If you are an Indian resident involved in foreign transactions – such as investing abroad, holding foreign assets, or receiving foreign funds – you are subject to the rules of FEMA: the Foreign Exchange Management Act, 1999.
But when exactly does FEMA require a person or entity to register, report, or seek approval?
This blog explains who must register under FEMA, key thresholds, and situations where reporting is mandatory even without formal approval.
Legal Reference
- Foreign Exchange Management Act, 1999
- FEMA (Overseas Investment) Rules, 2022
- FEMA (Non-debt Instruments) Rules, 2019
- RBI Master Directions and A.P. (DIR) Circulars
Who is Required to Register or Report Under FEMA?
You are required to register, report, or seek approval under FEMA if you fall into any of the following categories:
- Resident individuals or companies investing abroad under:
- ODI (Overseas Direct Investment)
- OPI (Overseas Portfolio Investment)
- LRS (Liberalised Remittance Scheme)
- Indian companies receiving FDI (Foreign Direct Investment)
- Must file Form FC-GPR, FC-TRS, and Annual Return on Foreign Liabilities and Assets (FLA)
- Start-ups issuing shares to foreign investors under automatic or approval route
- LLPs receiving FDI under automatic route as per RBI guidelines
- Residents holding foreign assets or bank accounts
- Must disclose in Schedule FA of ITR and report under LRS or ODI
- Exporters or importers transacting in foreign currency
- Must comply with FEMA rules on invoicing, repatriation, and settlement
- NPOs or NGOs receiving foreign contributions (FCRA)
- Must register under both FEMA and FCRA (Foreign Contribution Regulation Act)
Registration vs. Reporting Under FEMA
- No central registration portal under FEMA like GST or PAN
- But reporting obligations exist via:
- RBI FIRMS Portal (for ODI, FDI, LLP)
- AD Bank (for Form A2, LRS)
- FLAIR Portal (Annual FLA return)
- Income Tax Portal (Schedule FA)
Example Scenarios
- Example 1: A resident founder invests ₹2 crore in a Delaware C-Corp
- Must report under ODI and file Form FC-ODI via AD Bank
- Example 2: A start-up receives USD 100,000 from a Singapore VC
- Must file Form FC-GPR within 30 days of allotment
- Example 3: An Indian individual holds a foreign bank account from a previous job abroad
- Must disclose under Schedule FA in the ITR
Penalties for FEMA Non-Compliance
- Up to 3 times the amount involved or ₹2 lakh (whichever is higher)
- Additional ₹5,000 per day for continuing default
- Prosecution or compounding proceedings in serious cases
Conclusion
FEMA compliance is not optional for Indian residents or businesses engaged in cross-border investments or foreign asset holding. Even if no physical registration is required, timely reporting is mandatory – and often missed. Early documentation and coordination with your CA or banker avoids costly penalties.
Call to Action
Have you made or received any foreign payments, investments, or transfers recently?
Even simple transactions may trigger FEMA compliance.
Book a one-on-one consultation with Anshul Goyal, Chartered Accountant, to check your FEMA obligations and avoid penalties.
https://calendly.com/anshulcpa
Disclaimer
This blog is intended for educational purposes only and does not constitute legal or financial advice. FEMA regulations are detailed and subject to RBI notifications and circulars.
Anshul Goyal is a Chartered Accountant licensed with the ICAI, India.
Always consult a qualified FEMA advisor for case-specific compliance.
Frequently Asked Questions
1. Is there a central registration for FEMA compliance?
No. But specific filings like FC-GPR, FC-ODI, and FLA are mandatory on RBI/FIRMS portals.
2. Do I need approval to invest abroad?
Not under LRS or automatic ODI route (within limits), but reporting is mandatory.
3. Can individuals gift money abroad without registration?
Yes, under LRS up to USD 250,000 – but Form A2 must be filed via bank.
4. What happens if I forget to file FC-GPR or FLA return?
You may face penalties and lose eligibility for future foreign investments.
5. Does FEMA apply to crypto or digital asset holdings abroad?
Yes, if any foreign wallet, platform, or bank involvement exists – consult a CA.