FDI & ODI Structuring Advisory (FEMA/RBI): Who Needs It and Who Does Not
Whether FDI & ODI Structuring Advisory (FEMA/RBI) applies to a given business is the first thing worth settling, and it is where most of the early questions land. The questions below are the ones raised most often in practice; the full scope of the service is on the FDI & ODI Structuring Advisory (FEMA/RBI) page.
What is the 'automatic route' versus 'government route' for FDI?
Under the automatic route, a foreign investor can invest in an Indian company without prior RBI or government approval — the company simply reports the investment to RBI after the fact via FC-GPR. Under the government route, prior approval from the concerned administrative ministry (routed through the Foreign Investment Facilitation Portal) is mandatory before the investment can be made. Most sectors in India are on the automatic route; a defined list of sectors — including defence beyond specified limits, print media, multi-brand retail, and a few others — require government route approval, along with any investment from an entity or citizen of a country sharing a land border with India, other than the limited case eased by Press Note 2 (2026): an investor incorporated outside those countries whose land-border beneficial ownership is non-controlling and up to 10%, which can go through the automatic route with a report to DPIIT.
In practice: We check the current sector classification against the latest Consolidated FDI Policy and any DPIIT press notes at the time of each transaction — sector caps and conditions do get revised, and relying on an old reference is a recurring source of avoidable delay.
What is a valuation report and why is it mandatory for FDI transactions?
FEMA pricing guidelines require that shares issued to a non-resident, or transferred by a resident to a non-resident, be priced at or above fair value (and shares transferred from a non-resident to a resident at or below fair value), determined under an internationally accepted pricing methodology, certified by a SEBI-registered Merchant Banker or a practising Chartered Accountant. This protects against under-pricing (which could disguise a disallowed capital transfer) and ensures the transaction is at arm's length. The valuation report is a mandatory attachment to the FC-GPR filing.
In practice: We coordinate a valuation methodology that satisfies both the FEMA pricing guideline and, where the same transaction has income-tax implications, Rule 11UA of the Income-tax Rules — structuring one report to serve both purposes wherever the methodologies align, rather than commissioning two separate reports.
What is the Annual Performance Report (APR) and who must file it?
The APR is an annual filing required from every Indian party that has made an ODI, for each overseas entity in which it holds equity, reporting the entity's financial performance based on its audited financial statements (or other prescribed certification where local audit is not statutorily required in that jurisdiction). It is due by 31 December each year, for as long as the overseas entity exists and the Indian party holds equity in it.
In practice: APR is the single most commonly missed ODI compliance item we encounter — clients often complete the initial Form FC filing correctly and then assume the FEMA obligation is a one-time event. It is not; it is an annual recurring filing until the overseas entity is closed or the stake is fully divested.
What is the FLA Return and who needs to file it?
The Foreign Liabilities and Assets (FLA) Return is an annual return filed directly with RBI (not through the AD bank) by every Indian company that has received FDI and/or made ODI in the current or any previous year — including years with no new transaction, as long as the foreign investment or overseas investment remains outstanding on the company's balance sheet. It is due by 15 July each year, based on the previous financial year's audited or provisional figures.
In practice: FLA is entity-level and recurring — separate from the transaction-specific FC-GPR or Form FC filings. We add it to every client's compliance calendar the moment they complete their first FDI or ODI transaction, so it is never missed in a later year when the original transaction is no longer top-of-mind.
Can an NRI invest in an Indian private company, and does it require special approval?
Yes. NRIs (Non-Resident Indians) can invest in Indian companies on a repatriation basis under the same FDI framework applicable to other foreign investors, subject to the same sector caps and pricing guidelines. NRIs also have a specific option to invest on a non-repatriation basis under Schedule IV of the FEMA (Non-Debt Instruments) Rules, which is treated as domestic investment for most purposes and is not subject to the sectoral caps applicable to repatriable FDI, though certain restrictions on borrowed funds and specific prohibited sectors still apply.
In practice: Whether to structure an NRI investment as repatriable or non-repatriable is a genuine strategic choice, not a formality — it affects future exit flexibility, sectoral cap consumption, and reporting requirements. We walk NRI investors through this trade-off explicitly before the investment is made, not after.
What is the government fee for FC-GPR or Form FC filings?
RBI does not levy a specific government fee for filing FC-GPR or Form FC through the FIRMS/SMF portal in the ordinary course. Costs that do arise are: professional fees for structuring, valuation, and filing assistance; the valuer's fee for the mandatory valuation report; and, where relevant, the Late Submission Fee if a filing is delayed beyond the prescribed window, or compounding fees if a formal contravention has occurred.
In practice: We provide a written, fixed-fee scope for the structuring and filing engagement before work begins — separate and itemised from the third-party valuer's fee, so clients see exactly what each cost component covers.
Can a foreign investor be a director of the Indian company they are investing in?
Yes. Foreign nationals, including the foreign investor itself if it nominates an individual, can be appointed as a director of the Indian investee company, subject to the Companies Act's requirement that at least one director be a person who has stayed in India for a specified minimum period in the previous calendar year. This is a Companies Act requirement, separate from and in addition to the FEMA investment compliance covering the equity itself.
In practice: We coordinate the director appointment (DIN, DSC, apostilled documents) alongside the FDI structuring so both workstreams close together, rather than treating governance appointments as an afterthought to the funding round.
Can an Indian resident individual invest in a foreign company personally, outside of a corporate ODI structure?
Yes, within the Liberalised Remittance Scheme (LRS), which allows a resident individual to remit up to a specified annual limit for permitted current and capital account transactions, including investment in shares and debt instruments of a foreign entity. This is a distinct, individual-level route from corporate ODI, has its own annual limit and reporting mechanics through the remitting bank, and does not require Form FC/UIN allotment in the same way corporate ODI does, though certain overseas investment structures under LRS by resident individuals were also brought within the scope of the 2022 Overseas Investment framework depending on the nature of the investment.
In practice: Founders sometimes plan to make an overseas investment personally under LRS to avoid corporate ODI paperwork — this is workable for smaller, portfolio-style investments, but for setting up or controlling an operating foreign entity, the LRS annual limit and the specific conditions applicable to individual ODI under the 2022 rules should be checked carefully before assuming it is the simpler route.
What is a step-down subsidiary and how does it affect ODI reporting?
A step-down subsidiary is a subsidiary of the overseas entity the Indian party has directly invested in — for example, an Indian company sets up a US subsidiary (first-level ODI), and that US subsidiary in turn sets up its own subsidiary in Singapore (step-down/second-level structure). The Overseas Investment Rules 2022 require this multi-layer structure and the financial commitment at each level to be disclosed and reported, and impose conditions on the number of permissible layers and the overall financial commitment ceiling relative to the Indian party's net worth.
In practice: Multi-layer overseas group structures are common for IT/services companies building a global holding structure — we map the full step-down chain at the outset of the first ODI filing, since retrofitting compliance for an undisclosed step-down layer discovered later is materially more complex than disclosing it correctly from the start.
Where this sits in the wider engagement
FDI & ODI Structuring Advisory (FEMA/RBI) rarely arrives on its own. The statutory basis and the current requirements are set out on the FDI & ODI Structuring Advisory (FEMA/RBI) 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 FDI & ODI Structuring Advisory (FEMA/RBI) we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.