AS | Ankit Sarawagi|Founder, CFOmatrix·September 2026·10 min read | FEMA & FDI |
You set up a US subsidiary to sign enterprise customers, or a Singapore holding company for your next round. Money moved out of India, and with it came a FEMA obligation that does not end when the wire clears. It comes back every single year, and almost everyone forgets it.
Overseas direct investment (ODI) is how an Indian company or resident invests abroad, and it is one of the most quietly mishandled corners of FEMA. The one-time reporting is straightforward: you file Form FC through your AD bank, you get a UIN, you submit share certificates within six months. The part that gets missed is the recurring one, the Annual Performance Report (APR), due by 31 December every year. This guide covers the Overseas Investment (OI) Rules, 2022 framework, when ODI applies to a startup, and why the APR deserves a hard reminder in your calendar.
- What it is
- Overseas direct investment: an Indian party investing in a foreign entity’s capital, under the OI Rules, 2022.
- First filing
- Form FC to your AD bank at or before the investment to get a UIN for the overseas entity.
- Evidence
- Share certificates or other proof of investment to the AD bank within 6 months.
- Annual filing
- APR by 31 December, one per overseas entity, CA-certified, via the AD bank.
- If you miss it
- Next ODI blocked, Late Submission Fee (LSF) or compounding, and a FEMA contravention on record.
1 What is overseas direct investment (ODI)?
Overseas direct investment is when an Indian company or an Indian resident invests in the equity capital, or other permitted instruments, of a foreign entity. It is the mirror image of FDI: FDI is money coming into India, ODI is money going out of India into a business abroad. Both sit under FEMA, but ODI is governed by its own framework, the Foreign Exchange Management (Overseas Investment) Rules and Regulations, 2022, which replaced the older ODI regime.
The OI Rules draw a line between two things:
- Overseas Direct Investment (ODI): an investment that gives you a lasting interest, typically 10% or more of the equity of a foreign entity, or control, or any investment in an unlisted foreign entity. This is the bucket a startup’s foreign subsidiary usually falls into.
- Overseas Portfolio Investment (OPI): smaller, more passive investments that do not amount to control, subject to their own conditions and limits.
For a founder, the practical trigger is simple. If your Indian company sets up or funds a foreign subsidiary, or if you as a resident invest into a foreign holding company, you are almost certainly doing ODI, and the reporting under the OI Rules kicks in.
2 When does ODI apply to a startup?
ODI is not only for large groups building overseas plants. It is increasingly a startup reality, and there are two common patterns.
The Indian company with a foreign subsidiary
Your Indian operating company sets up a wholly owned subsidiary abroad, a US Inc to sign enterprise contracts, a Singapore Pte Ltd for regional operations, or a UAE entity for the Gulf market. The Indian company remits capital into that subsidiary. That remittance is ODI by the Indian company, and the subsidiary becomes an overseas entity that must be reported and tracked.
Founders or residents investing abroad
Sometimes it is not the company but the individuals. A founder who is a resident invests personally into a foreign holding company, or a resident angel puts money into an overseas startup. Resident individuals can invest abroad within the Liberalised Remittance Scheme (LRS) limit, and where that investment amounts to ODI it must be reported under the OI Rules like any other.
3 The one-time filings: Form FC, UIN and evidence
Before the investment, or at the time of it, the Indian party files Form FC with the AD bank. On the basis of Form FC, the Reserve Bank allots a Unique Identification Number (UIN) for that overseas entity. The UIN is the reference number for that investment for its entire life, every later filing, including the APR, quotes it.
Two things follow the investment:
- The remittance itself goes out through the AD bank under the OI Rules, supported by your board and shareholder approvals and, where required, a valuation of the foreign entity.
- Evidence of investment, the share certificates issued by the foreign entity (or equivalent proof that the investment was made), must be submitted to the AD bank within six months of the remittance.
4 The APR: the most-missed FEMA filing
Here is the one that costs founders. The Annual Performance Report (APR) is an annual filing that every Indian party with overseas direct investment must submit for each foreign entity it holds. It is due by 31 December each year, is based on the audited accounts of the foreign entity, and is certified by a Chartered Accountant. It is filed through your AD bank.
The APR is missed more than any other FEMA filing, and the reason is structural. The Form FC, the UIN and the share certificates all happen in a burst around the investment, when everyone is paying attention. The APR then falls due a year later, and every year after that, long after the deal is closed and the lawyers have moved on. There is no fresh transaction to trigger a reminder. It just sits there, silently overdue, until an investor’s due diligence or your next ODI surfaces it.
