FEMA Consultants India
Expert Advisory on FDI, NRI, ODI, ECB, and Compounding

The Foreign Exchange Management Act, 1999 (FEMA) is India’s comprehensive statute governing all cross-border financial transactions. Whether a foreign company is investing in an Indian startup, an NRI is buying property in Mumbai, an Indian company is setting up a subsidiary in Singapore, or an Indian business is raising a foreign currency loan from an overseas lender, FEMA and the Reserve Bank of India’s (RBI) regulations at rbi.org.in determine what is permitted, what requires prior approval, what must be reported within 30 or 60 days of the transaction, and what attracts a penalty for non-compliance. FEMA is not a single simple statute — it is a framework of the principal Act supported by Foreign Exchange Management (Non-debt Instruments) Rules 2019, Foreign Exchange Management (Debt Instruments) Regulations, current account transaction rules, sector-specific FDI Policy issued by DPIIT at dpiit.gov.in, and hundreds of RBI Master Directions, circulars, and notifications that amend the framework continuously. Navigating this landscape without a dedicated FEMA consultant almost always results in inadvertent violations — and FEMA violations, though civil rather than criminal, require regularisation through the RBI’s compounding mechanism and come with financial penalties.

N D Savla & Associates, Chartered Accountants based in Mumbai, is a multi-disciplinary FEMA consulting practice offering advisory, compliance, and regularisation services across the full spectrum of FEMA: inbound FDI (companies receiving foreign investment, filing Form FC-GPR and FC-TRS on the FIRMS portal at firms.rbi.org.in, and managing the FLA Annual Return); NRI/PIO/OCI FEMA advisory (bank account structuring across NRE, NRO, and FCNR-B accounts, property transaction compliance, Form 15CA/15CB repatriation certification, and returning NRI FEMA planning); Outward Direct Investment (ODI) for Indian companies investing abroad; External Commercial Borrowings (ECB) for Indian companies raising foreign loans; FEMA compounding for any entity that has discovered a past violation; Liberalised Remittance Scheme (LRS) advisory for resident individuals; and export/import FEMA compliance for Indian businesses trading internationally. Our integrated CA practice — combining income tax, GST, and company law under one roof — ensures that every FEMA transaction is analysed from all relevant angles: the FEMA obligation, the income tax consequence, and the Companies Act/SEBI implication.

This page provides a structured overview of N D Savla & Associates’ FEMA consulting services and the regulatory framework underpinning each service area. For detailed guidance on specific topics: see our FDI Filing with RBI guide for Form FC-GPR, FC-TRS, and FLA; our FLA Return Filing guide for the annual Foreign Liabilities and Assets return; our FEMA India Rules for NRI guide for NRE/NRO/FCNR accounts, property, and repatriation; and our Company Secretary Services guide for the secretarial compliance that often runs alongside FEMA transactions.

The FEMA Framework — Two Categories of Transactions

FEMA divides foreign exchange transactions into two broad categories:

• Current Account Transactions: trade in goods and services, travel, education, medical treatment, gifts — these are largely free and do not require RBI permission, though individual limits and documentation requirements apply under the FEMA (Current Account Transactions) Rules
• Capital Account Transactions: investments (FDI, FPI, ODI), borrowings (ECB, trade credit), immovable property, guarantees, deposits — these are regulated under specific FEMA regulations and require compliance with prescribed conditions, reporting, and in some cases prior approval

