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Overseas Direct Investment (ODI)

Investment in unlisted foreign entity by way of acquisition of equity capital or subscription as a part of the Memorandum of Association of the foreign entity (irrespective of % stake), or  Investment in listed foreign entity where the stake if 10% or more of the paid-up equity capital, or  Investment with control* where investment is less than 10% of the paid-up equity capital of a listed foreign entity

*Control: The right to appoint a majority of the directors or control management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreement or voting agreements that entitle them to 10% or more of voting rights or in any other manner in the entity.

Permissible investors under automatic route

An Indian entity which is defined as a ‘Company defined under the Companies Act, 2013 or a body corporate incorporated by any law for the time being in force or a Limited Liability Partnership (LLP) formed under the Limited Liability Partnership Act, 2008 or a partnership firm registered under the Indian Partnership Act, 1932’ and Resident Individuals.

Financial commitment

Financial commitment by a person resident in India means the aggregate amount of investment by way of investment into equity capital, debt other than Overseas Portfolio Investment (OPI) and non-fund based facility or facilities extended by it to all foreign entities. Resident Individuals are permitted only to make investment in equity capital of overseas entities.

Permissible limits

Financial commitment shall not exceed 400% of net worth as per the last audited balance sheet (not more than 18 months preceding the date of transaction) or USD 1 (one) billion (or its equivalent) in a financial year, whichever is lower. Any resident individual may make ODI by way of investment in equity capital or OPI in the manner provided in Schedule III of subject to the overall ceiling under the Liberalized Remittance Scheme i.e. USD 250,000 per annum.

Prohibited sectors

Real estate activity, gambling in any form, dealing with financial products linked to the Indian Rupee without having specific approval of the Reserve Bank of India. In addition to these, Resident Individuals are not allowed to invest in financial sectors and set up any Step-Down Subsidiary (SDS).


What is Overseas Portfolio Investment (OPI)?

  • Investments other than Overseas Direct Investment (ODI) in foreign securities, but not in any unlisted debt instruments or any security issued by a person residing in India who is not in an International Financial Services Centre (IFSC)
  • The investment (including sponsor contribution) in units of any investment fund overseas, duly regulated by the regulator for the financial sector in the host jurisdiction will be considered as OPI
  • Shares or interest acquired by the resident individuals by way of Sweat Equity Shares, Minimum Qualification Shares or under Employee Stock Ownership Plan (ESOP)/ Employee Benefits Scheme up to 10% of the paid-up capital/stock, whether listed or unlisted, of the foreign entity and without control will also qualify as OPI
  • Any investment made overseas according to schedule IV of the Overseas Investment (OI) Rules in securities as stipulated by the Securities and Exchange Board of India (SEBI) by Mutual Funds (MFs), Venture Capital Funds (VCFs) and Alternative Investment Funds (AIFs) registered with SEBI, will be considered as OPI.




  • Provided that ODI by a person residing in India in the equity capital of a listed entity, even after its delisting, will continue to be treated as ODI until any further investment is made in the entity
  • Once an investment in a foreign entity is classified as ODI, the investment will continue to be treated as ODI, even if such investment falls below 10% of the paid-up equity capital or if the investor loses control in the foreign entity.

What is Equity Capital?

Equity Capital means equity shares, perpetual capital or instruments that are irredeemable or contribution to non-debt capital of a foreign entity, which are fully and compulsorily convertible instruments. Accordingly, any instrument, which is redeemable, non-convertible or optionally convertible, will be treated as debt for the purpose of OI Rules/Regulations/Directions.

What is Financial Commitment?

The aggregate amount of investment made by a person residing in India by way of Overseas Direct Investment, debt other than Overseas Portfolio Investment in foreign entities. It will include non-fund based facilities extended by such person to or on behalf of such foreign entity or entities.

What is the maximum permissible financial commitment by an Indian entity?

The total financial commitment made by an Indian entity in all the foreign entities taken together at the time of undertaking such commitment shall not exceed 400 percent of its net worth as on the date of the last audited balance sheet or USD 1 (one) billion (or its equivalent) in a financial year, whichever is lower.


Net worth will have the same meaning as assigned to it in clause (57) of section 2 of the Companies Act, 2013 (18 of 2013). Net worth of a registered Partnership firm or Limited Liability Partnership will be the sum of the capital contribution of partners and undistributed profits of the partners, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the last audited balance sheet.

Are Resident Individuals (RI) allowed to invest in an overseas entity?

Resident individuals are permitted to make ODI & OPI up to the limit prescribed by the Reserve Bank of India from time to time, per financial year under the Liberalised Remittance Scheme (LRS). The prevailing LRS limit is USD 250,000 per financial year.

Which are the prohibited sectors for making an Overseas Direct Investment?

Indian Entities/Resident Individuals are restricted from investing in a foreign entity that is engaged in real estate activity*, gambling in any form or dealing in financial products linked to the Indian Rupee.

