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India Cross-Border Compliance
FEMA and RBI Compliance Services in India
Money crossing India's border creates a reporting obligation almost every time. Some obligations are triggered by a transaction, some recur every year whether anything happened or not. The second kind is what companies miss.
- Inbound, outbound and borrowing in one place
- A dated annual compliance calendar
RBI ReportingFiled on FIRMS & FLAIR
- 45+years of cross-border advisory
- 500+FEMA filings completed
- 3jurisdictions: India, UAE, Singapore
- 150+entities under annual compliance retainer
Quick Answer
What are FEMA and RBI compliance services?
FEMA compliance covers the reporting an Indian entity owes the Reserve Bank when money crosses the border. It divides into event-driven filings, such as Form FC-GPR within 30 days of allotting shares to a foreign investor, and recurring annual filings, such as the FLA return by 15 July and the Annual Performance Report by 31 December.
The five things worth knowing before anything else
- The obligation sits with the Indian entity, not with the foreign investor and not with the bank.
- Annual filings recur whether or not there was any transaction that year. This is where most contraventions come from.
- A late filing is regularised by a Late Submission Fee for up to three years. A substantive breach is regularised by compounding.
- Exposure under Section 13 of FEMA is calculated on the amount involved, not on the length of the delay.
- The external commercial borrowing framework was substantially liberalised in February 2026, which changes the debt-versus-equity calculation for foreign parents funding Indian subsidiaries.
This page is the whole of FEMA: inbound investment, outbound investment, borrowing and the annual cycle. For inbound FDI compliance in depth, including the full reporting map and the pricing rules, see FDI compliance and FEMA advisory in India.
Regulatory Scope
What FEMA actually governs
FEMA divides cross-border money into two categories and regulates them differently. Current account transactions are generally free. Capital account transactions, which change assets or liabilities outside India, are permitted only as the rules allow and are reported.
| Family | What it covers | Governing rules |
|---|---|---|
| Inbound investment | Foreign direct investment into an Indian company or LLP, and transfers of those instruments afterwards. | FEM (Non-Debt Instruments) Rules, 2019 and the Mode of Payment and Reporting Regulations, 2019. |
| Outbound investment | Indian entities and residents investing in foreign entities, whether as Overseas Direct investment or Oversear Portfolio Investment. | FEM (Overseas Investment) Rules and Regulations, 2022. |
| Borrowing and lending | External commercial borrowings, trade credits, and rupee lending across the border. | FEM (Borrowing and Lending) Regulations, as amended in February 2026. |
| Immovable property and other assets | Acquisition and transfer of property in India by non-residents, and overseas property by residents. | FEM (Non-Debt Instruments) Rules and the property regulations. |
Two portals, and they are not connected
Event-driven inbound filings go through the FIRMS portal. The annual FLA return goes through FLAIR. Outbound filings go through the AD bank on the OID application. These are separate systems with separate registrations, and being registered on one does not register you on another.
Discovering in the second week of July that the company has never been registered on FLAIR is a familiar problem, and it is entirely avoidable.
Obligation Mapping
Which obligations apply to your entity
Most entities carry two or three of these, not all of them. The quickest way to scope the work is to answer four questions about what has ever happened, rather than what happened this year.
| If the entity has | Event filings | Recurring filings |
|---|---|---|
| Received foreign investment, ever | Entity Master, Form FC-GPR on each issue, Form FC-TRS on each transfer | Annual FLA return by 15 July, every year, permanently |
| Foreign ownership above 50 percent or foreign control | Form DI on any investment into another Indian company | As above, plus the downstream position reviewed annually |
| Granted options to anyone resident outside India | Form ESOP within 30 days of issue | Half-yearly reporting where the parent's plan is involved |
| Invested in a foreign entity | Form OI Part I within 30 days of remittance or guarantee | Annual Performance Report by 31 December |
| Borrowed from a non-resident lender | Form ECB before drawdown, to obtain the loan registration number | Form ECB-2 monthly return |
| Transactions with the foreign parent or group | Not a FEMA filing | Form 3CEB transfer pricing certification with the tax return |
The question that catches people out
Not "did anything happen this year" but "has anything ever happened". A company that took foreign investment once, five years ago, and has been quiet since, still owes an FLA return every 15 July. So does a company whose foreign shareholder sold out three years ago, if foreign investment sat on the balance sheet at any point in the year being reported.
