Overseas Direct Investment (ODI) Compliance

Financial commitment ceiling (companies)

400% of net worth of the Indian entity (per last audited balance sheet)

LRS individual limit

USD 2,50,000 per financial year per individual (covers ODI, OPI, gifts, education, travel combined)

ODI in financial services sector

Indian entity must be regulated financial entity; RBI/SEBI/IRDAI prior approval required

Restricted jurisdictions

ODI in countries identified by FATF as high-risk requires additional RBI approvals

Valuation requirement

Investment in unlisted foreign entity must be at fair value certified by a CA or merchant banker (FEMA pricing guidelines)

APR filing deadline

31 December each year (for the financial year ended 31 March) — filed on FIRMS portal

Form ODI — Part I

Before or at the time of making the overseas investment

Filed on the FIRMS portal (Single Master Form) through the AD Category-I bank. Captures entity details, investment amount, purpose, and financial commitment computation.

Form ODI — Part II (if applicable)

Within 30 days of certain specified events

For subsequent investments in the same entity, divestment, change in ownership, or other material changes to the ODI structure.

Annual Performance Report (APR)

By 31 December each year

Captures financial performance of the overseas entity — revenue, profit, net worth, dividends declared, inter-company loans. Must be certified by a CA. Filed on FIRMS portal.

FEMA Valuation Certificate

Before each investment in unlisted overseas entity

CA or SEBI-registered merchant banker certifies that the investment is at or above FMV. Required for equity investments; not required for loans.

What changed in 2022 under the new FEMA Overseas Investment Rules?

The FEMA (Overseas Investment) Rules, 2022 (effective 22 August 2022) replaced the old FEMA (Transfer or Issue of any Foreign Security) Regulations, 2004. Key changes: (1) ODI and OPI are now clearly defined and separated (10% equity threshold for ODI); (2) "Round-tripping" restrictions tightened — Indian entity cannot invest in foreign entity which invests back into India without genuine business purpose; (3) Investments in start-ups allowed under a dedicated route; (4) APR filing date shifted from 31 July to 31 December; (5) FIRMS portal replaces the old ODI reporting system. The financial commitment ceiling of 400% of net worth remains.

Can an individual invest abroad under ODI through LRS?

Yes. Individual residents can invest in overseas companies or LLPs under the LRS (Liberalised Remittance Scheme) upto USD 2,50,000 per financial year (all purposes combined — education, travel, ODI, OPI, gifts). This investment is classified as ODI or OPI based on the equity stake acquired. The individual must file APR annually for each ODI investment through their AD bank. LRS remittances for ODI should ideally be through the same AD bank to maintain a complete investment trail.

Is round-tripping of ODI funds allowed?

No. Round-tripping — where an Indian entity invests in an overseas entity that then invests the same funds back into India — is not permitted unless the foreign entity has genuine business activities outside India and the investment back into India follows the regular FDI route. RBI scrutinises structures where a foreign entity set up by an Indian promoter holds Indian assets without any overseas business substance. Such structures can be challenged as round-tripping and may require compounding.

What is the penalty for not filing the Annual Performance Report (APR)?

Under the FEMA (Overseas Investment) Rules, 2022, failure to file the APR by 31 December is a contravention that attracts Late Submission Fee (LSF) per the RBI Master Direction on Compounding. If the APR is not filed for multiple years, the contravention can accumulate — both in terms of LSF and the risk of FEMA adjudication. RBI also blocks further investments (Form ODI) by entities with APR defaults. Regularisation through compounding on PRAVAAH is the standard remedy.