*For the purposes of this sub-rule, the expression ‘real estate activity’ means buying and selling of real estate or trading in Transferable Development Rights, but does not include the development of townships, construction of residential or commercial premises, roads or bridges for selling or leasing.

§  Resident Individuals are not allowed to invest in a Foreign Entity engaged in the Financial Service sector.

What is a Subsidiary/ Step down Subsidiary (SDS)?

  • SDS means an entity in which the foreign entity has invested in equity capital and has control. The investee entities of the foreign entity, where such foreign entity does not have control will not be treated as SDSs and therefore need not be reported henceforth.

Can an Indian Entity (IE)/Resident Individual (RI) provide a Loan to the Foreign Entity?

An IE may lend or invest in any debt instruments issued by a Foreign Entity or extend non-fund based commitment to or on behalf of a Foreign Entity, including overseas SDSs of such IE, subject to the following conditions:

a) The Indian Entity is eligible to make ODI

b) The Indian Entity has made ODI in the Foreign Entity

c) The Indian Entity has acquired control in the Foreign Entity on or before the date of making such financial commitment        

d) In case of a Loan, it should be duly backed by a Loan Agreement, where the rate of interest will be charged on an arm’s length basis.

Explanation: For the purpose of this regulation, the expression ‘arm’s length’ means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest.


Resident Individuals are allowed only to invest in equity capital of the Foreign Entity. 

Can a Loan given to any Foreign Entity by an Indian party, be converted into equity? If yes, what are the reporting requirements?

Yes. Loan may be converted into equity capital under the automatic route and reported online to RBI, through the designated Authorised Dealer (AD) bank.

Is an AD bank allowed to process an ODI transaction of an individual, if there is already another investor who had carried out an ODI transaction in that Overseas Entity through another AD Bank?

If there is any shareholder who has already carried out a transaction to the Foreign Entity through one AD bank and UIN is generated for the Foreign Entity, the transaction can be processed through another AD Bank only after the transfer of UIN from one AD bank to another.

Can an ODI transaction be processed if Annual Performance Reporting (APR) is pending for a Foreign Entity?

ODI transaction to the Foreign Entity is not permissible if there is any pending reporting such as APR submission, Share Certificates submission, Foreign Liabilities & Assets (FLA) Return, pending LSF payment etc. for that Foreign Entity.

What is considered as Financial Services activity?

A Foreign Entity is considered to be engaged in the business of Financial Services activity, if it undertakes an activity, which if carried out by an entity in India, requires registration with or is regulated by a financial sector regulator in India.

Can an individual invest in Foreign Entities, which has subsidiaries?

The Foreign Entity in which a Resident Individual has control, will not set up or should not have any Step Down Subsidiaries.

Can an Indian Entity (IE) setup a Step Down Subsidiary in India?

The financial commitment by IE in a Foreign Entity that has invested/invests in India at the time of making such financial commitment or at any time thereafter, either directly or indirectly, resulting in a structure with more than two layers of subsidiaries is not permitted according to rule 19(3) of the OI Rules, provided that, no further layer of subsidiary/subsidiaries will be added to any structure existing with two or more layers of subsidiaries, post notification of the OI Rules/Regulations.

What are the various reporting requirements post an ODI transaction?

Nature of reporting


Annual Performance Report (APR)

IE/RI acquiring equity capital in a Foreign Entity which is reckoned as ODI, will submit an APR with respect to each Foreign Entity every year, till the person residing in India is invested in such Foreign Entity by December 31st. Where the accounting year of the Foreign Entity ends on December 31st, the APR will be submitted by December 31st of the next year.

Example 1:  If the accounting year of a Foreign Entity is Apr-Mar, then Form APR filing due date for the FY 2021-22 (Apr’21-Mar’22) will be Dec 31, 2022.


Example 2: If the accounting year of a Foreign Entity is Jan-Dec, the Form APR filing due for the FY 2022 (Jan’22-Dec’22) will be Dec 31, 2023.

Proof of Investment  /

Share Certificate

IE/RI acquiring equity capital in a Foreign entity, which is reckoned as ODI, will submit the evidence of investment of OI Regulations to the AD bank within six months, failing which, the funds remitted overseas will be repatriated within the said period of six months.

Post Investment changes

IE/RI should report the details regarding acquisition/setting up /winding up/transfer of an SDS or alteration in the shareholding pattern in the Foreign Entity during the reporting year in the APR, failing which, it will amount to non-submission of APR.  

Form OPI

This form has incorporated the previous form for portfolio reporting as provided for listed Indian companies, Mutual Fund (MF), Alternative Investment Fund (AIF)/ Venture Capital Fund (VCF) and Employee Stock Ownership Plan (ESOP) reporting.  

Form OPI is to be submitted by a person residing in India other than a resident individual within <60> days from the end of the half-year (i.e., September or March end as the case maybe) in which such OPI or transfer by way of sale is made.

Form FC – Section F

(Reporting of Restructuring)

Section F of Form FC is required to be submitted by such person residing in India, whose financial commitment changes due to restructuring of the Foreign Entity’s balance sheet. This should be submitted within <30> days from the date of such restructuring.