Foreign Subsidiaries
RBI compliance for foreign subsidiaries
An Indian subsidiary of a foreign parent carries a distinct set of obligations, because it is simultaneously a recipient of foreign investment, a foreign owned and controlled company, and usually a party to related-party transactions with its own parent. Foreign subsidiary compliance in India runs on three tracks at once.
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As a recipient of FDI
Entity Master registration, Form FC-GPR within 30 days of each allotment including every capital top-up from the parent, and the annual FLA return by 15 July for as long as the foreign holding exists.
A valuation is required for every issue after incorporation, not just the first external round.
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As a foreign owned and controlled company
Any investment the subsidiary itself makes into another Indian company is a downstream investment. It must comply with the sectoral caps that would apply to a direct foreign investment into that target, Form DI is due within 30 days, and the funds cannot come from borrowing.
Groups treat a second Indian entity as an internal reorganisation. Under FEMA it is not.
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As a related party
Service fees, royalties, cost-plus arrangements and interest paid to the parent all sit inside transfer pricing. Form 3CEB certification is required, and thin capitalisation under Section 94B caps the interest deduction once payments to a non-resident associated enterprise exceed the threshold.
The three filings a foreign subsidiary misses most
The FLA return. Calendar driven, no transaction to prompt it, recurs forever.
Form FC-GPR on the second tranche. The first subscription at incorporation is at face value with no valuation, so the second is treated the same way. It cannot be.
Form DI on a second Indian entity. Not recognised as a reportable event because nothing about it feels like foreign exchange.
Compliance Calendar
The annual FEMA compliance calendar
Dated obligations first, because those are the ones with no transaction to trigger a reminder. Event-driven filings follow. Both are set out in full so a finance team can lift this straight into a compliance tracker.
Recurring obligations by date
| Due | Filing | Applies to |
|---|---|---|
| 7th of every month | Form ECB-2 return | Any entity with an outstanding external commercial borrowing, for the previous month. |
| 15 July | Annual FLA return, on FLAIR | Every entity that has received foreign investment or holds foreign assets or liabilities, reporting the position as at 31 March. Filed on provisional figures if accounts are not yet audited, and revised later. |
| 30 September | Form DIR-3 KYC | Company law rather than FEMA, but every director of an Indian subsidiary holding a DIN. Included because it is missed alongside the FEMA calendar. |
| 31 December | Annual Performance Report, Form OI Part II | Every Indian entity holding an overseas direct investment, for the accounting period ended on or before the preceding 31 March. |
| Half-yearly | Overseas portfolio investment reporting | Reported through the Indian entity within the prescribed window after each half-year end, including where the foreign parent's stock plan is extended to Indian employees. |
| With the income tax return | Form 3CEB | Any entity with international related-party transactions. |
Diarise the two annual returns first
15 July and 31 December carry no transaction to prompt them and no bank to chase them. Between them they account for the majority of FEMA contraventions we see in health checks, and both take a few hours to file when the underlying records are in order.
Filings triggered by a transaction
| Trigger | Filing | Deadline |
|---|---|---|
| Before any inbound filing | Entity Master registration on FIRMS | One-time, before the first filing |
| Receipt of subscription money | Allot shares against it | Within 60 days, or refund within the following 15 |
| Issue of equity instruments to a non-resident | Form FC-GPR | 30 days from allotment |
| Transfer between a resident and a non-resident | Form FC-TRS | 60 days from transfer or receipt of consideration, whichever is earlier |
| Downstream investment by a foreign owned company | Form DI | 30 days from allotment |
| Foreign investment into an LLP | Form LLP-I | 30 days from receipt |
| Disinvestment from an LLP | Form LLP-II | 60 days from receipt of funds |
| Options granted to a person outside India | Form ESOP | 30 days from issue |
| Convertible notes issued by a startup | Form CN | 30 days |
| Overseas direct investment or guarantee | Form OI Part I | 30 days from remittance or issue of the guarantee |
| Signing an external commercial borrowing | Form ECB, to obtain the loan registration number | Before drawdown |
Inbound Investment
Inbound: foreign investment into India
Four questions decide whether an inbound investment is compliant: is it permitted, is it priced correctly, was it reported on the right form inside the window, and what recurs afterwards.
