FEMA / FDI Compliance

Form FC-GPR (Foreign Currency — Gross Provisional Return) must be filed on the RBI FIRMS portal within 30 days of allotment of shares or convertible instruments to a foreign investor under either the Automatic or Government Route. It is filed by the Indian company receiving the FDI. The filing reports: investment details, consideration received, a valuation certificate (from a SEBI-registered Merchant Banker or CA for unlisted companies, under Rule 11UA of the Income Tax Rules), and the FIRC (Foreign Inward Remittance Certificate) from the AD bank. Failure to file within 30 days is a FEMA contravention under Section 13 and attracts compounding proceedings.

Automatic Route: FDI is permitted up to the sectoral cap without prior RBI or Government approval. The AD bank and the Indian company self-certify compliance with DPIIT conditions and sectoral caps. Government Route: prior approval from DPIIT (for most sectors) or RBI (for banks and NBFCs) is mandatory before the Indian company can receive FDI. Key Government Route sectors: defence above 74%, print media, broadcasting, multi-brand retail trading, and satellite services. Prohibited sectors — where FDI is not permitted at all under Schedule I of the FEM (Non-Debt Instruments) Rules 2019 — include lottery businesses, gambling, chit funds, and tobacco manufacturing.

For unlisted companies: shares cannot be issued below fair market value (FMV) determined by a SEBI-registered Merchant Banker using DCF method, or by a CA using NAV or book value. This is the floor — you can issue at or above it, not below. For listed companies: SEBI ICDR preferential allotment pricing applies (26-week or 2-week VWAP, whichever is higher). Convertible instruments (CCDs, CCPS): the conversion price must also comply with the FMV floor at the time of conversion. The valuation certificate is attached to the FC-GPR filing. The same FMV floor also serves as the ceiling for outbound FDI (ODI) — an Indian company cannot sell shares to a foreign entity below FMV.

Every Indian company that has received FDI or made overseas direct investment in any preceding year must file the FLA Return with the RBI by July 15 each year via the FLAIR portal (RBI notification dated January 28, 2019). The FLA must be filed every year as long as any outstanding FDI or ODI position appears on the balance sheet — even if no new investment occurred during the year. The return covers: equity capital, reserves, long-term and short-term borrowings from non-residents, and overseas equity investments. Non-filing or late filing attracts FEMA compounding under Section 13 read with the compounding rules.

Downstream investment by an Indian company that has received FDI is regulated under the FEM (NDI) Rules 2019 — the Indian company is treated as a conduit for the foreign investor. The downstream investment must comply with the sectoral cap and entry route conditions applicable to the ultimate foreign investor, not just the immediate Indian parent. Within 30 days of making a downstream investment, the Indian company must notify DPIIT with a declaration of compliance in the prescribed format. Multi-layered downstream structures are regulated to prevent round-tripping and must be reported in the FLA each year. Indirect foreign ownership through the chain is counted toward the sectoral cap.