Overseas Direct Investment (ODI) Filing & Compliance Services in India
Domestic individuals or companies acquire a fixed interest, ownership, or control in international companies through Overseas Direct Investment (ODI). FEMA 1999 and the FEMA (Overseas Investment) Rules, Regulations and Directions, 2022 govern ODI. Choose your destination (Singapore, US, UK, or Netherlands) based on your needs. JustStart is your legal and compliance advisor, simplifying the process by managing RBI and FEMA compliance.
- 2-4 weeks for Automatic Route
- 🏢 6-12 Weeks for Government Route
- UIN Allotment
- AD Bank Portal/ FC Form Filing
- Share Allotment Proof (180 Days)
Everything included in your ODI Service package
- Form FC Filing Support
- Automatic & Approval Route Guidance
- AD Bank Coordination
- APR & FLA Compliance Support
- End-to-end RBI/FEMA Documentation
- 100% Online Process
Request a Callback
4.9 star all time rating
4.8 star all time rating
OVERVIEW
What is Overseas Direct Investment (ODI)?
The Overseas Direct Investment (ODI) is a cross-border investment that allows Indian entities and resident individuals to invest in foreign entities through equity, share purchase, or subscription to the memorandum of association. Indian businesses or individuals made direct investments in foreign entities to boost domestic business, acquire strategic assets for lasting interest, and integrate into the global economy. Furthermore, through it, the companies easily establish Joint Ventures (JV) or Wholly-Owned Subsidiaries (WOS) abroad.
The Foreign Exchange Management Act (FEMA), 1999, is the primary governing law that regulates the ODI (Overseas Direct Investment). The complete process of Overseas Direct Investment (ODI) operates under the FEMA (Overseas Investment) Rules, Regulations & Directions, 2022, which are issued by the Reserve Bank of India (RBI). Through cross-border investment, businesses from India gain access to an international target market. Through it, domestic individuals and businesses expand their international footprint and competitiveness.
Benefits
Benefits of ODI for Indian Businesses
Establishing a joint venture or a wholly owned subsidiary abroad is a golden opportunity for Indian businesses or individuals. Although the Overseas Direct Investment in India provides various benefits. These core benefits include the following:
Provides International Market Access
The outward investment provides the opportunity to set the mark in larger foreign economies or walk into emerging markets. It generally bypasses trade barriers and establishes local operations. By directly expanding the customer base, the Indian entities get the chance to establish a JV or WOS.
Gaining Technology & R&D
The outbound direct investment allows Indian entities to secure foreign assets as well as integrate with the global supply chain. By investing in a foreign country, domestic businesses gain direct access to advanced technology. It further helps to improve skills and R&D by comparing resources and workflow between the two countries.
Ideal for Fundraising Credibility
Making an investment in a foreign country from India directly helps to boost business credibility. The Indian companies are eligible to invest up to 400% of their net worth, as per the revised regulation. It provides the biggest funding flexibility under the Automatic Route.
Boosts Foreign Exchange Earnings
Investment in international markets directly impacts foreign trade and revenue. Although it allows Indian entities or individuals to make income through royalty fees, dividends, and technical know-how payments.
Strengthens the External Trade
Setting up an overseas affiliate drives the export opportunity for Indian businesses. Through the outbound investment, the domestic businesses strengthen their connection for manufacturing or services with global buyers. It directly provides quality and targeted buyers for specific goods/services to domestic entities.
Laws and Authorities
Key Legislation and Authority for ODI (Overseas Direct Investment)
The Overseas Direct Investment for Indian businesses is governed by a strict legal framework and regulatory authorities. The major laws and authorities for ODI are the following:
Primary Law
The Foreign Exchange Management Act, 1999 (FEMA) is the primary law under which the Overseas Direct Investment (ODI) is governed. This primary governing framework defines and regulates overseas investment to safeguard India's external economic stability.
