Foreign Direct Investment (FDI) in India – Reporting & Compliance

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In this article I will try to give some insights on the Procedural aspects like remittance, issuance of shares and Reporting/Compliance to RBI (Reserve Bank of India), with the help of a case study.

FDI In India – Basics – methods of investment, who can invest  & entry routes available. 

Each subscriber to the Memorandum of Association  (MoA) of the company (Private or Public), after its incorporation shall be required to deposit minimum subscription money (i.e. first subscription money) as specified in the Memorandum of Association (MoA) against share capital in the Company’s bank account. The subscriber may be a body corporate (company incorporated outside India) or foreign national or PIO/NRI/OCI holder.  In that case an Indian Company receiving investment from either of the above parties should report the details of amount of consideration to the Regional office of Reserve Bank of India (RBI) within whose jurisdiction the office is situated and comply with the rules and regulations as specified in Foreign Exchange Management Act (FEMA) under Foreign Direct Investment Policy.

A case study :-

ABC Private Limited, a company incorporated in Mumbai having two shareholders, one is Mr. A, an individual holding 200 equity shares of Rs. 10 each and other is ABC Inc. (a body corporate) situated in USA, holding 9800 equity share of Rs. 10 each. Hence the total paid up capital of ABC Private Limited  is Rs. 1 Lakh. After incorporation, ABC Inc. has remitted Rs.  98000 to ABC Private Limited towards issue of Equity shares to ABC Inc.

I) Information to be provided by ABC Inc. :

ABC Inc.’s bank will provide following information to Authorised dealer * (AD) of ABC Pvt.Ltd. while remitting amount.

a) Name of the beneficiary : e.g. ABC Private Limited

b) Name and place of the remitter : e.g. ABC Inc. USA

c) Name and place of remitter bank : e.g. ABC Inc’s Bank

d) Foreign currency amount : e.g. INR 98000

e) Purpose of remittance : e.g. Foreign Direct Investment in Equity

An authorised dealer after receipt of remittance and above information, will initiate the process of issuing FIRC (Foreign Inward Remittance Certificate) to ABC Pvt. Ltd.

Authorised Dealer – Authorised dealer means a Institute/Bank authorized as an authorized dealer under sub-section (1) of section 10 of FEMA.

II) Reporting of advance remittance by ABC Pvt.Ltd. to RBI

After receipt of FIRC, ABC Pvt. Ltd. shall be required to report inward remittance to RBI, Mumbai through an authorized dealer which would involve following activities :

Reporting of Inflow to Reserve Bank of India within 30 days from the date of remittance.

a)      To file FIRC (Foreign Inward Remittance Certificate) to the Reserve Bank of India through an Authorised Dealer. The FIRC must contain the purpose i.e. towards Share application money/ towards FDI in India in Equity.

b)     To submit an Advance reporting form and KYC (Know Your Customer) report.  This can be obtained from an authorized dealer from banker of ABC Inc.

The RBI will allot Unique Identification number to ABC Pvt. ltd which can be used for future transactions with the Bank.

III) Issue of Shares by ABC Pvt. Ltd. to ABC Inc. 

ABC Pvt. Ltd. shall be required to issue equity shares/ Convertible Preference shares/ Debentures within 180 days from the date of remittance. After issue of shares, it shall be required to file Form FC-GPR [Foreign Collaboration-General Permission Route] to RBI (Regional Office : Mumbai) within 30 days from the date of issue of shares. This form is to be signed by Managing Director/ Director/ Secretary of the company and submitted to the Authorised dealer. This FC-GPR shall be filed along with certificate from Company Secretary certifying that all the requirement of the Companies Act, 1956, have been complied with. A certification from Statutory Auditor or Chartered Accountant indicating the manner of arriving at the price of shares issued to the person outside India.

After complying with the provisions of FDI Policy, the RBI will send ABC Pvt. ltd. an acknowledgment towards the same.

IV) Subsequent Remittances

In case of subsequent remittance, an Indian Company shall follow the same procedure of reporting of foreign inward remittance to RBI and also file e-Form 2 (Return of allotment) to the Registrar of Companies (RoC) within 30 days from the date of allotment of equity/ preference/ debenture to any foreign national or body corporate. Before filing e-form 2 with the RoC, the company shall be required to obtain valuation report from a Chartered Accountant who will determine the share valuation price as per discounted cash flow (DCF) method.

