What this covers: Reporting obligations for foreign direct investment (FDI) into Indian companies and transfers of shares between residents and non-residents. Reference table for key events, applicable forms, filing timelines, and documentation requirements.
Statutory framework: Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (FEMA 20(R)); RBI Master Directions on Reporting under FEMA; FEMA 20(R) 2019.
FDI Reporting Obligations Reference Table
| Event | Form to File | Filing Timeline | Filed Through | Key Documents Required |
|---|---|---|---|---|
| **Receipt of foreign investment (new issue of shares to a foreign investor)** | **FC-GPR** (Foreign Currency, Gross Provisional Return) | Within **30 days** of issue of shares / capital instruments to the non-resident investor | Through the AD Category I Bank of the Indian investee company | Inward remittance certificate / SWIFT copy; share certificate; board resolution approving allotment; details of consideration received; valuation report (see pricing guidelines below) |
| **Transfer of shares from Indian resident to non-resident (secondary sale)** | **FC-TRS** (Foreign Currency, Transfer of Shares) | Within **60 days** of receipt of consideration by the seller | Through the AD Category I Bank of either the buyer or the seller (as applicable) | Agreement to sell / Share Transfer Form (SH-4); proof of consideration; valuation report; no-objection from Indian income tax authority (if required) |
| **Transfer of shares from non-resident to Indian resident (buy-back or transfer out)** | **FC-TRS** | Within **60 days** of receipt of consideration by the seller | Through AD Bank | Same as above |
| **Transfer of shares between two non-residents** | **FC-TRS** | Within **60 days** | Through AD Bank | Same as above |
| **Issue of shares by a Limited Liability Partnership to a foreign investor** | **LLP-I** | Within **30 days** of receipt of contribution | Through AD Bank | LLP agreement; contribution details; SWIFT/remittance proof |
| **Transfer of LLP interest** | **LLP-II** | Within **60 days** | Through AD Bank | Transfer agreement; valuation |
| **Convertible note issuance to foreign investor (DPIIT-recognised startups only)** | **Form CN** (or via the Startup India portal / RBI reporting) | Within **30 days** of issuance | Through AD Bank | DPIIT recognition certificate; terms of convertible note; remittance proof |
| **Downstream investment by an Indian company that has received FDI** | **DI Form** | Within **30 days** of making the downstream investment | Through AD Bank | Resolution of investing Indian entity; compliance with sectoral cap of the investee entity |
| **Issue of shares under ESOP to non-resident employees** | **FC-GPR** | Within **30 days** of issue | Through AD Bank | ESOP scheme; exercise price; proof of consideration |
| **Annual Return on Foreign Liabilities and Assets (FLA)** | **FLA Return** | Annually by **July 15** of each year | Filed directly on RBI portal (flair.rbi.org.in) by the Indian entity | Audited/unaudited balance sheet; FDI inflow and outflow details for the financial year |
Pricing Guidelines for FDI Transactions
| Type of Transaction | Applicable Pricing Guideline |
|---|---|
| **Primary issuance of shares (equity / CCPS / CCD) to foreign investor** | Price must not be less than the **fair market value (FMV)** as computed using the Discounted Cash Flow (DCF) method, as determined by a SEBI-registered merchant banker or a Chartered Accountant |
| **Transfer of shares from resident to non-resident** | Price must not be less than **FMV** (same DCF method or Net Asset Value method for unlisted companies) |
| **Transfer of shares from non-resident to resident** | Price must not be more than **FMV** |
| **Shares of listed company** | Price must not be less than the **SEBI guidelines for listed companies** (typically: greater of the floor price under SEBI LODR, or Volume Weighted Average Price for specified period) |
Sector-Specific Approval Requirements
| Sector | FDI Route | Ceiling | Notes |
|---|---|---|---|
| Most manufacturing and IT/Tech sectors | Automatic route | Up to 100% | No government approval; only RBI reporting required |
| Defence manufacturing | Automatic route up to 74%; Government route beyond 74% | Up to 100% | Government approval required for >74% |
| Print media | Government approval | Up to 26% | FIPB/MIB approval required |
| Insurance | Automatic route | Up to 74% | IRDAI licensing requirements apply |
| Pension sector | Automatic route | Up to 74% | PFRDA approval required |
| Real estate (not SEZ or affordable housing) | Not permitted | 0% | FDI in real estate business is prohibited |
| Multi-brand retail trading | Government approval | Up to 51% | State government concurrence required |
| Single-brand retail trading | Automatic route | Up to 100% | Sourcing conditions apply |
Common Compliance Failures
- Late FC-GPR filing: Shares issued to foreign investors but FC-GPR not filed within 30 days, extremely common; attracts compounding under FEMA
- Incorrect valuation: Shares issued at below-FMV price to foreign investor, violates pricing guidelines; requires compounding
- FLA Return not filed: Many Indian companies with foreign investment miss the annual FLA filing by July 15
- Downstream investment unreported: Indian company with FDI makes a downstream investment in another Indian company without filing the DI Form
- Sector cap violation: FDI received in a sector that requires government approval on the automatic route
Compounding of FEMA Violations
Minor FEMA violations (late filings, procedural non-compliance) can be compounded, that is, the RBI accepts a monetary payment in lieu of prosecution. Compounding applications are filed with the RBI through the AD Bank. The compounding amount is calculated based on the nature, size, and duration of the violation.
This resource is for general information purposes only and does not constitute legal advice. For advice on your specific situation, seek appropriate professional counsel.
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