Current Regulatory Framework
The current active legislation for outbound direct investment is the Foreign Exchange Management (Overseas Investment) Rules, Regulations, and Directions, 2022. This active legal framework was introduced in 2022 by the Ministry of Finance and the Reserve Bank of India (RBI), which determines how Indian residents invest capital outside India.
Governing Authority
ODI compliance and oversight are overseen by the Reserve Bank of India (RBI). For ODI, the approval route is managed by the RBI, as it is tasked with handling India's foreign exchange reserves and protecting against unauthorized capital flight.
Eligibility
Who Can Invest in ODI from India?
The eligible entities or individuals in India are those who invest in foreign companies to establish joint ventures or wholly owned subsidiaries abroad. The Overseas Direct Investment for Indian businesses is a tool to expand their goods or services in global markets, including technology transfer and business diversification. The eligible parties for ODI are:
Corporate Entities & Businesses
The businesses that are registered under the Companies Act can make cross-border investments via ODI. These corporate entities are Limited Liability Partnership (LLP), Partnership Firm, etc. The companies that are active in sectors such as manufacturing, tech, or any other services enroll in this investment to gain access to international markets.
Resident Individuals
The individuals, including minors, enroll for cross-border investment, making investments under the Liberalized Remittance Scheme (LRS). The residents of India are legally allowed to invest directly in equity capital. But the resident individuals are restricted from investing in prohibited activities such as gambling, real estate, or financial services.
Corporate Employees & Directors
Professionals or executives who are granted equity shares in foreign companies or their overseas joint ventures (JVs). But they are restricted to directly funding or incorporating a foreign corporate entity. Although they can get the shares of a foreign company under an Employee Stock Ownership Plan (ESOP).
HUFs (Hindu Undivided Family)
Under the Reserve Bank of India (RBI) and FEMA (Foreign Exchange Management Act) regulations, HUFs are generally restricted from making overseas direct investments. However, the HUFs can only make the outward investment under LRS for certain activities (not for business entities).
Who Cannot Participate in ODI?
Any individuals who are under scrutiny by enforcement agencies for any exporter default, Trusts and Societies, are prohibited from making outward investments. Those active in real estate & banking are strictly prohibited. It is legally prohibited to operate any form of gambling and betting in a foreign country. These are a few sectors or parties that cannot be part of ODI (Overseas Direct Investment). For this, they generally required the prior approval of the Reserve Bank of India (RBI).
Automatic vs Approval Route
ODI Different Routes - Automatic Route vs Approval Route
Automatic Route or Approval Route are the two core pathways through which Indian entities and individuals make the ODI (Overseas Direct Investment). The application process and eligibility are completely different in both routes, which are categorized as:
Automatic Route
The unrestricted sectors don't require prior RBI (Reserve Bank of India) approval. Under this route, the Indian party can directly invest through the designated AD (Authorized Dealer) bank. However, the financial commitment should not exceed 400% of the Indian entity's net worth. To be eligible for the automatic route, the condition is that the Indian party must not be on the RBI's exporter's caution list. Having clean background records is crucial to passing the Automatic Route. The sectors eligible under this pathway include:
- Manufacturing & industrial
- IT & Services
- Infrastructure & Energy
- Agriculture & Healthcare
- NBFCs registered as Indian entities (but comply with regulatory norms)
Approval Route
The approval route is followed when prior Reserve Bank of India (RBI) permission is required for investment in the sensitive sector (generally restricted/prohibited). The formal application is required when the financial commitment exceeds 400% of net worth. Even the Approval Route is required when an Indian party's company is under scrutiny by regulatory authorities. Prior RBI approval becomes mandatory when the investment is made in financial services or in those sectors that are prohibited from outbound investments. These are the major sectors that require RBI approval:
- Real Estate Activities (Only permitted construction & development of townships, road bridges, etc.)
- Bank Sector
- Rupee-Linked Financial Products
- Financial sector investments by non-financial entities
DOCUMENTS REQUIRED
What Documents are Required for ODI Filing?