Why FEMA Is Complex and Why Violations Are Frequent

• Multiple regulatory layers: FEMA (the Act), NDI Rules (for equity investment), Debt Instruments Regulations (for ECB, deposits, debentures), Current Account Rules, RBI Master Directions (updated frequently), sector-specific FDI Policy (DPIIT), and individual RBI circulars — all must be read together
• Constant changes: the RBI issues Master Directions, circulars, and press releases amending FEMA rules throughout the year. A position that was compliant two years ago may require re-evaluation today
• Transaction-specific compliance: each FDI transaction, each ODI transaction, each ECB drawdown requires specific documentation, valuation, and timely reporting. Missing even one step — like the 30-day FC-GPR deadline — is a violation
• Multi-law intersection: every cross-border transaction involves simultaneous FEMA compliance, income tax compliance (withholding tax under Section 195, DTAA analysis), and in many cases company law compliance (PAS-3 for share allotment, Form OC for overseas investment). Handling only one law while ignoring the others creates an incomplete picture
• FIRMS portal technical requirements: all major FEMA filings now happen on the FIRMS portal at
• firms.rbi.org.in, which requires technical familiarity with the portal’s modules (FLAIR for FLA, SMF for FC-GPR/FC-TRS, OI portal for ODI, ECB portal)

Foreign Direct Investment (FDI) is the most common FEMA compliance requirement for Indian private companies, startups, and LLPs that receive investment from foreign investors (overseas companies, VCs, angel investors, NRIs on repatriable basis). Our FDI consulting covers the complete investment lifecycle:

• Route determination: identifying whether the proposed FDI falls under Automatic Route (no prior government approval) or Government Route (prior DPIIT/sectoral ministry approval through the Foreign Investment Facilitation Portal at fifp.gov.in)
• Sectoral cap verification: confirming the applicable FDI limit for the specific business activity using the current DPIIT FDI Policy and FEMA NDI Rules 2019
• Pre-investment advisory: structuring the instrument (equity vs CCPS vs CCD vs convertible notes for DPIIT startups), ensuring pricing complies with FEMA fair value requirements, advising on conditions and prohibited activities
• Form FC-GPR filing: within 30 days of share allotment, on the FIRMS portal, with FIRC, bank KYC, valuation certificate, board resolution, and PAS-3 filing co-ordination with MCA
• Form FC-TRS filing: within 60 days of consideration for secondary share transfers between residents and non-residents
• FLA Annual Return: every 15 July for companies with outstanding FDI. See our dedicated FLA Return Filing guide for the complete FLA framework
• Downstream investment compliance: where the FDI-recipient Indian company makes further investment in another Indian entity, downstream investment reporting and compliance with prescribed conditions

For the complete FC-GPR and FC-TRS framework, step-by-step process, and FDI scenarios, see our FDI Filing with RBI guide

Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCI holders) have a comprehensive set of FEMA rights and obligations in India. Our NRI FEMA advisory covers:

• Account structuring: advising on the optimal mix of NRE (Non-Resident External, freely repatriable, foreign income), NRO (Non-Resident Ordinary, Indian income, USD 1 million repatriation cap), and FCNR(B) (foreign currency, no currency risk) accounts based on the NRI’s specific income sources and investment plans
• Property transactions: advising NRIs on permitted and prohibited property acquisitions (residential and commercial properties are permitted; agricultural land is prohibited), structuring property purchase through NRE vs NRO funds for maximum repatriation flexibility, and planning property sale and fund repatriation
• Form 15CB certification: issuing Form 15CB (CA certificate on applicable tax, DTAA analysis, and nature of payment) for NRI remittances from NRO accounts — required by authorised dealer banks before processing overseas remittances
• Form 15CA filing: online declaration on the Income Tax portal for NRI overseas remittances, co-ordinated with Form 15CB
• Returning NRI planning: advising NRIs who are returning to India permanently on FEMA account conversion obligations (NRE to Resident/RFC, FCNR to RFC), RNOR status planning for income tax, foreign asset retention rights under FEMA, and the RFC (Resident Foreign Currency) account structure
• NRI investment advisory: PIS (Portfolio Investment Scheme) for listed shares, FDI route for unlisted companies, mutual fund investments through NRE/NRO accounts, and government securities

For the complete NRI FEMA framework — including the NRE/NRO/FCNR comparison table, repatriation rules, property compliance, and returning NRI RNOR planning — see our FEMA India Rules for NRI guide

Outward Direct Investment (ODI) refers to investment made by an Indian company or a resident individual in a foreign company — whether by acquiring shares, subscribing to new shares, providing a loan, or giving a guarantee. ODI is regulated under the FEMA Non-Debt Instruments Rules, 2019 (Overseas Investment provisions, as amended in 2022) and the RBI’s Master Direction on Overseas Investments. The 2022 overseas investment framework consolidated and liberalised the earlier ODI regulations significantly.