Note :

1.  Depending upon the nature of activity of Indian company, one should check whether approval of RBI is needed (i.e. approval route) before investment or it is not required  (i.e. under Automatic route).

2. The latest/updated FEMA Forms can be found on the RBI Website here.

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Legal Disclaimer:
The information / articles & any replies to the comments on this blog are provided purely for informational and educational purposes only & are purely based on my understanding / knowledge. They do not constitute legal advice or legal opinions. The information / articles & any replies to the comments are intended but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as a legal advice or an indication of future results. Therefore, I can not take any responsibility for the results or consequences of any attempt to use or adopt any of the information presented on this blog. You are advised not to act or rely on any information/article contained without first seeking the advice of a Practicing Professional.

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290 thoughts on “Foreign Direct Investment (FDI) in India – Reporting & Compliance

  1. worth reading your blog

    My client is wholly owned subsidiary company of foreign company. Foreign company has transferred fund to subsidiary for investment in capital of subsidiary company. further foreign fund converted through transfer wise transferred in INR to HDFC bank and then in ICICI bank(subsidiary co holds ac). now HDFC is denying to issue FIRC certificate as money received to them in INR. do i need to file FC-GPR???
    Please guide me in this regard

  2. Dear Ma’m,

    My Company has been incorporated in 2011. Earlier its FIRCs were filed by their AD bank, as an additional service to their clients. Then they changed their Banker, as that AD Bank got closed.
    I conducted a search and have all the PAS-3/ Form 2 filed for allotment of shares.

    My query: Is there any way we can find out the ARFs/ FC-GPR filed by the previous AD Bank on behalf of the Company w.r.t. Issue of Share capital?
    (How to get RBI related data?)

    As I have to file a Compounding application for this Company.

    • Since earlier i.e.before 2016 ARF and FCGPR form were to be submitted physically so if company have any physical record it is easy to search for previuos document. otherwise there is no solution. Otherwise you may approach AD bank and request.

  3. A company was incorporated in January 2018 and the subscription money to MOA is received in March 2018. Meanwhile, the company held its first board meeting in February 2018, allotted the shares as per MOA subscription and issued the share certificates prior to receipt of subscription money.

    In this case for the purpose of FCGPR, can the date of allotment be prior to the date of receipt of funds??

    • After receipt of initial subscription, the share certificates should have been issued to initial subscribers of Memorandum of Association and not before that. This is non compliance as per Company law and FEMA Act.

  4. Query:

    company issued share of rs 700000 at 120( value including premium 110) Rs.84000000 to NR, but inward remittance amount Credited 8,39,99,891. department raise the comment(share cannot be issued more than inward remittance can u please guide me how i can proceed with and reply to department

    and also i m getting delayed to compliance due to firc and kyc delayed from banker side.

  5. Indian subsidiary company is incorporated on 11-11-2017 and company need to issue Rs 1,00,000 share capital to subscriber of MOA and remittance received of Rs. 99,729.60 on 28-12-2017. Money short Rs. 270.40 due to conversion of currency. and balance money of Rs 270.40 is received on 09-02-2018.The ARF form for money received on 28-12-2017 is filed on 23-01-2018.
    Please tell me what allotment date could be decided so that sec 56(4) of companies act 2013 and fcgpr time limit both complied

    • As per my view, the share certificates should have been issued for full amount before 60 days from date of incorporation. The company shall issue two separate share certificates for Rs 99729.60 and Rs 270.40 and accordingly report to RBI while submitting FCGPR.

  6. In case NRI shareholder renounce his Rights share of a listed company in favour of resident and vice versa, should company has to file FC-TRS as renounce is tantamount to transfer ? What is the procedure ?

  7. Hello Ma’am,

    Need your help to understand, What should be the Post Issue Pattern for Wholly owned subsidiary of Foreign co.? where one share is held by Resident as nominee to comply with the requirement of two shareholders.

    If I mention 99.99% shareholding on Foreign company’s name and 1 share on resident name, like how we show in MGT-7, but RBI is raising query that ” The shareholding of Foreign co is not matching with their record”

    So need your suggestion for the same

  8. Madam,

    thank for your valuable updates.

