FEMA/ODI Compliance Checklist for Indian Startups Going Global

Part 1: Before You Set Up a Foreign Entity

1.1 Strategic Planning

Define the business purpose for the foreign entity (sales office, holding company, IP vehicle, client-facing entity)

Choose the jurisdiction: US (Delaware), UAE (DMCC/IFZA), Singapore, UK, or other

Evaluate entity type: subsidiary (100% owned), joint venture, or branch office

Assess tax implications: DTAA benefits, withholding tax, PE (Permanent Establishment) risk

Determine initial capitalization requirement and ongoing funding needs

Consult a FEMA specialist on the applicable RBI route (automatic vs approval)

1.2 RBI ODI (Overseas Direct Investment) Framework

Verify that the Indian entity is eligible to make ODI under FEMA regulations

Check the total financial commitment (TFC) limit: 400% of net worth per last audited balance sheet

Confirm the activity of the foreign entity is a permitted activity under ODI regulations

An entity with an NPA account, classified as a wilful defaulter, or under investigation needs a no-objection certificate first

Verify there are no defaults on any loans/borrowings from Indian lenders

Check if the sector requires prior RBI or Government approval

1.3 Board and Shareholder Approvals

Pass board resolution approving the overseas investment

Obtain shareholder approval if required (check AOA and SHA provisions)

Document the rationale for overseas investment in board minutes

Ensure director disclosures are updated (interest in foreign entities)

Part 2: Making the Overseas Investment

2.1 Funding the Foreign Entity

Determine the mode of investment: equity, loan, or guarantee

If equity: obtain valuation of the foreign entity (at fair market value)

If loan: ensure interest rate complies with arm's length standards and transfer pricing regulations

If guarantee: document the terms and ensure it is within the TFC limit

Route the remittance through an Authorized Dealer (AD) bank

Obtain the Unique Identification Number (UIN) from the AD bank before remittance

2.2 Form FC Filing

File Form FC through the AD bank at the time of the remittance or the financial commitment, whichever is earlier

Provide required documents: board resolution, valuation certificate, investment details, auditor's certificate, KYC

Obtain the AD bank's acknowledgment of Form FC filing

Retain a copy of the UIN for all future filings

2.3 Remittance

Remit funds only through the AD bank (not through any other channel)

Ensure the remittance is within the amount reported in Form FC

Obtain a bank certificate confirming the remittance details

Retain SWIFT copy and outward remittance advice

Part 3: Post-Investment Compliance (Annual)

3.1 Annual Performance Report (APR) - Deadline: December 31

Submit the APR to the designated AD bank

Attach the audited financial statements of the foreign entity

If the foreign entity has not started operations, file a "nil" APR

Ensure the APR is filed for EVERY foreign entity separately

3.2 FLA Return - Deadline: July 15

Filed directly on the RBI website (not through AD bank)

Covers all foreign assets and liabilities of the Indian entity

Required for both FDI recipients and ODI makers

3.3 Transfer Pricing Compliance

Maintain transfer pricing documentation for all intercompany transactions

Ensure intercompany transactions are at arm's length price

File Form 3CEB (Transfer Pricing Certificate) by the specified date, one month before the return due date

Maintain a Master File and Local File if turnover exceeds applicable thresholds

3.4 Tax Compliance

Report foreign income in the Indian entity's tax return

Claim DTAA benefits (foreign tax credit) where applicable

Foreign tax credit statement: Form 67 by the end of the assessment year for FY 2025-26 and earlier (Income-tax Rules 1962 rule 128(9)); from tax year 2026-27, Form No. 44 within twelve months from the end of the tax year (Income-tax Rules 2026 rule 76(12)); in both cases the return must be filed within the original or belated due date

Report foreign assets in Schedule FA of the income tax return

Check for POEM risk: ensure foreign entity decisions happen outside India

Part 4: Delaware Flip Compliance

4.1 Pre-Flip Planning

Obtain legal opinion on the proposed structure

Obtain valuation of the Indian entity (by a SEBI-registered merchant banker)

Calculate capital gains on the share swap (Income-tax Act 1961 for transfers up to 31 Mar 2026; Income-tax Act 2025 from 1 Apr 2026)

Evaluate Section 47(via) / 47(viab) exemption applicability

Plan the timeline: FEMA approvals can take 4-8 weeks

Brief existing investors and obtain consent for restructuring

4.2 FEMA Compliance for the Flip

Government approval only where the sector is under the Government route; a swap in an automatic-route sector needs no approval

Ensure foreign entity's investment complies with FDI pricing guidelines

Obtain a fresh valuation at the time of the flip

File FC-GPR within 30 days of share issuance to the new foreign parent

File Form FC for Indian shareholders investing in the foreign parent

Part 5: FDI Compliance (Receiving Foreign Investment)

5.1 Pre-Investment

Verify sector allows FDI (check consolidated FDI policy)

Check the land-border / beneficial-owner Government-route test (Press Note 2 (2026 Series), in the NDI Rules from 2 May 2026)

Obtain a valuation by a Chartered Accountant, a SEBI-registered Merchant Banker or a practising Cost Accountant (unlisted company); a share swap needs a SEBI-registered Merchant Banker

Ensure pricing at or above fair market value for non-residents

5.2 At the Time of Investment

Receive funds in a designated AD bank account

Allot shares within 60 days of receiving the funds

Issue share certificates and pass board resolution

5.3 Post-Allotment Filings

FC-GPR filing within 30 days of share allotment (through AD bank on FIRMS portal)

Provide to AD bank: FCGPR form, CS certificate, valuation certificate, board resolution, KYC, FIRC

File FLA return by July 15 annually

Part 6: Compliance Calendar

Deadline	Filing	Platform
July 15	FLA Return	RBI Website
October 31 (AY 2026-27: November 21, 2026)	Income Tax Return (company) with Schedule FA; November 30 where transfer pricing applies	Income Tax Portal
One month before the return due date (AY 2026-27: October 21, 2026)	Tax Audit Report (if applicable)	Income Tax Portal
October 31	Transfer Pricing Report (Form 3CEB)	Income Tax Portal
December 31	Annual Performance Report (APR) for ODI	AD Bank
Within 30 days	FC-GPR for any new FDI received	RBI FIRMS Portal
Within 60 days	FC-TRS for share transfers with non-residents	RBI FIRMS Portal
At remittance or commitment (earlier)	Form FC for overseas investment	AD Bank

Part 7: Common Mistakes to Avoid

1. Late FC-GPR filing - The 30-day window is strict. A late filing within three years of the due date can be regularised with a Late Submission Fee; after that, compounding.

2. Incorrect pricing - Valuation by a Chartered Accountant, a SEBI-registered Merchant Banker or a practising Cost Accountant (unlisted company); a share swap needs a SEBI-registered Merchant Banker.

3. Missing FLA return - Filed directly on the RBI website, not through the AD bank. Easy to miss.

4. No transfer pricing documentation - Penalty for non-compliance is 2% of the transaction value.

5. POEM risk not managed - If foreign entity's Place of Effective Management is in India, its entire global income becomes taxable in India.

6. Forgetting APR filing - Required for every overseas entity, every year. Even dormant entities need a "nil" APR.

7. Exceeding ODI limits - Total financial commitment cannot exceed 400% of net worth.

8. Not reporting foreign assets in ITR - Schedule FA non-disclosure can trigger Black Money Act penalties.

9. Downstream investment gaps - FDI-funded entity investing in another Indian entity must also comply with FDI norms.

10. No compliance calendar - One missed deadline can cost months of regulatory engagement.