FEMA Compliance Advisory & Review: The Process, Start to Finish
The mechanics of FEMA Compliance Advisory & Review are what clients ask about once they have decided to proceed. The questions below are the ones raised most often in practice; the full scope of the service is on the FEMA Compliance Advisory & Review page.
Why is FEMA compliance treated so much more seriously than, say, a late GST return?
Because FEMA contraventions are not resolved with a simple late fee in most cases. Serious or wilful contraventions can be referred to the Directorate of Enforcement under stricter provisions. Most contraventions are resolved through RBI's compounding mechanism rather than adjudication — but that still requires a formal application, a composition payment, and time. It is a materially higher-stakes compliance area than most domestic filings.
In practice: Contraventions are frequently procedural — a late filing or a documentation gap — rather than deliberate wrongdoing. RBI's compounding framework exists precisely to resolve these without criminal exposure. The key is addressing it proactively rather than waiting for it to surface elsewhere.
We received foreign investment two years ago and never filed FC-GPR. What happens now?
This is one of the most common gaps we find. The first step is confirming the exact allotment date and share details, then checking whether the delay qualifies for the Late Submission Fee (LSF) route — a simpler, faster, and materially cheaper regularisation mechanism RBI introduced for several categories of delayed reporting. If LSF is not available for your specific delay, a compounding application to RBI becomes the path — still resolvable, but with a longer timeline and a composition payment calculated on RBI's prescribed formula.
In practice: Delaying the fix because it seems complicated or expensive to address is a mistake. The earlier a contravention is regularised, the less disruptive it is likely to be to a funding round or other transaction timeline.
Our Authorised Dealer bank flagged an issue with a past remittance. Should we wait for RBI to contact us, or act now?
Act now. Once an AD bank flags an issue, it typically means the matter is already under some form of internal escalation or will be reported upward as part of the bank's own regulatory reporting obligations to RBI. Voluntarily initiating a compliance review and, where needed, a compounding application before RBI formally raises the matter is treated more favourably in practice than waiting to be contacted — and it puts you in control of the narrative and timeline rather than reacting to RBI's.
In practice: Approaching compounding voluntarily and proactively is generally preferable to waiting until a formal notice arrives.
What is the Entity Master on the FIRMS portal, and why does PNPC check it first?
The Entity Master is the foundational profile of a company on RBI's FIRMS (Foreign Investment Reporting and Management System) portal — it must be correctly created and updated before any FC-GPR, FC-TRS, or other reportable transaction for that entity can be filed. If the Entity Master was never set up, or was set up with incorrect details, every subsequent filing attempt either fails or gets recorded against an inaccurate profile. We check this first because it is a prerequisite gate — fixing downstream filings is pointless if the foundational entity record itself is broken.
In practice: We have found Entity Master registration missing entirely in companies that received FDI years ago through advisors who filed forms manually with the AD bank without ever completing the FIRMS portal setup that became mandatory later. This is an easy check to skip and a costly one to discover late.
How does RBI's pricing guideline actually work for share issuance to a foreign investor?
Under the Non-Debt Instruments Rules, shares issued by an Indian company to a person resident outside India must be priced at or above the fair value of the shares, determined using an internationally accepted pricing methodology on an arm's length basis — most commonly the Discounted Cash Flow (DCF) method — and certified by a Chartered Accountant, a SEBI-registered Merchant Banker, or a practising Cost Accountant. This is a floor price, not a fixed price — you can issue above fair value, but not below it. The certificate must be dated appropriately close to the transaction, since valuations are time-sensitive.
In practice: A common and costly error: using a valuation report that is many months old for a transaction happening much later, without updating it. Business fundamentals change, and RBI/AD banks can question a stale valuation being applied to a current transaction. We recommend a fresh or refreshed valuation for any allotment happening more than a few months after the report date.
We are an Indian company setting up a subsidiary in Dubai. What FEMA obligations apply?
This is Overseas Direct Investment (ODI), governed by the Foreign Exchange Management (Overseas Investment) Rules, 2022. Key obligations: the investment must be within the financial commitment limit tied to your entity's net worth, reported via Form FC at the time of investment, and followed by an Annual Performance Report (APR) filed by 31 December each year for as long as the overseas entity exists. Disinvestment, restructuring, or write-off of the overseas investment also carries its own reporting obligation.
In practice: APR is the filing most frequently missed once the initial excitement of overseas expansion settles into ongoing operations. We set this on the client's compliance calendar at the time of the initial ODI filing — not as an afterthought.
Our company has never had any foreign shareholding, but we pay a consultancy fee to an overseas vendor. Does FEMA still apply to us?
Yes. FEMA governs all cross-border transactions, not just equity investment. Outward remittances for services, royalty, technical fees, or consultancy are current account transactions — generally freely permitted under FEMA, but still subject to documentation requirements (including Form 15CA/15CB (Forms 145 and 146 under the Income-tax Rules 2026) on the income-tax side, which runs in parallel) and to sectoral or transaction-specific restrictions in certain cases. The review scope for a company with only this kind of exposure is narrower, but not zero.
In practice: We right-size the review to your actual transaction profile. A company with only occasional current-account remittances needs a much lighter-touch review than one with FDI, ODI, and ECB exposure — and we quote accordingly rather than applying a one-size engagement.
How long does a full FEMA compliance review typically take?
For a company with a moderate transaction history — a handful of FDI rounds, no ODI or ECB — a full review, findings report, and remediation of straightforward gaps takes less time than for companies with more complex histories (multiple funding rounds, overseas subsidiaries, ECBs, layered group structures); confirm the expected timeline at scoping. If compounding is required for any identified gap, that adds RBI's own processing timeline on top, which PNPC does not control.
In practice: We give an honest, transaction-specific timeline estimate after the initial scoping call rather than a generic promise — the actual duration depends heavily on how many years of records need to be reconstructed and how many transactions are involved.
Can this review be done confidentially, without alerting our bank or RBI that we are checking our own compliance?
Yes, up to the point where remediation requires an actual filing or compounding application. The review itself — document collation, FIRMS portal check, pricing and route verification — is an internal advisory exercise between you and PNPC and does not involve notifying the bank or RBI. Only when remediation requires an actual filing (a backlog FC-GPR, an LSF payment, or a compounding application) does the process necessarily involve the AD bank and, for compounding, RBI itself.
In practice: We are careful about this distinction in the scoping call — clients often want to understand their exposure before committing to any filing action, and that is a legitimate and common first step. The review phase carries no disclosure obligation to any regulator.
Where this sits in the wider engagement
FEMA Compliance Advisory & Review rarely arrives on its own. The statutory basis and the current requirements are set out on the FEMA Compliance Advisory & Review service page, and the related services are grouped under Fema Rbi.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On FEMA Compliance Advisory & Review we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.