What is ODI (Overseas Direct Investment)?

How it works

It is reported in Form FC through an authorised dealer bank, a Unique Identification Number is allotted, and an Annual Performance Report (APR) is filed by 31 December.

What the 2022 rules changed

The Overseas Investment Rules and Regulations of August 2022 replaced a framework that had accumulated two decades of circulars. The central new distinction is between Overseas Direct Investment — 10% or more of equity capital, or any stake carrying control — and Overseas Portfolio Investment, which is below 10% and without control. That classification decides the reporting path, the permissible instruments, and whether an Annual Performance Report is required at all.

Limits, prohibitions and the round-tripping relaxation

Total financial commitment — equity, loans and 100% of guarantees issued — is capped at 400% of the Indian entity's net worth, with commitments beyond US$1 billion in a financial year requiring RBI approval even within that ceiling. Overseas investment in real estate business, gambling, and financial products linked to the rupee without RBI approval remains prohibited. The most consequential liberalisation was on round-tripping: structures where the foreign entity invests back into India are now permissible within a limit of two layers of subsidiaries, replacing a position that had made many legitimate holding structures unviable. Entities under investigation, or classified as wilful defaulters or non-performing assets, need a no-objection certificate before investing.

Worked example and the annual obligation

An Indian company subscribes to 100% of a Dubai subsidiary for US$2 million. Form FC is filed through the authorised dealer bank, which routes it to the RBI, and a Unique Identification Number is allotted — no further remittance is permitted until it is. Thereafter an Annual Performance Report is due by 31 December each year, based on the foreign entity's audited accounts, for as long as the investment is held. The APR is the obligation most commonly missed, and a lapsed APR blocks further remittance to the same entity and attracts Late Submission Fees.

This content is for general guidance only and does not constitute professional advice. Tax law changes frequently — verify the current position and consult a qualified Chartered Accountant before acting. Last reviewed: June 2026.