Planning to start a business abroad as a resident Indian or invest in a foreign company from India? Or setting up a business in India with foreign shareholding?
Such transactions are regulated under FEMA (Foreign Exchange Management Act, 1999) and require registration or reporting with the Reserve Bank of India (RBI) through authorized banks.
This blog explains how to register a business under FEMA guidelines, whether outbound or inbound investment, with legal references and step-by-step process for FY 2024-25.
Legal Reference
- Foreign Exchange Management Act, 1999
- FEMA (Overseas Investment) Rules, 2022
- FEMA (Non-debt Instruments) Rules, 2019
- RBI Master Directions on ODI and FDI Reporting
When Does FEMA Apply?
You must register or report under FEMA if:
- You are an Indian resident investing in or incorporating a foreign entity (ODI or OPI)
- You are a foreign entity or NRI investing in an Indian company or LLP (FDI)
- Your Indian business receives foreign equity, capital infusion, or convertible notes
- You remit funds abroad or receive capital from outside India for business purposes
Types of FEMA-Compliant Business Registrations
- Outbound Investment (Resident Indian → Foreign Entity)
- ODI: Overseas Direct Investment (equity/control >10%)
- OPI: Overseas Portfolio Investment (non-controlling stake)
- Inbound Investment (Foreign/NRI → Indian Entity)
- FDI: Foreign Direct Investment into Indian companies
- NRI Investments in proprietary firms or LLPs (under automatic or approval route)
Documents Required (General List)
- PAN, Aadhaar (for Indian entities or individuals)
- Constitution documents: MoA/AoA, LLP Agreement, Incorporation Certificate
- Board Resolution or shareholder approval
- Valuation Report by CA or Merchant Banker (for FDI/ODI cases)
- KYC documents of foreign investor or Indian promoter
- Remittance Proof or inward SWIFT messages
- Banker’s certificate and authorized dealer (AD) bank support
Step-by-Step Guide for FEMA Registration
- For Indian Resident Investing Abroad (ODI)
Step 1: Prepare investment documents and Board Resolution
Step 2: File Form FC-ODI Part I on RBI FIRMS Portal via AD Bank
Step 3: Remit funds through Authorized Dealer using Form A2
Step 4: File FC-ODI Part II (after share allotment)
Step 5: File Annual Performance Report (APR) every year by 31st December
- For Foreign Investor in Indian Company (FDI)
Step 1: Receive inward remittance through RBI-compliant banking channel
Step 2: File Form FC-GPR within 30 days of share allotment
Step 3: Submit KYC + FIRC (Foreign Inward Remittance Certificate) via AD Bank
Step 4: If selling shares, file Form FC-TRS within 60 days
Step 5: File Annual FLA Return every year (if applicable)
FEMA Reporting Portals
- RBI FIRMS Portal: https://firms.rbi.org.in (for ODI and FDI)
- FLAIR Portal: For filing FLA returns
- Income Tax Portal: For Schedule FA disclosure in ITR
- Authorized Dealer (Bank) Portal: Form A2 and transaction support
Common Mistakes to Avoid
- Not reporting foreign investments within time limits (30/60 days)
- Using individual accounts for business remittance
- Missing annual reporting (APR or FLA)
- Structuring businesses without RBI-sectoral compliance (e.g., real estate, defense)
Conclusion
FEMA compliance is mandatory for any business engaging in foreign investment — inward or outward.
Even if no specific license is needed, timely filing of forms like FC-ODI, FC-GPR, and APR is essential to avoid penalties and future transaction blocks.
Call to Action
Planning to invest abroad or receive foreign capital in your Indian business?
Book a FEMA compliance session with Anshul Goyal, Chartered Accountant, and ensure full RBI and FEMA adherence from the start.
Visit: https://calendly.com/anshulcpa
Disclaimer
This content is for general awareness only. FEMA filing and investment rules are subject to RBI approvals, sector-specific caps, and complex foreign exchange laws.
Frequently Asked Questions
1. Is it mandatory to file FC-ODI if I start a company abroad?
Yes, for any controlling stake or equity investment made by an Indian resident.
2. What is the time limit to file FC-GPR after receiving FDI?
Within 30 days of share allotment.
3. Can individuals register a foreign company under FEMA?
Yes, but under LRS and ODI rules, and subject to investment limits and approvals.
4. What happens if I miss my APR or FLA return?
You may face RBI penalties and be blocked from future ODI/FDI filings.
5. Do freelancers need FEMA registration for earnings from abroad?
Not for service income. But if they invest overseas, ODI rules apply.