    Please guide on following.

    Mr. X holding shares in indian Company as resident shareholder and now shifted to UK and become resident of UK as present status in india is non-resident

    1. What complainace to be made to be made under FEMA ?

    2. Does Company need to file Statement of Foreign Assets and Liablities ?

    3. any other guidance to give effect.

    • If there is NRI (When he started residing in UK) investment in Indian company then company shall report to RBI about foreign remittance towards equity shares. Yes the company shall be required to file FLA with RBI every year till he is shareholder.

  9. Dear Madam,

    Remittance made through NRE account in our case and Bank has provided FIRC and KYC for it. Should we have to file ARF and FC GPR Form ?

  10. Is this necessary to file ARF in case subscription money received from the foreign company(subcriber to MOA) is on non-repatriation basis?

  11. Hi ma’am,

    Reporting of ARF is for the amount of Rs. 100050 and allotment amount is Rs. 100000.
    While filing Form FC-GPR, an error is showing that the form is incomplete because of the difference amount.
    Kindly suggest what shall be the way out in this case??

    • While submitting ARF form clarification of extra remittance of Rs 50 to be mentioned and then FCGPR with Rs 1 lakh to be filed. Then there won’t be any query.
      Now if ARF with extra amount is filed with RBI, then while submitting FCGPR, please give explanation about extra remittance and file it with RBI.

  12. Hi Ms. Meenal, How to report the inward remittance from an NRI, if the investment is made from his NRE/NRO account, as in such cases the AD is not providing the FIRC & KYC. what options are available to the Investee company in such cases.

    • For remittance through NRE or NRO account i.e. remittance in rupees, FIRC and KYC will not be required. FIRC and KYC will be required only in cases where remittance is in foreign currency. Therefore reporting to RBI will not be required in such case. Normal issue of shares will be done as per Company law.

  13. Hi Meenal,

    If shares are transferred from NR to NRI and payment is done through NRE account of NRI, do we need to do the below compliances:
    1. Filing of FC-TRS – Is it required to be filed?
    2. Valuation of shares – Is it required and under which method?
    3. Can the transfer be done at face value of INR 10 or it has to be done through valuation?


  14. ma’am

    1-what are the provisions in relation to the non receipt of inward remittances (subscription money) in case of newly incorporated company from the foreign shareholder within the applicable time period????????????

    2–and please tell me the time frame applicable with regards to the receipt of inward remittance by foreign shareholder????????

    3–can a foreign shareholder bring inward rremittances after expired time after paying penalty to the RBI??????????

    • 1. The company shall file application to RBI about non receipt of inward remittance describing facts of the case , reason of delay etc.
      2. within 2 months from date of incorporation of private ltd company
      3. yes.

  15. dear mam,
    my company is a joint venture of an Indian and Italian company, in the month of July we made a right issue of shares. our foreign investor brings excess money.
    now we have to refund the excess amount.
    kindly provide a checklist to refund the excess money.

  16. Hi Mam,

    Can u brief the process of FDI reporting by LLP. One newly formed LLP has two partners- one Indian n one foreigner. Foreigner has transferred his contribution towards capital from abroad. What’s the process of reporting the same to RBI?

  17. Hi.. Ms.Meenal,

    I must congratulate you for the nice blog. I have a querry about my client.

    Company incorporated in Dec, 2015 with 5,00,000 Eq.Shares out of which Non Resident subscriber to MOA was allotted 4,99,999 shares and 1 share is held by Indian Subscriber.

    Subscription received in August, 2016. AFR filing delayed and started on 10-10-16 but completed on 02-09-2017 due to various reasons. FCGPR filing is yet to be done.

    Shares were alloted in Sept, 2016 after receiving the subscription. Thereafter, further money received from the foreign subscriber towards right issue of shares.

    AFR procedure for the amounts received towards right issue is yet to be carried out and is under process.

    Want to ask :

    1 whether FCGPR needs to be filed separately for subscription to MOA and right issue or one FCGPR can be filed for all subsequent right allotment alongwith initial subscription.

    2. Any adverse remark about delay in receiving subscription to MOA need to be mentioned in Company Secretary’s certificate?

    3. Even if its subscription to MOA, CA certificate is required for issue of shares at PAR?

    Your valuable guidance will help me to decide further course of action.

