ODI / FDI
Compliance Checklist
FC-GPR · FC-TRS · FLA · APR · Form OPI

FDI (Foreign Direct Investment) involves a non-resident entity acquiring 10% or more of the post-issue paid-up equity capital of an Indian company, or making a long-term investment with the intent of participating in management. FPI (Foreign Portfolio Investment) is investment by registered Foreign Portfolio Investors (FPIs) in Indian listed securities (shares, bonds, debentures) below 10% of the company's equity — purely for capital appreciation without management participation. FDI is reported via FC-GPR and governed by FEMA NDI Rules 2019. FPI is regulated by SEBI and reported through depository channels. A foreign investor holding 10%+ in a listed company triggers reclassification from FPI to FDI category.

Yes — DPIIT-recognised startups can issue convertible notes to foreign investors under the FDI policy. A convertible note is an instrument that is initially a loan and converts to equity at a future date (on a trigger event or at investor's option). Conditions: (1) Company must be a DPIIT-recognised startup, (2) Minimum amount per convertible note: ₹25 lakh, (3) Conversion within 5 years, (4) Reporting required: File within 30 days of receipt of funds on the FIRMS portal. Convertible notes offer simplicity for early-stage FDI — no need to determine equity valuation at the time of investment. TAXAJ prepares convertible note agreements and handles FEMA reporting for startup fundraising rounds.

Share prices for FDI transactions must comply with FEMA pricing guidelines: For unlisted companies: Price must be not less than the fair value determined using internationally accepted pricing methodology (DCF — Discounted Cash Flow method is most common). A SEBI-registered merchant banker or CA must certify the valuation. For listed companies: Price must be not less than the market price on recognised stock exchange (volume-weighted average). For share transfers (FC-TRS): If non-resident is buying from resident, price must be ≥ fair value. If non-resident is selling to resident, price must be ≤ fair value. Valuation report date must be within 6 months of the transaction. TAXAJ provides FEMA-compliant valuation certificates for FDI transactions.

No prior RBI approval is needed for ODI under the automatic route, subject to conditions: (1) Indian company must be profitable in the last 3 financial years, (2) ODI amount must not exceed 400% of the net worth of the Indian company, (3) The overseas investment must not be in a company in a country on the FATF non-compliant list or in a country identified in the negative list. RBI approval (prior) is required if: (1) Total ODI exceeds 400% of net worth, (2) Investment is in a financial services sector (requires additional RBI/SEBI/IRDAI approval), (3) Investment is in a Pakistan, North Korea, or FATF non-compliant country. ODI must be reported within 30 days of remittance via Form OI through the AD bank on the FIRMS portal.

FEMA compounding is a legal process where a person who has violated FEMA provisions (by not filing FC-GPR, FLA, APR, or making unauthorised transactions) voluntarily approaches the RBI and pays a settlement amount (compounding fee) to resolve the violation without criminal prosecution. Process: (1) File a compounding application with the RBI Regional Office (for amounts up to ₹10 crore) or ED (for larger amounts), (2) RBI reviews and issues a compounding order, (3) Pay the compounding amount (typically 0.015% per day of delay on the amount involved, subject to minimum ₹5,000), (4) Violation is settled — no further action. Key point: Always compound proactively before receiving an RBI show-cause notice — self-compounding attracts significant leniency. TAXAJ has handled 50+ FEMA compounding cases and ensures minimum compounding amounts through proper application drafting.