Indian founders and companies set up entities abroad for good reasons: to sell to US customers, to raise money from foreign investors, or to hire outside India. The money that goes out to fund that entity is an overseas investment under FEMA, and it has its own route, forms and yearly reporting.
This guide covers the India side: which rules apply, the limits for a company and for an individual, the forms your bank will ask for, the annual report, the tax that follows, and the choice between flipping your Indian company and running a parallel structure.
The rules that apply
Overseas investment from India is governed by the Foreign Exchange Management (Overseas Investment) Rules, 2022, read with the RBI's accompanying regulations and directions. The 2022 framework replaced the older ODI rules, and it is the version your AD bank will work from.
ODI or OPI
The 2022 framework separates overseas direct investment (ODI) from overseas portfolio investment (OPI). ODI is the route for setting up or taking a strategic stake in a foreign operating business, which is what a subsidiary is. OPI covers passive, portfolio-type holdings. The rules draw the line between the two, and it decides which conditions and which reporting apply. Setting up a US or Singapore subsidiary, or taking a controlling stake in one, is ODI.
Who is investing: a company or an individual
| Point | Indian company | Resident individual |
|---|---|---|
| Limit | A financial commitment ceiling linked to the company's net worth, set in the 2022 rules | Counts towards the Liberalised Remittance Scheme limit of US$250,000 per financial year (April to March) |
| What you can invest in | A bona fide foreign business, subject to the sectors the rules restrict | Only an operating business, and not one engaged in financial services |
| Reporting | Form FC through the AD bank, then the APR every year | Form FC through the AD bank, then the APR every year |
| APR certification | Filed through the AD bank, with the foreign entity's accounts | Certified by a chartered accountant where the entity has no statutory audit, which is the usual case for a small LLC |
Most founders forming a US LLC or a Delaware C-Corp personally fall in the right-hand column. Where an Indian company is the investor, check the net worth ceiling against its latest audited balance sheet before you commit, because what counts towards the financial commitment was redefined in 2022.
Automatic route and approval route
Most ODI goes through the automatic route: no prior RBI approval, provided the investment meets the conditions in the rules. The AD bank checks those conditions before it releases the money.
Anything outside those conditions needs prior approval, applied for through the AD bank. The time an approval takes depends on the case, so build it into your plan rather than assume a date. If a structure only works on the approval route, it is worth asking first whether a simpler structure would do.
The filings: Form FC, UIN and the APR
- Form FC. The investment is reported to the RBI in Form FC through your authorised dealer bank. Talk to the bank before the money leaves India: it will ask for the form and supporting documents along with the remittance.
- UIN. On the first investment, the AD bank obtains a Unique Identification Number for the foreign entity. Every later remittance to it, and every APR, is reported against that number.
- Annual Performance Report. An APR is filed for the foreign entity every year, due by 31 December, through the AD bank.
What happens if you miss a filing
Delayed reporting under the overseas investment rules attracts a late submission fee, which regularises the delay without a formal proceeding. Where that route is not available, the contravention has to be compounded with the RBI. Compounding is a settlement process: you apply, admit the contravention, and pay the amount the RBI fixes, which closes the matter without adjudication. It is slower and more expensive than filing on time.
Round-tripping
A round-trip is an overseas entity funded from India that then invests back into India. The 2022 rules did not ban it outright: they allow some such structures, subject to conditions and limits on the number of layers.
The conditions are specific and the consequences of getting them wrong are serious. If any money from the foreign entity may come back into India, as investment or as a loan, get the structure reviewed for FEMA and tax before the first remittance, not after.
The tax layer
FEMA decides whether and how the money can go. Tax decides what you owe on what comes back.
- Indian tax on foreign income. A resident's total income includes income accruing or arising outside India: under section 5 of the Income-tax Act, 1961 for FY 2025-26, and under section 5 of the Income-tax Act, 2025 from Tax Year 2026-27.
- Credit for foreign tax. Tax paid abroad on the same income is credited in India. A resident claims it in Form 67, which becomes Form 44 from Tax Year 2026-27.
- Schedule FA. A resident reports foreign assets, including the shares or membership interest in the foreign entity, in Schedule FA of the return. See our NRI and cross-border return service.
- US LLC owned by one foreign person. A foreign-owned single-member US LLC files Form 5472 attached to a pro forma Form 1120 every year. The penalty for missing it is US$25,000 per form.
- Delaware C-Corp. The corporation files Form 1120, and pays US federal corporate tax at 21% of taxable income.