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Permissibility and pricing
The sector and cap determine whether approval is needed. Beneficial ownership traced to a land border country overrides the sectoral position. Equity issued to a non-resident cannot be priced below fair market value, certified by a merchant banker or a chartered accountant in practice.
Automatic route vs government approval · Press Note 3 and land border countries · Pricing and valuation
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Reporting and recurring obligations
Entity Master first, then Form FC-GPR within 30 days of each allotment with the inward remittance certificate, investor KYC, valuation certificate, board resolution and company secretary certificate. Form FC-TRS on any later transfer. Then the FLA return every 15 July.
Outbound Investment
Outbound: Indian entities investing abroad
The Overseas Investment Rules and Regulations of 2022 consolidated a framework that had been spread across several instruments. They also drew a clearer line between direct investment, which carries control or a strategic stake, and portfolio investment, which does not.
| Point | Position |
|---|---|
| Financial commitment limit | Up to 400 percent of the Indian entity's net worth per its last audited balance sheet, under the automatic route. |
| Resident individuals | Investment abroad within the Liberalised Remittance Scheme limit of USD 250,000 per financial year, for equity capital. |
| Initial reporting | Form OI Part I through the AD bank within 30 days of the remittance or the issue of a guarantee. |
| Annual reporting | Annual Performance Report by 31 December each year, for the accounting period ended on or before the preceding 31 March, based on the foreign entity's audited accounts. |
| Portfolio investment | Reported separately on a half-yearly basis, including where employees in India hold shares of a foreign parent under a stock plan. |
| Disinvestment | Reported within the prescribed window, with the sale proceeds repatriated inside the period the rules allow. |
The APR depends on someone else's audit
The Annual Performance Report is prepared from the foreign entity's audited financial statements. Where the overseas company is small, in a jurisdiction with a later audit cycle, or run by a joint venture partner, those accounts routinely arrive after the Indian team needs them.
The 31 December deadline does not move to accommodate that. Groups that ask for the foreign accounts in October rather than December file on time; those that ask in December do not.
Borrowing & Lending
Borrowing from abroad, after the February 2026 reforms Updated
The external commercial borrowing framework was substantially rewritten by the Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026, notified on 9 February 2026 and gazetted on 16 February 2026. Guidance describing the previous regime is now materially wrong, and the change matters to any foreign parent weighing debt against equity.
| Area | Previously | Now |
|---|---|---|
| Eligible borrowers | Tied to whether the sector was open to FDI. | Any person resident in India other than an individual, incorporated under a central or state law, including entities in restructuring or insolvency resolution, subject to disclosure. |
| Eligible lenders | Limited to FATF and IOSCO compliant jurisdictions. | Broadened to include overseas branches of RBI-regulated entities and financial institutions in an International Financial Services Centre. Indian bank branches abroad may lend in rupees or foreign currency. |
| Borrowing limit | A single prescribed annual ceiling. | The higher of USD 1 billion in outstanding borrowings or 300 percent of the borrower's net worth. |
| Minimum average maturity | Varied by category and end use. | Standardised to three years, with one to three years permitted for manufacturing borrowers up to a specified outstanding amount. |
| All-in-cost ceiling | A prescribed spread over a benchmark. | Removed entirely. Pricing is left to commercial negotiation, and caps on prepayment charges and penal interest were also removed. |
| End-use restrictions | A restrictive negative list. | Relaxed, including acquisition financing, a wider set of real estate activities such as industrial parks and townships, and distressed acquisitions under the insolvency framework. |
Reporting on an external commercial borrowing
- Form ECB is filed through the AD bank before drawdown, to obtain the loan registration number. No money may be drawn until the number is allotted.
- Form ECB-2 is a monthly return of actual transactions, due by the seventh of the following month, for as long as the borrowing is outstanding.
- Changes to the terms of the borrowing are reported to the AD bank and, where required, to the Reserve Bank.
What this means for a foreign parent funding an Indian subsidiary
Debt from a parent used to sit under a cost ceiling that made it unattractive relative to equity in many cases. With the ceiling removed, the maturity standardised and the borrower eligibility widened, borrowing is a more realistic option than it was, and the comparison against a compulsorily convertible debenture or fresh equity should be run again rather than assumed from a previous decision.
