TaxTMI 
TaxTMI 
Overseas Investment (Updated as on April 01, 2026)
X X X X Extracts X X X X
X X X X Extracts X X X X
....ange Management Act (FEMA), 1999. These directions lay down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/ constituents with a view to implementing the OI Rules and the OI Regulations. 3. Instructions issued on Overseas Investment by persons resident in India have been compiled in this Master Direction. The list of underlying circulars which form the basis of this Master Direction is furnished in the Annex I. Reporting instructions related to Overseas Investment are provided in Part VIII of Master Direction no. 18 on 'Reporting under Foreign Exchange Management Act, 1999' dated January 01, 2016. AD Category-I Banks may bring the contents of these Directions to the notice of their customers / constituents concerned. 4. This Master Direction has been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law. Yours faithfully (N Senthil Kumar) Chief General Manager Master Direction - Overseas Investment These Directions shall be called Master D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reign entity" - the extant concept of Joint Venture (JV) and Wholly Owned Subsidiary (WOS) is substituted under the new regime with the concept of foreign entity, which means an entity formed or registered or incorporated outside India, including in International Financial Services Centre (IFSC) in India, that has limited liability. 'Limited liability' would mean a structure such as a limited liability company, limited liability partnership, etc. where the liability of the person resident in India is clear and limited. In case of a foreign entity being an investment fund or vehicle, duly regulated by the regulator for the financial sector in the host jurisdiction and set up as a trust outside India, the liability of the person resident in India shall be clear and limited not exceeding the interest or contribution in the fund in any manner. Further, the trustee of such fund shall be a person resident outside India. (ii) "strategic sector" shall include energy and natural resources sectors such as Oil, Gas, Coal, Mineral Ores, submarine cable system and start-ups and any other sector or sub-sector as deemed fit by the Central Government. The restriction of lim....
X X X X Extracts X X X X
X X X X Extracts X X X X
....foreign entity, or (ii) investment in 10% or more of the paid-up equity capital of a listed foreign entity, or (iii) investment with control where investment is less than 10% of the paid-up equity capital of a listed foreign entity. Explanation: Once an investment in a foreign entity is classified as ODI, the investment shall continue to be treated as ODI even if such investment falls below 10% of the paid-up equity capital or the investor loses control in the foreign entity. (vii) "equity capital" means equity shares or perpetual capital or instruments that are irredeemable or contribution to non-debt capital of a foreign entity, which is in the nature of fully and compulsorily convertible instruments. Accordingly, any instrument which is redeemable or non-convertible or optionally convertible shall be treated as debt for the purpose of OI Rules/Regulations/Directions. (viii) "financial commitment" by a person resident in India means the aggregate amount of investment by way of ODI, debt other than Overseas Portfolio Investment (OPI) and non-fund based facility or facilities extended by it to all foreign entities. An Indian entity may....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ame called) issued by an investment fund or vehicle, in terms of schedule V of the OI Rules subject to limits, as applicable. Explanation: 'investment fund overseas, duly regulated' for the purpose of this para shall also include funds whose activities are regulated by financial sector regulator of host country or jurisdiction through a fund manager. f) Resident individuals may make OPI within the overall limit for Liberalised Remittance Scheme (LRS) in terms of schedule III of the OI Rules. Further, shares or interest acquired by the resident individuals by way of sweat equity shares or minimum qualification shares or under Employee Stock Ownership Plan (ESOP)/ Employee Benefits Scheme up to 10% of the paid up capital/stock, whether listed or unlisted, of the foreign entity and without control shall also qualify as OPI. g) Any investment made overseas in accordance with schedule IV of the OI Rules in securities as stipulated by SEBI by Mutual Funds (MFs), Venture Capital Funds (VCFs) and Alternative Investment Funds (AIFs) registered with SEBI shall be considered as OPI. (x) "Listed equity capital or instrument" - Wherever a re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct to the following: • Prima facie viability of the foreign entity; • Benefits which may accrue to India through such investment; • Financial position and business track record of the Indian entity and the foreign entity; • Any other material observation. • Recommendations of the designated AD bank with confirmation that the applicant's board resolution or resolution from an equivalent body, as applicable, for the proposed transaction(s) is in place. • Diagrammatic representation of the organisational structure indicating all the subsidiaries of the Indian entity horizontally and vertically with their stake (direct and indirect) and status (whether operating company or SPV). • Valuation certificate for the foreign entity (if applicable). • Other relevant documents properly numbered, indexed and flagged. 4. Approval from the Central Government The applications for overseas investment/financial commitment in Pakistan/other jurisdiction as may be advised by the Central Government from time to time or in strategic sectors/specific geographies in accordance with rule....
