ODI filing in India: a practical guide (2026).

Our FEMA practice.

1. The 2022 framework, in one paragraph.

The 22 August 2022 overhaul rewrote the rules for Indian residents investing abroad. The Foreign Exchange Management (Overseas Investment) Rules, 2022 (made by the central government) and the Foreign Exchange Management (Overseas Investment) Regulations, 2022 (made by RBI), together with the Foreign Exchange Management (Overseas Investment) Directions, 2022, replaced the earlier patchwork of ODI rules under the 1999 Act framework. The new framework draws a clearer line between Overseas Direct Investment (ODI) and Overseas Portfolio Investment (OPI), introduces a clean concept of "financial commitment", and provides for late-filing fees instead of compounding for routine procedural breaches.

2. OPI vs ODI: the threshold question.

Every cross-border investment by an Indian resident now falls into one of two buckets.

Overseas Direct Investment (ODI) is investment in equity capital of a foreign entity that results in either (a) acquisition of unlisted equity, or (b) acquisition of 10% or more of the paid-up equity capital of a listed foreign entity, or (c) control of the foreign entity. Control is defined to include the right to appoint majority of directors or to control management or policy decisions, including by virtue of shareholding, management rights or shareholders agreements.

Overseas Portfolio Investment (OPI) is investment in equity capital of a listed foreign entity that is less than 10% and does not amount to control. OPI rules are lighter; ODI rules are detailed.

The boundary matters because the moment an OPI position crosses 10% (or the investor acquires control through any means), the entire investment is recharacterised as ODI and all ODI compliances apply from inception.

3. Eligible Indian parties and eligible foreign entities.

An Indian entity (company, LLP, partnership, registered body) and a resident individual are both permitted to make ODI, subject to the conditions in the rules. Resident individuals are subject to the Liberalised Remittance Scheme (LRS) limit (currently USD 2,50,000 per financial year).

The foreign entity in which the investment is made must be engaged in a bona fide business activity. The 2022 framework introduced a clear prohibition on round-tripping: an Indian entity cannot invest in a foreign entity which has invested or proposes to invest into India in a manner that creates a structure of more than two layers of subsidiaries between the Indian entity and its Indian downstream investment. This was a substantial tightening of the prior position.

Certain sectors are off-limits for ODI: real estate (other than development of townships and infrastructure projects), gambling, and any activity not permitted under the prevailing FDI policy of the host country.

4. Auto route vs approval route.

Most ODI is permitted under the automatic route, subject to the eligible-investor and eligible-entity tests and the financial-commitment limits. RBI approval is required in specific situations:

• ODI by an Indian entity that is on the RBI defaulter list.
• ODI where the financial commitment exceeds the limits (see next section).
• ODI in foreign entities engaged in financial services, by entities other than those specifically permitted to undertake financial-services ODI under auto route.
• ODI in pension funds, insurance companies and similar regulated financial entities, where additional sectoral RBI conditions apply.

For auto-route ODI, no prior approval is required; the investor proceeds with the investment and files the post-investment reports.

5. Financial commitment and the 400% rule.

Financial commitment is the aggregate of equity, debt, guarantees and other obligations the Indian entity has towards the foreign entity. The auto-route limit is 400% of the Indian entity's net worth as per the latest audited balance sheet.

The 400% is the total financial commitment ceiling, not a per-investment limit. An Indian entity with ₹100 Cr net worth can have aggregate financial commitments to foreign entities of up to ₹400 Cr. Investments above this need RBI approval.

Resident individuals are not subject to the 400% rule; they are subject to the LRS limit (USD 2,50,000 per financial year) which forms the upper bound for their cumulative remittances abroad including ODI, OPI, and other LRS-permitted purposes.

6. The filing pack: Form FC, APR, FLA.

The three filings every ODI investor must remember:

Form FC (Foreign Currency). The principal ODI form. Filed at the time of initial investment, on every subsequent investment, and on remittances within 30 days. Filed through the AD bank (authorised dealer category I bank) on the FIRMS portal of RBI. The form captures the investor, the foreign entity, the nature of the investment, the financial commitment, and the source of funds.

Annual Performance Report (APR). Filed annually by 31 December for the foreign entity's financial year ended in the previous calendar year. The APR includes the foreign entity's latest audited financials, the share of profit, and any changes in shareholding or activity. Mandatory for every foreign entity in which the Indian investor has ODI, until disinvestment.

Foreign Liabilities and Assets (FLA). Filed annually by 15 July with RBI by every Indian company that has foreign assets or liabilities. Covers FDI, ODI, FII positions and other cross-border financial positions of the Indian company.

Late filing now triggers Late Submission Fees (LSF) under a defined schedule, rather than triggering compounding for procedural delay. LSF is calculated by the AD bank using the prescribed formula and paid through the bank.

7. Post-investment compliance.

Beyond the three core filings, the Indian investor has continuing obligations:

• Repatriation of profits. Dividends, royalties, interest and other current-account income from the foreign entity must be repatriated through banking channels and reported in the APR.
• Disinvestment proceeds. On exit (full or partial), proceeds must be repatriated within 90 days of receipt and reported in Form FC.
• Change in shareholding. Any change in the Indian investor's shareholding in the foreign entity (additional investment, dilution, transfer) requires fresh Form FC filing.
• Change in foreign entity status. Conversion of foreign entity, merger, demerger, liquidation - all reportable.
• Annual audit. Foreign entity's audited financials must be obtained and reviewed by the Indian investor.

8. Disinvestment and closure.

Disinvestment is the cleanest part of the framework, provided the steps are followed:

• Disinvest at fair value (independent valuation or recognised mechanism).
• Repatriate proceeds within 90 days.
• File Form FC reporting disinvestment within 30 days.
• If full disinvestment, ensure APR has been filed up to disinvestment date.
• If foreign entity is to be wound up, follow the liquidation procedures of the host jurisdiction; report closure to RBI.

Partial disinvestments are common and well-handled if reported on time. Full disinvestments without proper closure leave a continuing FLA reporting obligation that often goes unaddressed.

9. Practical issues we see.

Five recurring issues across our FEMA practice:

• The control question on apparent minority stakes. Investors take a 9% equity position with board rights, veto rights, or material management influence. The 9% becomes ODI not because of the percentage but because of the control. Many such positions are reported as OPI in error.
• Step-up sale of OPI to control. An OPI position that crosses 10% or acquires control is recharacterised as ODI from the date of recharacterisation, with all ODI compliances kicking in. The transition is often handled retrospectively, triggering late-filing exposures.
• Round-tripping structures from the pre-2022 era. Structures created before the 2022 framework with more than two layers of intermediate subsidiaries between the Indian investor and the Indian downstream investment now need unwinding or grandfathering. The MCA and RBI views on existing structures continue to evolve.
• Net-worth recalibration after losses. An Indian entity whose net worth falls (due to losses or restructuring) finds its 400% financial commitment ceiling fall correspondingly. Existing commitments above the new ceiling are not automatically compounding but may not be increased without RBI approval until net worth recovers.
• APR misses for dormant foreign entities. Investors who hold foreign entities that are dormant or under wind-up frequently miss the APR. The APR is mandatory until full disinvestment is reported, even for entities with no operations.

The 2022 framework has made the rules clearer; it has not made them simple. For investments above a threshold, a structured ODI/OPI review before the transaction and an annual compliance calendar afterwards are the two interventions that prevent every category of issue above.

CA Dheeraj Somani

Founder & Proprietor · D Somani & Associates · More about the firm →