The exact documentation depends on whether the Indian party is investing through an automatic route or an approval route. Here is the comprehensive list of documentation required under both routes:
Documents under Automatic Route
- Form FC filed by the Authorized Dealer (AD) Bank
- Board Resolution to approve the overseas investment in JV/WOS
- Net Worth certificate, certified by a Chartered Accountant
- Directors'/Partners'/Proprietors' KYC documents
- Audited Financial Statements (Last 3 years)
- Valuation Report for Share Purchase
- Source of Funds Declaration
- AD bank documents include account details, remittance proof,
- Form FC (undertaking financial commitment)
- Due Diligence report
- Foreign entity papers (JV/WOS agreement, MOA of foreign entity, and registration certificate
Documents Required Under the Approval Route
- RBI approval application (Form ODI Part 1)
- Detailed Application Letter
- Request Letter
- Board Resolution for the proposal
- Net Worth Certificate (as per RBI format)
- Audited Financial Statements (last 3 years)
- Directors' and management personnel's KYC documents
- Mandatory Valuation Report
- Due Diligence Report
- Detailed Source of Funds Breakdown
- AD Bank Approval for Remittance Authorisation
- RBI/Ministry Approval (Sector-specific permissions)
- No Objection Certificate (NOC) from existing lender (if applicable)
- Foreign Entity (MOA & AoA, JV agreement, registration certificate)
- FEMA Compliance Certificate
Process
Step-by-Step Guide: ODI Filing Process
The process of ODI (Overseas Direct Investment) has three structured stages. First, the Indian party is required to complete the pre-filing requirements, which also include an eligibility check. Second, filing and remittance processes; third, post-investment formalities. The following are the steps included for ODI filing:
Step 1: Verify the Eligibility
The Indian entity or individual resident must check the eligibility criteria for outward investment under the FEMA (Overseas Investment) Rules, 2022. Verifying eligibility is crucial, as few sectors are prohibited for ODI.
Step 2: Choose the Filing Route
The Indian party must verify which ODI filing route is accurate. You must use the Automatic Route if the total financial commitment doesn't exceed 400% of the Indian entity's net worth. However, RBI approval is mandatory if the commitment exceeds these thresholds. Reserve Bank of India (RBI) approval is further compulsory when you are investing in prohibited sectors.
Step 3: Submit the form FC to the AD Bank
The Form FC must be filed before a financial commitment. You are required to file it along with the specific documents with the designated AD (Authorized Dealer) Category I bank.
Step 4: Verification by the Bank
The AD bank will scrutinize all specific documents. These submitted documents will be verified to ensure automatic route compliance. If approval is required, it forwards the proposal to the RBI's Overseas Investment Division.
Step 5: RBI Issues the UIN
The Reserve Bank of India (RBI) issues a Unique Identification Number (UIN) for the foreign entity via an AD bank.
Step 6: Remittance of Funds
Once you receive the UIN, you must remit funds through the AD bank strictly. It must be as per the ODI structure and RBI guidelines.
Step 7: Proof of Investment Submission
Submitting the evidence of investment is important. You are required to submit the share certificate or equivalent evidence within 6 months of remittance.
Step 8: Annual Compliance
- The Form APR (Annual Performance Report) must be filed by 31 December
- File the FLA return on the FLAIR portal by 15th July.
Compliances
The Ongoing ODI Compliance
Meeting the specific administrative formalities is crucial for Indian businesses to stay compliant. Here are the major annual compliance requirements that domestic businesses must fulfil:
1. Annual Performance Report (APR)
The APR must be filed by December 31st every year on the APR form. It is filed via the entity's designated Authorised Dealer (AD) Category-I bank. Meanwhile, it generally covers the entity's financial/accounting year that ended on or before March 31 of the calendar year. Further, Indian individuals or entity required to file the APR (Annual Performance Report) only when they acquire control over a foreign entity by securing a 10% or more equity stake. Along with APR filing, the Indian entities are also required to audit their financial records.
