FEMA Explained (Part 2): Foreign Investment in India – FDI Routes, FC-GPR, FC-TRS and Deadlines
Foreign investment in India explained: automatic vs government route, pricing, FC-GPR in 30 days, FC-TRS in 60 days, FLA by 15 July and common mistakes.
Illustration, not a real client: a Hyderabad SaaS startup closes a seed round from a Singapore investor. The money lands in March and the founders celebrate. In May, the investor’s lawyer asks one question: “Where is your FC-GPR?” The clock had started the day shares were allotted.
- Part 1: What FEMA is, who it covers, the rule book
- Part 2: Money coming in: FDI, FC-GPR, FC-TRS, FLA (you are here)
- Part 3: Money going out: LRS, ODI, ECB
- Part 4: Trade and people: exports, imports, NRIs
- Part 5: Penalties, compounding, appeals, calendar
1. What counts as foreign investment?
Foreign Direct Investment (FDI) means a non-resident subscribing to or buying equity instruments of an Indian company: equity shares, compulsorily convertible preference shares, compulsorily convertible debentures and warrants. Instruments that are not fully and mandatorily convertible are treated as debt and follow a different framework, such as the External Commercial Borrowing rules covered in Part 3. Classifying the instrument correctly is the first step because it decides which rulebook, form and deadline apply.
2. Automatic route or Government route?
| Automatic route | Government route | |
|---|---|---|
| Approval needed | None from the Government or RBI, subject to sectoral cap and conditions | Prior approval of the Government through the competent ministry or department |
| Typical sectors | Most sectors, including IT services, manufacturing and many startups | Sectors with sensitivity or conditions, and certain cases involving land-bordering countries |
| Reporting | FC-GPR within 30 days of allotment | Same, after approval is received |
| Watch out | Sectoral caps and conditions (for example, sector-specific entry rules) | Time taken for approval and conditions attached |
- 12 June 2026: the NDI (Third Amendment) Rules, 2026 (S.O. 3030(E)) widened Schedule III so that listed-equity investment on a repatriation basis is no longer limited to NRIs and OCIs; it now reaches overseas individuals, with the aggregate ceiling reported as raised from 10% to 24% (confirm individual limits). RBI followed with Notification FEMA 395(4)/2026-RB on 13 June 2026.
- Reports indicate 2026 changes to the insurance sector cap and to land-border investment restrictions, with a 10% beneficial-ownership benchmark (confirm against the DPIIT Press Notes and the Gazette).
3. Pricing: the fair value rule
For unlisted Indian companies, shares cannot be issued to a non-resident below fair value, and a transfer from a resident to a non-resident cannot be below fair value. A transfer from a non-resident to a resident cannot be above fair value. Fair value is certified using an internationally accepted pricing methodology by a Chartered Accountant, Cost Accountant or SEBI-registered merchant banker, as applicable. Keep the certificate in your FEMA file; it is the first document a bank or auditor asks for.
4. The journey from term sheet to filing
5. FC-GPR versus FC-TRS
| FC-GPR | FC-TRS | |
|---|---|---|
| Trigger | Company issues new shares to a non-resident (primary) | Shares change hands between a resident and a non-resident (secondary) |
| Who files | The Indian company | Resident party or non-resident holder, as the transaction requires |
| Deadline | 30 days from allotment | 60 days from the transfer or receipt of funds, whichever is earlier |
| Portal | FIRMS (Single Master Form) | FIRMS (Single Master Form) |
| Example | Seed round into your company | Founder sells 5% to a foreign angel |
6. Other filings people forget
| Filing | Applies to | Timeline |
|---|---|---|
| FLA return | Any Indian entity that has received FDI or made overseas investment, every year | 15 July (revised return by 30 September if unaudited figures were used; confirm) |
| Form DI | Downstream investment by an Indian entity owned or controlled by non-residents | 30 days from allotment |
| ESOP reporting | Options granted to non-resident employees or directors (Rule 8 of the NDI Rules) | Reported with FC-GPR on exercise and allotment |
| LLP forms | Foreign investment in an LLP | Forms LLP-I and LLP-II (confirm timelines on the current Master Direction) |
7. Late filing: the Late Submission Fee
Delayed reporting is usually regularised by paying a Late Submission Fee (LSF) to the RBI through the AD bank rather than going through full compounding. A commonly reported formula is Rs 7,500 plus 0.025% of the amount involved multiplied by the number of years of delay (confirm the formula and rounding in the current Master Direction).
Where delay is extensive, or the issue goes beyond reporting (for example shares issued without compliance with pricing or route), the matter may need compounding. See Part 5.
8. Eight mistakes that cost founders money
- Allotting shares but never filing FC-GPR because “the bank already knows”.
- Not allotting within 60 days of receiving funds, and not refunding within 15 days.
- Issuing shares below fair value or without a valuation certificate.
- Choosing the wrong instrument (for example optionally convertible notes) and discovering later that it is debt.
- Missing FC-TRS on founder-to-investor secondary sales.
- Skipping the FLA return in a year with no new investment.
- Ignoring sectoral caps or land-border conditions during a cap-table restructure.
- Filing late and paying LSF year after year instead of fixing the process.
Related reading: Setting up an overseas subsidiary from Hyderabad and our startup compliance page.
Why work with ComplianceKart
ComplianceKart is a boutique practice bringing Chartered Accountants, Company Secretaries and advocates under one roof. Think of a multi-speciality hospital: the physician, the radiologist and the pharmacist read from one patient file, so you never carry reports between buildings. A funding round needs a valuation view, a shareholder agreement, a board and shareholder resolution, a FIRMS filing and a tax check. When these sit with one team, the filing deadline is tracked from the day funds arrive.
Frequently Asked Questions
What is the deadline for FC-GPR?
Within 30 days from the date of allotment of equity instruments to the non-resident investor.
Is FC-TRS needed when a resident sells shares to a non-resident?
Yes. Reports of transfers between residents and non-residents are filed in FC-TRS within 60 days, subject to the exceptions in the Rules.
Do we have to file FLA if there was no new investment this year?
Yes. An Indian entity that has received FDI or made overseas investment files the FLA return every year by 15 July.
Can shares be allotted after 60 days of receiving foreign funds?
As a rule, shares must be allotted within 60 days of receipt, failing which the amount is refunded within a further 15 days. Delays beyond this need specific regularisation through the AD bank or the RBI.
Is a valuation certificate mandatory?
For unlisted shares, the price must meet the fair value requirement, which in practice is evidenced by a valuation certificate from an eligible professional.
Sources
- FEM (Non-debt Instruments) Rules, 2019 and FEM (Non-debt Instruments) (Third Amendment) Rules, 2026 (S.O. 3030(E), 12 June 2026)
- FEM (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019 (FEMA 395/2019-RB) and Fourth Amendment, FEMA 395(4)/2026-RB (13 June 2026)
- RBI Master Direction on Reporting under FEMA, 1999 (for forms and LSF)
Website: FEMA and NRI compliance services
Email: team@compliancekart.com
Phone: 9959536391
Educational article, last updated 11 November 2026. It is general information, not advice on a specific transaction. FEMA directions change often; confirm the position on the date you act. Items marked (confirm) were reported by secondary sources and should be checked against the RBI or Gazette text.
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