What has not changed is that genuine debt is not FDI. It is reported on Form ECB and the monthly ECB-2 return, not on Form FC-GPR, and an instrument reported under the wrong framework is a contravention from the date it was issued.
Regularisation
If a filing has been missed
Most FEMA problems are fixable. Which route applies depends on whether the failure is one of timing or of substance, and how old it is.
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Late Submission Fee
Available where the only failure is that a form was filed late, for up to three years from the original due date. It regularises the position without any adjudication, and it is computed as a fixed component plus a percentage of the amount involved for each year of delay, capped at the amount involved.
The fee grows with time, so the arithmetic favours filing today over filing after the next board meeting.
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Compounding
Required where the failure goes beyond timing: shares allotted outside the 60 days of receipt of consideration, an issue below fair value, a downstream investment funded by borrowing, a debt instrument reported as FDI, or any filing more than three years late.
Under the Foreign Exchange (Compounding Proceedings) Rules, 2024, notified on 12 September 2024, the application fee is INR 10,000 plus GST, an order must issue within 180 days, and the amount is payable within 15 days of the order.
Voluntary disclosure is treated better than discovery
Compounding is a voluntary process, and a disclosure made before the contravention is detected is treated more favourably than one made after an enquiry has begun. Waiting does not improve the position, and Section 13 exposure is calculated on the amount involved rather than the delay, which is why a small unreported tranche from years ago can carry a number out of all proportion to the transaction.
It is also why a buyer will not close on an entity with an open FEMA position rather than price the risk. The compounding timeline of up to 180 days sits directly across most deal timetables.
Diligence Readiness
The FEMA health check
A structured review of every cross-border event in an entity's history against what should have been filed. Two to three weeks, and the most useful piece of work available to a company that has never had the position examined end to end.
Build the transaction history
Every inward remittance, allotment, transfer, option grant, downstream investment, overseas investment and borrowing since incorporation, reconstructed from bank statements, the share register, board minutes and the portal records.
Map each event to the filing it required
Filed, filed late, or not filed, with the acknowledgement for each one that was made.
Test the substantive position
Sector and route at the date of each investment, pricing against fair value, instrument characterisation, FOCC status and downstream investments, the funding source for each, and the ECB position where applicable.
Quantify and route the exposure
Which gaps are curable by Late Submission Fee, which require compounding, and an estimate of the cost of each. This is the output a board or an acquirer actually needs.
Regularise and put a calendar in place
File what is outstanding, submit the compounding application where one is needed, and hand over a dated filing calendar so the position does not drift again.
The right time is twelve months before a transaction
Regularisation takes weeks for a late filing and up to 180 days for a compounding order, and a buyer's timetable rarely accommodates either. A health check run early is a cost. The same work run inside a live deal is a discount on the price.
Common Pitfalls
Where FEMA compliance fails
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The bank was assumed to be filing
The remittance arrives, the bank issues an inward remittance certificate, and everyone treats that as the reporting. The bank's role ends at the certificate. The filing obligation sits with the Indian entity and nobody else.
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Filing stopped when the transactions stopped
A company raises a round, files its FC-GPR correctly, and hears nothing more. The FLA return recurs every 15 July regardless. Five quiet years produce five contraventions, none of which anyone noticed.
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The APR waited for accounts that never came
The Annual Performance Report needs the overseas entity's audited accounts. They arrive in January, or not at all where a joint venture partner controls the audit. The 31 December deadline does not move.
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The instrument was reported under the wrong framework
An optionally convertible instrument, or one with an assured return, reported on Form FC-GPR as FDI. It is debt, belonging under the ECB framework with a loan registration number and a monthly return. The contravention runs from the date of issue and compounds each year.
Why IMC
How IMC handles FEMA and RBI compliance
What the engagement covers
Ongoing compliance held on retainer: Entity Master and FIRMS registration, every event-driven filing as it arises, the annual FLA return, the Annual Performance Report, the monthly ECB-2 return where applicable, and a dated filing calendar maintained on the client's behalf.
Advisory alongside it: route and permissibility checks before an investment, instrument classification, pricing and valuation coordination, downstream investment analysis, and the debt versus equity comparison under the revised ECB framework.
