FDI & FEMA Compliance Checklist for Startups
After receiving foreign investment, run through every FEMA compliance step — FC-GPR, annual FLA, pricing guidelines, share transfer KYC, and RBI reporting timelines.
Foreign direct investment into your Indian company
Money must come via SWIFT to your company's bank account. Bank will issue a Foreign Inward Remittance Certificate (FIRC) — keep it. Funds received in foreign currency must be converted at the time of allotment.
Penalty: Compounding up to 3× remittance amount
Shares must be allotted within 60 days. If allotment is delayed, return funds to investor — you cannot hold foreign funds beyond 60 days without allotment.
Penalty: Violation of FEMA if not allotted; must return funds
Log in to FIRMS (firms.rbi.org.in). AD Bank submits FC-GPR on your behalf. Attach FIRC, KYC of foreign investor, valuation certificate, board resolution, and share certificates.
Penalty: Compounding for late filing; penalty up to ₹2 lakh/day
For equity: SEBI-registered Category I Merchant Banker using DCF. For preference shares or convertible instruments: CA using NAV or DCF. Foreign investor cannot receive shares below FMV.
Penalty: Allotment at below FMV is an FEMA violation
File PAS-3 (return of allotment) with ROC within 30 days. If the allotment requires special resolution, file MGT-14 as well.
Penalty: ₹1,000/day for late PAS-3
All companies with FDI outstanding must file the Foreign Liabilities and Assets (FLA) return annually by 15 July. Filed via RBI's XBRL system.
Penalty: Compounding for non-filing
Based on FEMA 1999, OI Rules 2022, RBI Master Directions, and CGST Act. FEMA violations can result in compounding proceedings (up to 3× the contravention amount) and ED enforcement action. Consult a CS or FEMA specialist for your specific transaction.
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Frequently asked questions
What is FC-GPR and when must it be filed after receiving foreign investment?
FC-GPR (Foreign Currency — Gross Provisional Return) is the RBI form for reporting foreign equity investment received by Indian companies. It must be filed on the RBI FIRMS portal (firms.rbi.org.in) within 30 days of allotting shares to the foreign investor. Required attachments: share allotment board resolution, KYC of foreign investor, valuation certificate from CA/Merchant Banker, and proof of remittance (FIRC/credit advice). Late filing attracts compounding penalties under FEMA.
What is the annual FLA return and which companies must file it?
The Annual Return on Foreign Liabilities and Assets (FLA) must be filed by July 15 each year on the RBI FLAIR portal (flair.rbi.org.in). All Indian companies that have received FDI (equity, CCDs, preference shares) or made overseas investments must file FLA annually — even if the investment was fully repaid or repatriated. A company must continue filing until all foreign liabilities and assets are fully settled. Non-filing can attract up to ₹2 lakh penalty plus ongoing charges.
What are the pricing guidelines for issuing shares to foreign investors?
Under FEMA 20(R), shares issued to foreign investors must be at or above Fair Market Value (FMV) determined by a SEBI-registered Merchant Banker using DCF or NAV method (Rule 11UA of Income Tax Rules). Shares cannot be issued to foreigners below FMV — this would violate FEMA pricing guidelines and attract compounding. For listed companies, pricing is governed by SEBI ICDR Regulations (Floor price method). The pricing restriction applies to primary issuances — secondary transfers between non-residents may have different rules.
What is Form FC-TRS and when is it required?
FC-TRS (Foreign Currency — Transfer of Shares) is required when shares are transferred between a resident and non-resident (in either direction): (1) Resident selling shares to a non-resident, (2) Non-resident selling shares to a resident (repatriation of investment). FC-TRS must be filed on the FIRMS portal within 60 days of receipt of sale proceeds or payment. It requires KYC of both parties, valuation certificate, and share transfer agreement.
What FEMA compliance is required when a foreign investor exits (sells shares back to residents or other investors)?
Foreign investor exit triggers: (1) FC-TRS filing within 60 days if transferring to a resident; (2) If transferred to another non-resident (NRI or foreign entity), an FC-TRS may still be required depending on the share class and route; (3) The exit price must comply with pricing guidelines — the resident buyer cannot pay more than FMV (to prevent capital flight disguised as share payments); (4) The company must update its FLA return in the next cycle to reflect the change in foreign liabilities; (5) If the exit involves repatriation abroad, an AD Bank must certify FEMA compliance.