A note on “DIN” that founders sometimes hear: the practical block is on your next overseas remittance and the UIN-linked approvals, and prolonged FEMA non-compliance is exactly the kind of red flag that surfaces in diligence alongside your directors’ filings. The fix is the same either way, file the pending APR and clear the LSF or compounding before it compounds into a bigger problem.
5 Worked example: an Indian company with a US subsidiary
Numbers make the timeline concrete. Here is how it plays out for a typical startup that opens a US entity.
Brewly Pvt Ltd, an Indian company, decides to set up Brewly Inc in Delaware to sign US customers. In June 2026, after board and shareholder approval, Brewly Pvt Ltd remits USD 100,000 through its AD bank as equity into Brewly Inc. It files Form FC at the time of the investment and the RBI allots a UIN for Brewly Inc. By December 2026, well within the six-month window, Brewly submits the share certificates issued by Brewly Inc to the AD bank as evidence of investment. The one-time reporting is done.
Now the recurring part. Brewly Inc closes its first US financial year, gets its accounts finalised, and Brewly Pvt Ltd must file its first APR by 31 December 2027, CA-certified, quoting the UIN. Brewly’s team, focused on India filings, forgets. It surfaces in mid-2028 when Brewly wants to inject more capital into Brewly Inc and the AD bank refuses to process the remittance until the overdue APR is filed. Brewly now files the pending APR and pays a Late Submission Fee, a flat ₹7,500 for a periodic return like the APR, and only then can the next investment go through. A recurring calendar reminder would have avoided all of it.
6 If you have already missed a deadline: LSF or compounding
A missed ODI reporting or APR is not the end of the world, but you have to regularise it, it does not fix itself. There are two routes.
| Route | When it fits |
|---|---|
| Late Submission Fee (LSF) | The quick, self-service route for delayed filings. For a periodic return like the APR it is a flat ₹7,500. For other ODI delays the LSF is a base ₹7,500 plus a variable amount (0.025% x the amount involved x the number of years of delay). Available up to 3 years from the due date. |
| Compounding | The formal route via the RBI PRAVAAH portal, with an application fee of about ₹11,000. Used for larger or older breaches, or contraventions that are not eligible for the simple LSF. The RBI passes a compounding order quantifying the amount. |
Whichever route applies, file the pending report first, then pay. And keep every payment challan and the compounding order, because in due diligence the legal and finance teams will ask for proof that the breach was regularised, not just that you paid. Our FEMA Late Submission Fee and compounding guide walks through both routes in detail.
7 Your ODI and APR checklist
- Confirm the investment is ODI under the OI Rules, 2022 (foreign subsidiary, or a resident investing abroad), and check for round-tripping if it is a flip.
- Get board and shareholder approval, and a valuation of the foreign entity where required.
- Loop in your AD bank early; register the Entity Master and Business User on FIRMS beforehand.
- File Form FC at or before the investment and obtain the UIN for the overseas entity.
- Remit the funds through the AD bank and keep the Form A2 and remittance advice on file.
- Submit share certificates or other evidence of investment to the AD bank within 6 months.
- Get the foreign entity’s accounts audited in time, and file the CA-certified APR by 31 December each year, per entity, quoting the UIN.
- If a deadline was missed, file the pending report and regularise via LSF or compounding, and keep every challan.
Not sure which FEMA filings your startup owes?
Use our free FEMA / FDI Filing Checker: answer a few questions about your foreign investors and overseas entities, and get the exact list of filings you owe, ODI, APR, FC-GPR, FLA and more, with their due dates.
Check my FEMA filings8 FAQs
What is overseas direct investment (ODI) under FEMA?
What is the APR and when is it due?
When does ODI apply to a startup?
What happens if you miss the APR deadline?
What documents are needed for ODI and the APR?
Related guides & tools
FEMA & FDI compliance for startups (pillar guide) →
The startup flip: FEMA and round-tripping →
FEMA Late Submission Fee and compounding →
FEMA / FDI Filing Checker (free tool) →
AS | Founder, CFOmatrix | Finance Strategy & Compliance CFOmatrix helps Indian startups build finance, tax and compliance functions that stand up to investor due diligence, from process and controls to the filings and the numbers behind them. |
Disclaimer: This article is general information as of August 2026 and is not legal, tax or professional advice. The FEMA Overseas Investment Rules and Regulations, RBI procedures, portals and fees can change. Confirm your specific obligations with your AD bank and a qualified professional before investing or filing.