    Thanks in advance.


    • Thank you for your comment.
      Answers to your queries:- 1) Company needs to file separate FCGPR after receipt of each funds in intervals. 2) Yes, CS should mention in his certificate that compliance as per Company law is not done or if there is delay in receipt of funds due to bank, CS should mention the facts of the case for delay in filing FCGPR. Also Directors should report facts of delay to RBI while filing delay FCGPR. 3) CA certificate is required for first subscription as well as for further subscription. Because share certificates are issued on the basis of valuation done by CA.

  18. As per Notification No. FEMA 205/2010-RBI dated 07 April 2010, Valuation has to be done by a SEBI Category – I Merchant Banker or a Chartered Accountant as per the Discounted Cash Flow (DCF) method. However, in the given case, shares are being issued to the Foreign Party which is one of the subscribers to the memorandum. The company is a JV Company and it is newly incorporated. This is the initial allotment of shares. So can we value the shares at Face Value instead of Fair Value arrived at by Discounted Cash Flow method?

  19. Good writing, keep going.

  20. A non-resident non-resident has not remitted the investment funds due to some issues in the banking channels and the remittance get delayed but the shares are already been allotted to the non-resident by the Company.
    But the subscription money was received after the allotment is done.
    Here is there any non-compliance?

    • As per Company law, the shares shall be alloted to subscriber after receipt of share application money. The process which company has already completed is not as per Company law. This is non compliance and not legal procedure.

  21. Dear Madam,

    We have received FDI in the form equity from an entity in excess of the authorized capital in a private limited company. The excess amount is due to exchange fluctuation. Do we need to return the excess money to the foreign entity?

  22. Hello Mam,

    Company is incorporated on 22-12-2016

    In a company there is a 3 directors in which 2 directors are NRI with 47.5% and 47.5 % shareholding and 1 is indian director is with 5% shareholding and they are subscriber to the memorandum and bank account is open in April but 1 foreign investor could not deposits funds in a bank account .. how will complience is full fill

  23. can foreign direct investment be used for repayment of loan?

  24. Hi Ms Meenal,

    This is with regards to KYC and FIRC of my Investor,

    I am getting delayed from the bankers side for KYC and FIRC unable to submit it with in 30 days to RBI , How do i take extension for submitting the docs

  25. A pvt. Ltd. Co. incorporated in Dec. 16. There are two Subscribers to MOA one Indian & other an NRI. The NRI has paid the subscription money by taking laon from Indian Subscriber in Indian Rupees. Whether payment of subscription money allowed under FEMA regulations?

    • Subscriber of MOA should deposit subscription money individually. NRI person should deposit the money from his NRI account or rupee account and taking loan from Indian subscriber is wrong procedure. Then after receipt of money, Indian company should file ARF and FCGPR with RBI.

  26. Hi Meenal, in this case he is saying that money recd in May and August’2014.when the full amount received in August how can the allotment took place in June?

  27. thanks Maam!!
    If Pvt Ltd Co received money (40%) in May 2014 & 60% in Aug 2014 towards issue of equity share and Filed return with ROC in Dec 2014 and in Return shown Share Allotted in June 2014.
    whether any non- compliance under FEMA/RBI?
    since above shows that part money received in May and Balance in Aug but shares allotted in May 2014 but Return filed with ROC in Dec 2014..Please advise

    • AS per FEMA, Indian company shall report advance reporting within 30 days of receipt of funds and file FCGPR within 30 days of issue of share certificate. If the company fails to comply,it shall be liable for penalty for late filing of ARF and FCGPR. In this case, the company not filed ARF and FCGPR, then RBI will take action and issue show cause notice to company’s director.

      • Hello ma’am,

        We have filled AFR on time,but GC-GPR is yet to be filled as ebiz show error of not matching shareholding.

        My question is do we need to show whole inflow by IPO, Or only Foreign investment is need to be shown.

        Please guide, we are already running late.

        • In ARF shareholding of foreign remittance is to be specified. in FCGPR whole shareholding ( means Indian +Foreign remittance) shall be mentioned. It should match as per MOA AOA Subscription pages. Otherwise RBI normally raises query.

  28. Where would i get NIC code for bussiness to fill in FCGPR E-form?

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