Where something has been missed: a full FEMA health check, Late Submission Fee filings, and preparation and conduct of compounding applications.
What to have ready before the first call
Whether the entity has ever received foreign investment, ever invested abroad, or ever borrowed from a non-resident. Whether it holds shares in any other Indian company. Whether options have been granted to anyone outside India. And whether an FLA return has ever been filed. Those five answers size the work in an hour.
Meet The Team
Experts behind this service
The people who will actually run your branch or liaison office approval, end to end.
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Shriya Mandal
Director - Compliance
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Deepakshi Sukhwani
Senior Associate - Corporate Services
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Mudita Gehlot
Senior Associate - Corporate Services
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Poornima J
Director - Strategic Partnerships & Business Development
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Ninad Parkar
Director
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Aishwarya Shiva
Director - Strategic Partnerships & Business Development
FAQs
Advisory and filing services covering the reporting an Indian entity owes the Reserve Bank when money crosses the border. That includes event-driven filings such as Form FC-GPR and Form OI, recurring annual filings such as the FLA return and the Annual Performance Report, and regularisation where something has been missed.
The Indian entity. The authorised dealer bank processes the remittance and issues the inward remittance certificate, and it may flag a missing filing, but it has no obligation to make one and it will not do so. Assuming the bank is handling FEMA reporting is the single most common cause of unfiled forms.
The filings that recur every year regardless of activity. The FLA return by 15 July for any entity with foreign investment on its balance sheet, the Annual Performance Report by 31 December for any entity holding an overseas investment, the monthly Form ECB-2 where a borrowing is outstanding, and half-yearly portfolio investment reporting where it applies.
Yes. The obligation follows the existence of foreign investment on the balance sheet, not any transaction during the year. A company that took investment once, years ago, still files every 15 July. It is filed on provisional figures where the accounts are not yet audited and revised afterwards.
Three tracks at once. As a recipient of FDI: Entity Master, Form FC-GPR on every allotment, and the annual FLA return. As a foreign owned and controlled company: Form DI on any investment into another Indian company, funded from abroad or from accruals rather than borrowing. As a related party: transfer pricing and Form 3CEB.
By 31 December each year, for the accounting period of the foreign entity ended on or before the preceding 31 March. It is prepared from the overseas entity’s audited financial statements, which is why groups that request those accounts in October file on time and those that request them in December do not.
The Borrowing and Lending Amendment Regulations notified on 9 February 2026 widened eligible borrowers beyond FDI-linked sectors, broadened eligible lenders, raised the limit to the higher of USD 1 billion outstanding or 300 percent of net worth, standardised minimum average maturity at three years, and removed the all-in-cost ceiling entirely.
Registration is the one-time step of getting the entity onto the relevant portal, principally the Entity Master on FIRMS, without which no inbound filing can be made. Compliance is everything after that: the event-driven filings, the annual returns, and the substantive rules on permissibility and pricing that sit behind them.
A filing that is merely late can be regularised by paying a Late Submission Fee, available for up to three years from the due date. A substantive contravention, or a filing more than three years late, is regularised by compounding with the Reserve Bank under the Compounding Proceedings Rules, 2024.
An order must be issued no later than 180 days from receipt of a complete application, and the amount is payable within 15 days of the order. The application fee is INR 10,000 plus GST. Voluntary disclosure before detection is treated more favourably than disclosure after an enquiry has begun.
A review reconstructing every cross-border event since incorporation, mapping each to the filing it required, testing the substantive position on permissibility, pricing, instrument characterisation and downstream investment, then quantifying the exposure and routing each gap to either a Late Submission Fee or compounding. Typically two to three weeks.
Around twelve months before any transaction, not during one. Regularisation takes weeks for a late filing and up to 180 days for a compounding order, and no acquirer will close on an entity holding an open FEMA position. Run early it is a cost; run inside a live deal it becomes a reduction in price.
Get Started
Find out where the position stands
Tell us whether the entity has ever received foreign investment, invested abroad or borrowed from a non-resident, and whether an FLA return has ever been filed. We will come back with what is outstanding, what it will cost to regularise, and how long it will take.
Response within one working day. Initial position review at no cost.
IMC