- Dealings with the Indian company. Payments between the Indian company and its foreign subsidiary are international transactions that must be at arm's length, with an accountant's report in Form 3CEB. See transfer pricing for SaaS companies. Payments to the foreign entity may also need Form 145 and 146, the old 15CA and 15CB.
No FinCEN BOI report for a US-formed company
FinCEN's interim final rule of March 2025 removed beneficial ownership information reporting for entities created in the United States, and a final rule issued on 11 August 2026, effective 14 August 2026, keeps that exemption. A new Delaware or Wyoming entity does not file a BOI report, whatever some sellers still offer.
The flip or a parallel structure
In a flip, a US corporation becomes the parent and the Indian company becomes its subsidiary, usually by the Indian shareholders swapping their shares for shares in the US company. Both sides of the swap are regulated:
- The Indian company's shares going to a non-resident is foreign investment into India, reported in Form FC-GPR or the relevant form through the AD bank. See FC-GPR filing and FDI reporting.
- Resident shareholders receiving US shares are making an overseas investment, reported in Form FC, within the LRS limit for individuals.
- The pricing needs a valuation. See our share valuation service.
- The transfer can be taxed in India, and later transfers of the US parent's shares can raise indirect-transfer questions where the value sits in India. Get a written tax opinion before the swap. We do not put a rate on a flip from a web page.
In a parallel structure, the Indian company stays Indian-owned, a separate foreign entity is set up, and the two run distinct businesses with arm's length agreements between them. It avoids the swap, but not the ODI reporting, the transfer pricing or the question of which entity owns the IP.
Which to choose is usually a funding question. If a US investor is asking for a US parent, read the term sheet with that in mind: see our term sheet review.
How Regikart helps
We handle the India side of going abroad in one engagement: the structure, Form FC with your AD bank, the APR every year, the return with foreign tax credit and Schedule FA, and the remittance forms. Our international business setup team also forms the US entity and helps with the US bank account. Call or WhatsApp +91 70444 94804, or contact us.
Frequently asked questions
What is ODI under FEMA?
Overseas direct investment is an investment by a person resident in India in a foreign entity, typically to set up or take a strategic stake in a foreign operating business. It is governed by the Foreign Exchange Management (Overseas Investment) Rules, 2022 and reported in Form FC through your AD bank.
Can a resident individual invest in a foreign company?
Yes. A resident individual can invest in a foreign operating business, not one engaged in financial services, and the amount counts towards the LRS limit of US$250,000 per financial year. The investment is reported in Form FC through the AD bank, and an Annual Performance Report follows each year.
What is the difference between ODI and OPI?
The 2022 framework separates overseas direct investment, for setting up or taking a strategic stake in a foreign business, from overseas portfolio investment, which covers passive holdings. The distinction decides which conditions and reporting apply. A foreign subsidiary is ODI.
When is the Annual Performance Report due?
By 31 December every year, filed through your AD bank. Where the foreign entity has no statutory audit, which is usual for a small LLC owned by an individual, a chartered accountant certifies it. Late reporting attracts a late submission fee.
What is a UIN in ODI?
A Unique Identification Number that the AD bank obtains for the foreign entity on the first investment. Every later remittance to that entity and every APR is reported against it.
Is income from my foreign company taxable in India?
If you are resident in India, yes. A resident's total income includes income arising outside India, under section 5 of the 1961 Act for FY 2025-26 and section 5 of the 2025 Act from Tax Year 2026-27. Credit for foreign tax is claimed in Form 67, which becomes Form 44 from Tax Year 2026-27, and foreign assets go in Schedule FA.
Does my US LLC need to file a FinCEN BOI report?
No. FinCEN removed BOI reporting for entities created in the United States in March 2025, and a final rule issued on 11 August 2026, effective 14 August 2026, keeps that exemption. A foreign-owned single-member LLC must still file Form 5472 with a pro forma Form 1120 with the IRS.
Is round-tripping allowed under the 2022 rules?
Not banned outright. The 2022 rules allow some structures where a foreign entity funded from India invests back into India, subject to conditions and limits on layers. Get the structure reviewed for FEMA and tax before the first remittance.
Foreign subsidiary banane ke liye RBI approval chahiye?
Usually not. Most overseas direct investment goes through the automatic route, where the AD bank checks the conditions and no prior RBI approval is needed. Investments outside those conditions need prior approval through the AD bank. Either way, Form FC is filed and an APR follows every year.
About the author
CA Deepak Jaiswal
Founding Partner, FCA at Regikart. Want to discuss this in the context of your business?