X X X X Extracts X X X X
X X X X Extracts X X X X
....filled in or may issue bid bond guarantee on their behalf in accordance with regulation 9(5) of OI Regulations for participation in bidding or tender procedure for acquisition of a foreign entity. On winning the bid, AD banks may facilitate further remittances to the foreign entity so acquired after obtaining Form FC duly filled in and report such financial commitment. (2) AD banks, while permitting remittance towards EMD should advise the Indian entity/investor that in case they are not successful in the bid, they shall repatriate the amount remitted in accordance with Notification No. FEMA 9(R)/2015-RB. (3) In cases where such a person resident in India, after being successful in the bid/tender decides not to proceed further with the investment, AD banks shall ensure the bona fides of transaction while permitting the invocation of bid-bond guarantee or forfeiture of EMD. 9. ODI in startups Any ODI in startups in accordance with rule 19(2) of OI Rules shall not be made out of funds borrowed from others. The AD bank, before facilitating the transaction, shall obtain necessary certificate in this regard from the statutory auditors/chartered a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de in freely convertible currencies, as well as their sale/winding up proceeds are required to be repatriated to India in freely convertible currencies only. 12. Pricing Guidelines (1) The AD bank, before facilitating an overseas investment related transaction, shall ensure compliance with the provisions contained in rule 16 of OI Rules. With respect to the documents to be taken by the AD bank, they shall be guided by their board approved policy, which may, inter alia, provide for taking into consideration the valuation as per any internationally accepted pricing methodology for valuation. The AD bank shall put in place a board approved policy within two months from the date of these directions^3. (2) Such policy may also provide for scenarios where the valuation may not be insisted upon, such as (i) transfer on account of merger, amalgamation or demerger or liquidation, where the price has been approved by the competent Court/Tribunal as per the laws in India and/or the host jurisdiction or (ii) price is readily available on a recognised stock exchange, etc. The policy shall also clearly provide for additional documents such as the audited financial stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9 of OI Regulations. (2) A person resident in India acquiring equity capital in a foreign entity, which is reckoned as ODI, shall submit the evidence of investment as per regulation 9(1) of OI Regulations to the AD bank within six months, failing which the funds remitted overseas shall be repatriated within the said period of six months. The evidence of investment shall be retained by the designated AD bank, who shall monitor the receipt of required documents and satisfy themselves about the bona fides of the documents so received. (3) Form FC shall be submitted along with requisite documents to AD bank for obtaining UIN on or before making initial ODI. The AD bank after due verification shall report the details in the OID application for allotment of UIN. Any remittance towards a foreign entity shall be facilitated by the AD bank only after obtaining the necessary UIN for such entity. The allotment of UIN does not constitute an approval from the Reserve Bank for the investment made/to be made in the foreign entity. The issue of UIN only signifies taking on record of the investment for maintaining the database. Further, with effect from June 01, 2012, an auto gene....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reporting 7500 2 Form ODI-Part I, Form ODI-Part III, Form FC, or any other return which captures flows or returns which capture reporting of non-fund based transactions or any other transactional reporting [7500 + (0.025% x A x n)] Notes: a) "n" is the number of years of delay in submission rounded-upwards to the nearest month and expressed up to 2 decimal points. b) "A" is the amount involved in the delayed reporting. c) LSF amount is per return. d) Maximum LSF amount will be limited to 100 per cent of 'A' and will be rounded upwards to the nearest hundred. e) Where an advice has been issued for payment of LSF and such LSF is not paid within 30 days, such advice shall be considered as null and void and any LSF received beyond this period shall not be accepted. If the applicant subsequently approaches for payment of LSF for the same delayed reporting, the date of receipt of such application shall be treated as the reference date for the purpose of calculation of LSF. f) The option of LSF shall be available up to three years from the due date of reporting/submission under OI Regulations. The option of LSF sha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hall be added to any structure existing with two or more layers of subsidiaries post notification of the OI Rules/Regulations. Note: It may be noted that subsidiary shall have the meaning as provided in the OI Rules i.e. an entity in which the foreign entity has control (which includes a stake of 10% or more in an entity as per the OI Rules). Part III - Specific provisions 21. Financial commitment by an Indian entity An Indian entity, within the overall limit provided in schedule I of the OI Rules and subject to regulation 3 of OI Regulations, may make financial commitment by way of ODI as per schedule I of the OI Rules, financial commitment by way of debt as per regulation 4 of OI Regulations and non-fund based financial commitment as per regulations 5, 6 and 7 of OI Regulations. The following is further provided: (1) In case of swap of securities both the legs of transaction shall comply with FEMA provisions, as applicable. (2) In case of investment in foreign entity by a registered Partnership firm, it will be in order for individual partners to hold shares for and on behalf of the firm in the foreign entity if the host ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elow: Security by Indian entity In whose favour Facility availed Amount reckoned towards financial commitment A) Pledge the equity capital of the foreign entity /its SDS outside India. AD bank or a public financial institution in India or an overseas lender. Fund/non-fund based facilities for Indian entity. Nil. Fund/non-fund based facilities for any foreign entity/its SDSs outside India. The value of the pledge or the amount of the facility, whichever is less. A debenture trustee registered with SEBI in India. Fund