• Eligible investors: Indian companies (resident in India), Limited Liability Partnerships, and resident individuals under the Liberalised Remittance Scheme (LRS)
• Permitted instruments: equity, CCPS, CCDs, loans to wholly owned subsidiaries (WOS) and joint ventures (JV), guarantees to foreign entities
• Automatic Route ODI: eligible Indian entities can make ODI without prior RBI approval, subject to conditions (the investee must be a bona fide business activity; the Indian entity must be profitable; no SEBI debarment)
• Government Route ODI: ODI in certain restricted sectors (defence, media) or beyond prescribed thresholds requires prior RBI/government approval
• OI Form filing: every ODI transaction (investment, loan, guarantee) must be reported on the FIRMS portal by the Indian entity within the prescribed timeline
• Annual Performance Report: every Indian entity that has made ODI must file an Annual Performance Report (APR) within 60 days of the close of the foreign entity’s financial year, reporting the foreign entity’s financials and the Indian entity’s investment position
• FLA return (Foreign Assets side): the Indian entity’s ODI position is also captured in the Foreign Assets section of the FLA Annual Return filed on the FIRMS portal

An External Commercial Borrowing (ECB) is a loan raised by an Indian entity from a foreign lender. ECBs are an important source of foreign currency funding for Indian infrastructure projects, manufacturing companies, service sector entities, and real estate developers. FEMA regulates ECBs through the RBI’s Master Direction on External Commercial Borrowings, Trade Credits, and Structured Obligations.

• Eligible borrowers: Indian companies (in most sectors), LLPs, non-government organisations (NGOs), microfinance institutions, and various other entities as specified by the RBI
• Eligible lenders: overseas banks, foreign equity holders, internationally recognised multilateral financial institutions, foreign collaborators, foreign shareholders
• Two tracks: ECB Track I (foreign currency denominated ECBs) and Track III (Indian Rupee denominated ECBs). Each has separate minimum average maturity requirements and end-use conditions
• Permitted end uses: capital expenditure, import of capital goods, refinancing of earlier ECB, expansion of project implementation, etc. — ECB cannot be used for real estate investment, equity investment in India, or certain prohibited purposes
• LRN (Loan Registration Number): before receiving the first drawdown, the Indian borrower must obtain an LRN from the RBI by filing Form ECB with the RBI through the designated AD bank
• Form ECB 2 (Monthly Return): after registration, the Indian borrower must file Form ECB 2 monthly (by the 7th of the following month) on the FIRMS portal, reporting all drawdowns, interest payments, and principal repayments during the month
• Violation of ECB norms: using ECB proceeds for prohibited purposes, failure to register before drawdown, or late Form ECB 2 filing are FEMA violations requiring compounding with the RBI

Compounding is the RBI’s official mechanism for regularising FEMA violations. Under Section 15 of FEMA and the Foreign Exchange (Compounding Proceedings) Rules, 2000, an entity that has committed a contravention of FEMA can approach the RBI to compound the violation: pay the compounding fee and receive a Compounding Order regularising the violation so that no further enforcement action is taken. Compounding is available for all FEMA violations except those involving national security concerns or violations being investigated under the Prevention of Money Laundering Act (PMLA).