2. Reporting of Investment & UIN
Once the financial commitment is made by the domestic entity to a foreign company, the Form FC is forwarded by the AD bank to the RBI. Upon successful completion of this process, the authority allots the Unique Identification Number (UIN). It is mandatory to submit the proof of share certificate or equivalent document for evidence of the investment to your AD Bank. The evidence documents must be submitted within 6 months of the date of remittance.
3. FLA Return (Foreign Liabilities and Assets)
FLA return filing is compulsory for the Indian entity that has made an ODI (Overseas Direct Investment) in the previous financial year or received FDI. FLA return must be filed by July 15 every year on the FLAIR portal.
Why Choose JustStart?
Why Choose JustStart for ODI Filing in India?
The domestic businesses or resident individuals are often stuck with ODI filing due to complex FEMA and RBI guidelines. JustStart has made the ODI filing process much simpler and error-free. Here are the core reasons why you should choose us:
Guidance for RBI & FEMA Regulations
JustStart has a professional and dedicated staff of chartered accountants and company secretaries who provide expertise on foreign exchange regulations. They ensure that you meet the specific guidelines for a foreign Joint Venture (JV) or Wholly-Owned Subsidiary (WOS).
End-to-End Filing Support
You will be guided and supported throughout the outward direct investment process. We ensure that every step during the process is accurate and meets the RBI & FEMA guidelines.
Help to Avoid Penalties
Our professional legal advisor ensures that your business does not face any kind of compounding penalties. We help domestic entities to stay in compliance with specific legal formalities.
Timeline Commitment
Under the Automatic Route, it generally takes 1 to 2 weeks. However, often during the approval route, the timeline exceeds 30 to 60 days. We ensure that the approval route is completed within a strict timeframe.
Locations
Overseas Direct Investment in Cities & States
FAQs
LET'S CLEAR ALL THE DOUBTS!
ODI is an investment made by domestic entities or resident individuals into foreign businesses. Through it, the domestic businesses establish the Joint Venture (JV) or Wholly-Owned Subsidiary (WOS).
The flow of capital and the role of the investor determine the difference between FDI (Foreign Direct Investment) and ODI (Overseas Direct Investment). In FDI, the capital flows into your country from international investors. In ODI, the money flows outward from your country into foreign entities.
Multiple applicants and entities are categorized to make outward investment from India. The legally registered companies in India under the Companies Act, 2013, can invest. SEBI-registered mutual funds and VC capital funds are also applicable, but under dedicated caps.
The Overseas Direct Investment (ODI) by resident individuals is governed by the Liberalized Remittance Scheme (LRS). The resident individuals are required to invest in the equity capital of overseas Joint Ventures (JVs) or Wholly Owned Subsidiaries (WOS). The resident individuals are prohibited from extending loans or issuing corporate/personal guarantees on behalf of the overseas entity.
The RBI (Reserve Bank of India) sets the rules for Outward Direct Investment (ODI) that govern how businesses and Indian individuals can invest in entities located outside of India. Further, the RBI ODI guidelines ensure that the investment adheres to the Foreign Exchange Management Act (FEMA).
No, it is not compulsory to obtain prior RBI approval in every specific sector for outward investment. The domestic entities and resident individuals can make outward investment through the Automatic Route, under which there is no need for approval, and it is managed by an Authorized Dealer (AD) Category-I Bank.
The Reserve Bank of India (RBI) didn't fix any statutory minimum investment limit for Overseas Direct Investment (ODI). The capital requirement typically depends on the specific destination country's incorporation rules.
The timeline for making an Overseas Direct Investment depends on the specific route, i.e., the Automatic Route and the Approval Route. The remittance process through the bank generally takes a few days under the Automatic Route. Meanwhile, the Approval Route typically takes 30 to 60 days from RBI clearance.
The specific sectors, such as the real estate business, gambling/betting, or banking, are prohibited from outward investment. The Indian entities cannot make an ODI if they are operating in these specific sectors.
Yes, the Startups can make Overseas Direct Investments (ODIs). However, they are required to meet the specific Reserve Bank of India (RBI) and FEMA ODI regulations.
