FEMA compliance for a foreign subsidiary (ODI)

An Indian entity investing in a foreign subsidiary makes Overseas Direct Investment (ODI) under FEMA, governed by the Overseas Investment Rules and Regulations, 2022. The investment is reported in Form FC through an authorised dealer bank, a Unique Identification Number is allotted, and an Annual Performance Report (APR) is filed each year.

The 2022 overseas-investment framework

The Foreign Exchange Management (Overseas Investment) Rules and Regulations, 2022 consolidated the earlier ODI/OPI regime. They distinguish Overseas Direct Investment (ODI) — broadly, equity in an unlisted foreign entity or 10%+ in a listed one, or control — from Overseas Portfolio Investment (OPI). Investment is generally under the automatic route within limits, or the approval route otherwise.

Reporting and the UIN

Financial commitment and conditions

• Total financial commitment is generally capped at 400% of the net worth of the Indian entity under the automatic route (with conditions).
• Round-tripping is now permitted within limits (up to two layers of subsidiaries), subject to conditions.
• The foreign entity should be engaged in a bona fide business activity.
• Verify the current limits and layer conditions under the 2022 rules.

Practical compliance

File Form FC before/at the time of remittance, track the UIN, and file the APR based on the audited financials of the foreign entity by 31 December each year — late or non-filing of APR is a common default that blocks further remittances. Coordinate ODI with income-tax disclosure (Schedule FA) and transfer pricing on intra-group dealings.