Most Common FEMA Violations Requiring Compounding

• Delayed FC-GPR filing: the most common violation — Form FC-GPR not filed within 30 days of share allotment to the foreign investor
• Delayed FC-TRS filing: Form FC-TRS not filed within 60 days of share transfer consideration
• FDI pricing violation: shares issued to foreign investor below fair value, or NR selling below the permitted minimum price
• Delayed FLA Annual Return: not filed by 15 July
• Wrong route: FDI received without obtaining Government Route approval where it was required
• Prohibited sector investment: FDI received in a sector where FDI is prohibited
• NRI purchasing agricultural land: NRI buying agricultural land in India (prohibited under FEMA)
• ECB non-compliance: ECB used for prohibited purposes, delayed Form ECB 2 filing, or drawdown before LRN
• ODI non-compliance: ODI made without filing OI Form, or investment in entities in FATF non-compliant countries

Our Compounding Service

• Violation identification and quantification: analysing past transactions to identify FEMA violations and computing the “contravention amount” (the value of the offending transaction, which is the basis for the compounding fee calculation)
• Compounding application preparation: drafting the compounding application in the prescribed format, including the factual background, the nature and duration of the violation, the reasons for the violation (inadvertent vs structural), and the current compliance status
• CA certificate on contravention: issuing the CA certificate on the quantum of contravention required as part of the compounding application
• RBI Regional Office liaison: submitting the application to the RBI Regional Office in Mumbai (or the relevant city) and responding to any queries from the Compounding Authority
• Post-compounding compliance: after the Compounding Order is issued and the fee paid, assisting the client in establishing correct FEMA compliance processes going forward to prevent recurrence

The Liberalised Remittance Scheme (LRS) allows every resident individual in India to remit up to USD 250,000 per financial year for permitted purposes, without specific RBI approval. LRS is used for:

• Overseas education: tuition fees, accommodation, and living expenses for students studying abroad
• Overseas travel: foreign travel expenses for self and family
• Family maintenance: remittance to close relatives abroad
• Investment abroad: equity investments, mutual funds, bonds, and real estate in foreign countries
• Gifts to NRI/foreign relatives: gifts to family members abroad
• Medical treatment abroad: hospital and healthcare expenses outside India

TCS on LRS Remittances

From 1 October 2023, Tax Collected at Source (TCS) is levied on LRS remittances under Section 206C(1G) of the Income Tax Act:

• Remittances above Rs. 7 lakh per financial year for purposes other than education and medical treatment: TCS at 20%
• Remittances for overseas education funded by a loan: TCS at 0.5% above Rs. 7 lakh
• Remittances for overseas education without a loan: TCS at 5% above Rs. 7 lakh
• Remittances for medical treatment: TCS at 5% above Rs. 7 lakh
• TCS is a prepayment of tax — it can be claimed as credit against the individual’s income tax liability for the year when filing the ITR

Export FEMA Compliance

Indian exporters must comply with FEMA’s requirements for receiving export proceeds:

• Export proceeds realisation: all export proceeds must be realised and repatriated to India within 9 months from the date of shipment/date of invoice (for software and services: within 9 months from the date of export). Default: FEMA violation
• EDPMS (Export Data Processing and Monitoring System): RBI monitors export shipment data and corresponding bank receipts through the EDPMS. Exporters with unrealised export proceeds appear on the EDPMS Outstanding Report
• SOFTEX form: exporters of software services must file SOFTEX forms for their software export invoices. SOFTEX is filed with the Software Technology Parks of India (STPI) or Special Economic Zone (SEZ) authorities
• Write-off of export bills: if export proceeds are not realised due to genuine reasons (buyer insolvency, trade disputes), the bank may permit write-off of the export bill, subject to prescribed conditions

Import FEMA Compliance

• Payment for imports: payments for goods imported into India must be made within prescribed timelines (payment after receipt for usance bills; advance payments are subject to conditions)
• Trade credits: import of goods on credit from the overseas supplier beyond prescribed periods is treated as ECB (a specific form of External Commercial Borrowing)
• Import of services: payments for imported services by Indian entities from foreign suppliers are subject to TDS under Section 195 of the Income Tax Act and Reverse Charge GST under the GST Act — we manage both compliance streams simultaneously