Form FC – Section G

(Reporting of Disinvestment)

Section G of Form FC is to be submitted while undertaking disinvestment in a Foreign Entity, within <30> days from the date of receipt of disinvestment proceeds (inward remittance). Where the disinvestment proceeds are received in tranches according to the agreement, each receipt will be reported in Form FC.

Who is responsible for filing of APR, if multiple persons are invested in the same Foreign Entity?

If more than one person residing in India has made ODI in the same Foreign Entity, the person holding the highest stake in the Foreign Entity will be required to submit APR. In case of holdings being equal, APR will be filed jointly by all such persons.

Is it mandatory that the APR filing should be based on the audited Financial Statement (FS) of the Foreign Entity?

The APR will be based on the audited Financial Statements of the Foreign Entity. Where the person residing in India does not have ’control’ in the Foreign Entity and the laws of the host jurisdiction do not provide for mandatory auditing of the books of accounts, the APR may be submitted based on unaudited Financial Statements certified by Indian Entity’s statutory auditor or by a Chartered Accountant, where the statutory audit is not applicable, including resident individuals.

When is APR filing requirement not applicable to an Indian Entity/Resident Individual?

The APRs will not be submitted in the following cases:

·         If a person residing in India is holding less than 10% of the equity capital without control in the Foreign Entity and there is no other financial commitment, other than by way of equity capital

·         When the Foreign Entity is under liquidation, from the date of initiation of the liquidation process

·         For the broken period (i.e. full year not completed) at the time of disinvestment. However, the details of transactions, if any, that had been undertaken from the date of submission of the last APR till the date of disinvestment/initiation of liquidation process, may be duly reported in the Form FC.

Can an Indian Party utilise the net worth of its Indian Entity/Indian Holding company for investing in a Foreign Entity abroad?

No. The concept of utilising the net worth of the Subsidiary/Holding company by the Indian Entity has been discontinued with the new ODI regime effective Aug 22, 2022.

The group company can give guarantee and block its limit for computation of the financial commitment limit. Further, for computing the financial commitment limit of the group company, any fund-based exposure of such group company to the Indian Entity or of the Indian Entity to such group company, will be deducted from the net worth of such group company. In case of a Resident Individual Promoter, the same shall be counted towards the financial commitment limit of the Indian Entity and accordingly be reported by the Indian Entity.


How is Late Submission Fee amount computed?

The LSF for delay in reporting of overseas investment related transactions will be calculated as per the following matrix:

Sr. No.

Type of Reporting delays

LSF Amount (INR)


Form ODI Part-II/ APR, FLA Returns, Form OPI, evidence of investment or any other return which does not capture flows or any other periodical reporting.



Form ODI-Part I, Form ODI-Part III, Form FC or any other return which captures flows or returns which capture reporting of non-fund based transactions or any other transactional reporting.

7500 + (0.025% × A × n)


a)     ‘n’ is the number of years of delay in submission rounded-upwards to the nearest month and expressed up to 2 decimal points

b)     ‘A’ is the amount involved in the delayed reporting

c)      LSF amount is per return

d)     Maximum LSF amount will be limited to 100 % of ‘A’ and will be rounded upwards to the nearest hundred

e)      Where an advice has been issued for payment of LSF and such LSF is not paid within 30 days, such advice shall be considered as null and void and any LSF received beyond this period will not be accepted. If the applicant subsequently approaches for payment of LSF for the same delayed reporting, the date of receipt of such application will be treated as the reference date for calculation of LSF.

The option of LSF will be available up to three years from the due date of reporting/submission under OI Regulations. The option of LSF will also be available for delayed reporting/submissions under Notification No. FEMA 120/2004-RB and earlier corresponding regulations, up to three years from the date of notification of OI Regulations

A person residing in India who has made a financial commitment in a Foreign Entity according to the Act or Rules & Regulations made thereunder, will not make any further financial commitment towards such Foreign Entity or transfer such investment, until any delay in reporting is regularised.

Is there any reporting requirement for investment by Venture Capital Funds (VCF)/Alternate Investment Funds (AIF), Portfolio Investments, overseas investment by Mutual Funds and purchase and repurchase of ESOPs?

Yes. Any investment under OI guidelines by Mutual Funds, Venture Capital Funds and Alternative Investment Funds will be treated as OPI.

A person residing in India other than a Resident Individual making any Overseas Portfolio Investment (OPI) or transferring such OPI by way of sale, will report such investment or transfer of investment within sixty days from the end of the half-year in which such investment or transfer is made, as of September or March-end, provided that, in case of OPI by way of acquisition of shares or interest under Employee Stock Ownership Plan or Employee Benefits Scheme, the reporting will be done by the office in India or the branch of an Overseas Entity/Subsidiary in India or the Indian Entity in which the Overseas Entity has direct or indirect equity holding where the resident individual is an employee or director.