based facilities for Indian entity. Nil. B) Create charge on its assets (other than A above) in India [including the assets of its group company or associate company, promoter and / or director]. AD bank or a public financial institution in India or an overseas lender. Fund/non-fund based facility for any foreign entity/its SDS outside India The value of charge or the amount of the facility, whichever is less Overseas or Indian lender. fund/non-fund based facilities for Indian entity. Nil. C) Create charge on the assets outside India of the foreign entity/ its SDS outside India. An AD bank in India or a p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hin 45 days from the date of receipt of application complete in all respects failing which it shall be deemed to be approved Not engaged in Financial Services activity Subject to the guidelines issued by the respective regulator b) Not engaged in Financial Services activity Engaged in Financial Services activity except banking or insurance Indian entity has posted net profits during the preceding three financial years. However, an Indian entity not meeting 3-year profitability condition may make such ODI in a foreign entity in IFSC in India. Engaged in general and health insurance Apart from the 3 years profitability criteria, such insurance business is supporting the core activity undertaken overseas by such Indian entity. For instance, health insurance to support medical/hospital business, vehicle insurance to support the manufacturing/export of motor vehicles, etc. c) Overseas investment in any sector by banks and non-banking financial institutions regulated by the Reserve Bank shall be subject to such other conditions as may be stipulated by the regulatory department concerned of the Reserve Bank in this regard. d) A foreign entity will be considered ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n case of swap of securities both the legs of the transaction shall comply with FEMA provisions, as applicable. However, where swap of securities results in acquisition of any equity capital which is not in conformity with the OI Rules/Regulations, e.g., ODI in foreign entity engaged in financial services activity, foreign entity having a subsidiary/SDS, etc., such equity capital must be disinvested within a period of six months from the date of such acquisition. (4) Resident individuals are not permitted to transfer any overseas investment by way of gift to a person resident outside India. (5) Shares/interest under ESOP/Employee Benefits Scheme - AD banks may allow remittances, towards acquisition of the shares/interest in an overseas entity under the scheme offered directly by the issuing entity or indirectly through a Special Purpose Vehicle (SPV) /SDS. Where the investment qualifies as OPI, the necessary reporting in Form OPI shall be done by the employer concerned in accordance with regulation 10(3) of OI Regulations. Where such investment qualifies as ODI, the resident individual concerned shall report the transaction in Form FC. (6) Foreign entitie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ety for Worldwide Interbank Financial Telecommunication (SWIFT) as per the by-laws of SWIFT, provided the bank has been permitted by the Reserve Bank for admission to the 'SWIFT User's Group in India' as a member. (5) Any overseas investment by the sole proprietorship or unregistered partnership firms may be made by the proprietor concerned or the individual partners concerned within their limit available under the LRS in accordance with schedule III of the OI Rules. If the proposed investment is in strategic sector, any application for making overseas investment in excess of the LRS limit may be made under the government approval route. (6) Overseas investment by registered trust/society may be made under the approval route in accordance with paragraph 1 of schedule IV of OI Rules. 24. Overseas investment in an IFSC in India by a person resident in India A person resident in India may make overseas investment in an IFSC in India in accordance with schedule V of OI Rules. The following is further provided: (1) ^4A person resident in India, being an Indian entity or a resident individual, may make investment (including sponsor contri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ired, for different foreign entities. (2) In case such a person resident in India wants to switch over to another AD, it may approach the new AD after obtaining an NOC from the existing AD bank. (3) ^5All communication from the person resident in India to the concerned Regional Office of the Reserve Bank should be routed through the nodal branch of the designated AD bank. Such communication shall be made by the AD bank through the relevant form available on the PRAVAAH portal (https://pravaah.rbi.org.in/pravaah), in accordance with UIN mapping given in the table below. Sr. No UIN with prefix Regional Office of RBI to which the reference is to be sent to 1. AH RO Ahmedabad 2. BG RO Bengaluru 3. BL or BY or PJ RO Mumbai 4. BN or CA or GA or GH RO Kolkata 5. CG or JM or JR or KA or ND or PT or WR RO New Delhi 6. HY RO Hyderabad 7. KO or MA RO Chennai For proper follow up, the AD bank shall maintain person-wise record in respect of each foreign entity. 27. Overseas investment under OI Rules/Regulations (1) AD banks may allow remittance towards oversea....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (5) In case of ODI by way of capitalisation of export proceeds or other entitlements, Indian entity/resident individual shall make an application in Form FC to its designated AD bank. AD bank may ensure necessary reporting in Form FC, compliance with OI Rules/Regulations and necessary reporting in EDPMS, wherever applicable, for facilitating such transactions. In case where such proceeds are overdue beyond the period specified for realisation/repatriation, before permitting such capitalisation AD bank may grant necessary extension post proper due diligence. (6) Pre-incorporation expenses - AD bank may allow remittance towards pre-incorporation expenses after satisfying itself of the reasonableness, up to a maximum of USD 100,000 per foreign entity. Such remittances made by a resident individual shall be reckoned towards their LRS limit. A person resident in India may capitalise pre-incorporation expenses (i.e., financial commitment by way of ODI) or recognise such expenses as receivables (i.e., financial commitment by way of debt) or account them as expenses in their books. It is clarified that unless recognised as financial commitment such expenses shall not attrac....