding company is the investor on FC-GPR. The land-border rule looks through it to the beneficial owners, so ownership charts need to go all the way up. See a Singapore VC investing in an Indian startup.
- UAE: the UAE is not a Hague Apostille Convention party, so corporate documents for the AD bank go through consular attestation rather than apostille. UAE business case.
- Investors with any link to China or another land-border country: investment by an entity or citizen of a country that shares a land border with India, or where the beneficial ownership sits there, needs government approval. Beneficial ownership is tested using the Prevention of Money-laundering Act thresholds and a control test. A later change in beneficial ownership that brings an existing investment within the rule also needs approval. Where an investor has some land-border ownership but falls below those tests, no approval is needed, but the investment is subject to reporting requirements specified by the RBI. See Press Note 3.
Common FEMA compliance mistakes we fix
- Filing PAS-3 and forgetting FC-GPR. The two run on different clocks (15 days for a private placement under the Companies Act; 30 days under FEMA).
- Allotting late. Shares must be issued within 60 days of receiving the money. Paying Companies Act interest on a late refund does not cure the FEMA breach.
- Using a stale valuation. The certificate must be no more than 90 days old on the investment date.
- Skipping the FLA return because nothing changed. It is due every year while FDI or ODI is outstanding at either end-March.
- Missing FC-TRS tranches on deferred-consideration deals, and missing Form DI when a foreign-owned company invests downstream or becomes foreign-owned after investing.
- Using domestic borrowings to fund downstream investment, when the rules require funds from abroad or internal accruals.
- Treating ECB 2 as a FIRMS form, or assuming old loans are outside the 2026 reporting rules.
- Letting the three-year LSF window lapse. The same delay then costs far more to compound.
- Not holding an LEI before a ₹50 crore-plus transaction.
Real scenarios: what happens when an FC-GPR deadline is missed. Raising a round? See fundraising compliance and FDI advisory; taking money out, see dividend repatriation.
Why use Beacon Filing for FEMA compliance?
We handle FEMA reporting for foreign-owned companies and LLPs as an ongoing service, with the deadlines checked against the RBI's current texts. You get a reconciled FEMA file, a calendar built around your transactions, filings prepared and followed through with your AD bank, and plain-English advice on whether a past gap is a Late Submission Fee case or a compounding case, with the arithmetic shown. Tell us about your structure and your last funding round, and we will tell you what is outstanding.
Need help with this?
Schedule a free consultation with our team. We will walk you through the process, timeline, and costs specific to your situation.
This article is for general information only and is not legal, tax, or investment advice. Confirm current rules with the relevant authority or a qualified professional — or ask our team. See our full disclaimer.