FEMA & RBI — Foreign Exchange & Overseas

RBI's new FEMA (Export and Import of Goods and Services) Regulations, 2026 take effect on 1 October 2026, extending realisation periods, mandating EDF for services, and replacing 167 legacy circulars. Here is what exporters and importers must check before the deadline.

Returning NRIs get 2-3 years of RNOR status under Section 6(6), during which most foreign income stays outside Indian tax. A June 2026 RBI circular has also opened an elevated FCNR(B) rate window that closes on 30 September 2026 — and FEMA account conversion rules that trip up even careful planners.

RBI's draft KYC Amendment Directions 2026, open for public comment since 11 September 2026, propose mandatory Video KYC for NRIs, any-branch updation, and extended renewal timelines for low-risk accounts. Here is what NRE, NRO, and FCNR(B) holders should do while the draft is under review.

DPIIT Press Note 3 (2026 Series) permits 100% automatic-route FDI in inventory-based e-commerce entities, but only where the entity exclusively exports domestically manufactured goods. The carve-out is not yet FEMA-legal until the corresponding FEM (NDI) Amendment notification is confirmed in the Gazette of India.

RBI's special FCNR(B) swap window, open since June 2026, lets banks offer NRIs USD deposit rates of up to 7.10% instead of the usual 3.5%. The window shuts on 30 September 2026 — deposits booked before that date keep the locked-in rate for their full tenure.

Companies that filed the FLA return with provisional figures by 31 July 2026 must submit the revised return with audited numbers on flair.rbi.org.in by 30 September 2026. Here's who must file, what data is required, and what happens if you miss it.

FEMA contraventions are civil, not criminal — FERA and its jail provisions were repealed in 1999. Yet NRIs routinely sit on unconverted resident accounts and demat holdings for years because someone warned them that disclosure invites prosecution. It does the opposite. Section 15 of FEMA 1999 exists precisely so a past contravention can be voluntarily settled, and the cost bears little resemblance to the three-times-the-amount ceiling in Section 13. For the reporting-delay category that captures most NRI cases, the RBI compounding matrix works out to a fixed Rs.1,00,000 plus a variable component in the 0.025 to 0.15 percent range per year of delay. This guide covers the jurisdiction thresholds by amount, the Foreign Exchange (Compounding Proceedings) Rules 2024 including the raised Rs.10,000 fee and the April 2025 deletion of the 50 percent repeat-applicant enhancement, the common NRI contraventions — account conversion, demat status, the USD 1 million NRO limit, agricultural land — and the exact eight-step process from regularisation through the AD Bank contravention letter to the 15-day payment window.

Most founders believe receiving foreign funds into an Indian company is a banking transaction. It is not. The Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 — commonly called FEMA Notification 20(R) by practitioners — require prior compliance checks, a FEMA-compliant valuation, and a Form FC-GPR filing with the RBI within 30 days of share allotment. Nine sectors are completely barred from FDI. Investments from entities in countries sharing a land border with India now require government approval under Press Note 2 (2026). Missing the 30-day FC-GPR deadline triggers late fees, compounding applications, and compliance flags that scare future investors.

Founders routinely treat money sent from an Indian company to its own Dubai or Singapore entity as an ordinary outward remittance. It is not. Under the Foreign Exchange Management (Overseas Investment) Rules, Regulations and Directions, 2022, it is Overseas Direct Investment, and it carries a filing chain that begins before the money leaves. This piece draws the line between ODI and Overseas Portfolio Investment, explains why any investment in an unlisted foreign entity is ODI regardless of ticket size, and shows why the 400%-of-net-worth automatic route ceiling is a cap on financial commitment rather than cash — counting 100% of corporate guarantees, 50% of performance guarantees, and charges created on assets. It sets out the current reporting forms — Form FC, Form APR due 31 December, Form FC-TRS on disinvestment — the Unique Identification Number requirement, and the difference between regularising a delay through the Late Submission Fee and compounding a substantive contravention under Section 15 of FEMA. Includes a seven-step pre-remittance checklist and four FAQs covering LRS by individuals, unfiled Form FC exposure, dormant subsidiaries, and overseas branch offices.

An NRI can invest in an Indian company without prior RBI approval — but compliance happens after the money lands. Miss the FC-GPR deadline or skip the FLA return and you are looking at a compounding application. Here is exactly what the sequence requires.