Key points
- ODI is an unlisted equity, or 10 per cent or more of a listed foreign entity, or a stake below 10 per cent that carries control. It stays ODI even if the stake later falls below 10 per cent.
- Form FC goes to the designated AD bank on or before the initial investment. The bank reports it for a UIN. The UIN records the investment. It is not the Reserve Bank's approval.
- Evidence of the investment reaches the bank within six months, or the remittance is repatriated in that period.
- The APR is due by 31 December, and by 31 December of the next year when the foreign entity closes its books on 31 December. RBI's list of returns describes it as an annual return the investor submits to the AD bank.
- The late submission fee for an APR is the flat ₹7,500 in the Master Direction's matrix for returns that do not capture flows. A further financial commitment waits until the delay is regularised.
What counts as ODI
The Master Direction on Overseas Investment, which operationalises the Overseas Investment Rules and the Overseas Investment Regulations notified on 22 August 2022, defines overseas direct investment as acquisition of any unlisted equity capital, or subscription as part of the memorandum of a foreign entity, or investment in 10 per cent or more of the paid-up equity capital of a listed foreign entity, or investment with control where the stake in a listed foreign entity is below 10 per cent. Once an investment is ODI, it continues to be treated as ODI even if the holding later falls below 10 per cent or control is lost.
Anything else in foreign securities is overseas portfolio investment, with the exceptions the direction spells out. Financial commitment is wider than the equity: it adds debt, other than portfolio investment, and non-fund-based facilities. A resident individual shall not make a financial commitment by way of debt. An Indian entity shall not lend directly to its overseas step-down subsidiary.
A person whose account is an NPA, or who is a wilful defaulter, or who is under investigation by a financial-sector regulator or an investigative agency, needs a no-objection from the lender, regulator or agency concerned before a financial commitment or a disinvestment. A financial commitment above USD 1 billion in a financial year needs the Reserve Bank's prior approval even when it sits inside the automatic-route ceiling.
The UIN, and the evidence within six months
Form FC, with the documents the reporting direction requires, is submitted to the designated AD bank for a unique identification number on or before the initial ODI. The bank verifies it and reports it in the OID application. Any remittance is facilitated only after the UIN. The direction is explicit that allotment of the UIN is not an approval of the investment. It signifies that the investment has been taken on record. Since 1 June 2012 the confirmation has been an auto-generated email to the bank and the investor, not a separate letter.
The person who acquires the equity submits evidence of the investment to the AD bank within six months. If that evidence does not arrive, the funds remitted are repatriated within the same six months. The bank keeps the evidence and satisfies itself about the documents. An incomplete filing is treated as non-submission.
Who files the APR, and by when
RBI's instructions on Form APR say a person resident in India who acquires equity capital reckoned as ODI submits an APR for each foreign entity every year, until that person is no longer invested, by 31 December. Where the foreign entity's accounting year ends on 31 December, the APR is submitted by 31 December of the next year. RBI's list of returns describes Form APR as the annual return on the foreign entity's financial position, shareholding, repatriation and step-down subsidiaries, submitted by the Indian investor to the AD bank, which reports it to the Reserve Bank. The Master Direction of 24 July 2024 is the authority that list cites.
The same instructions say an APR is not submitted where the Indian investor holds less than 10 per cent without control and has no other financial commitment, where the foreign entity is under liquidation from the date the process starts, or for the broken period at disinvestment. Transactions between the last APR and the disinvestment or the start of liquidation are reported in Form FC instead. Where more than one resident has invested, the person with the highest stake files, and equal holders file jointly or authorise one of them. The Master Direction confirms that a joint APR may be filed by one investor whom the others authorise.
The APR is based on the audited financial statements of the foreign entity. Where the Indian investor does not have control, and the host country does not require an audit, the APR may be based on unaudited statements certified by the statutory auditor of the Indian entity or, where a statutory audit does not apply, by a chartered accountant. That includes a resident individual. Acquisitions, winding up or a change in the shareholding of a step-down subsidiary during the year are reported in the APR, and leaving them out is treated as non-submission.
Delay, the fee, and what the bank will not do
A delay in the APR, or in any other overseas-investment return, is regularised by filing it and paying the late submission fee through the designated AD bank. In the matrix in the Master Direction, an APR sits with the returns that do not capture flows. The fee for that row is ₹7,500. The row for returns that capture flows, such as Form FC, is a different formula, 7,500 plus a percentage of the amount for the years of delay, and it is not the APR row.
Until the delay is regularised, the AD bank shall not facilitate any outward remittance or further financial commitment towards that foreign entity. A resident individual who invests under the Liberalised Remittance Scheme also reports as that scheme requires. This guide does not restate the LRS limit. Confirm the current cap with the bank or the scheme direction before you rely on a dollar figure.
The APR is filed with the designated AD bank. It is not a return the FxLayer platform prepares. The FLA return, which is a different annual filing and which does have a page on the platform, is covered in its own guide.
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This article is general information on Indian foreign exchange and tax rules as they stood on the date shown. It is not legal or tax advice. Rules and limits change; confirm the current position with your AD bank, the relevant RBI Master Direction or your adviser before acting.