FEMA and FDI Compliance for Indian Companies (2025 Guide)

Mandatory RBI Filings and Certifications for Companies with Non-Resident Shareholders

By CS Prashant Kumar

Introduction: Why FEMA Compliance Matters from Day One

For Indian companies with foreign shareholders, incorporation is only half the work — the real scrutiny begins under FEMA (Foreign Exchange Management Act, 1999) and India’s FDI (Foreign Direct Investment) Policy.

Whether your company has received FDI at incorporation or plans to raise funds later, it must comply with RBI reporting requirements and FEMA regulations. Missing these filings doesn’t just invite penalties — it can block future investment rounds, delay bank remittances, and raise red flags in due diligence.

FEMA filings are not optional paperwork. They are your company’s official passport for foreign capital.— CS Prashant Kumar

What Is FEMA Compliance and Why It’s Mandatory

FEMA compliance ensures that foreign investment received by an Indian company is legally reported to the Reserve Bank of India (RBI) through filings like FC-GPR, FC-TRS, and FLA Return. These filings verify that the investment adheres to India’s FDI policy and sectoral caps.

FEMA compliance applies whenever a non-resident invests in or transfers shares of an Indian company — whether at the time of incorporation or later.
It ensures that:

• The inflow of funds is legally reported to RBI.
• Sectoral caps and entry routes (automatic or approval) are followed.
• The company’s shareholding data matches RBI and MCA records.

Key FEMA Filings Every Company Must Know

1. Form FC-GPR (Foreign Currency-Gross Provisional Return)

When shares are allotted to a non-resident investor, the company must file Form FC-GPR on the RBI FIRMS/Single Master Form (SMF) portal within 30 days of allotment.
This filing records:

• Details of the investor and remittance.
• Amount and date of investment.
• Valuation certificate from a Chartered Accountant.
• Updated shareholding pattern post-allotment.

It must also include:

• Board Resolution approving the allotment.
• Declaration by the Company Secretary.
• KYC report from the investor’s bank (verified by the AD bank).

Failure to file FC-GPR within the 30-day window can attract penalties under FEMA’s compounding rules, which can extend to three times the investment amount in severe cases.

2. Form FC-TRS (Transfer of Shares)

When shares are transferred between a resident and a non-resident, the company (or its AD Bank) must file Form FC-TRS within 60 days of receipt of consideration.
This form records details of:

• Buyer and seller (resident/non-resident).
• Mode of transfer and price per share.
• Bank certificate evidencing fund flow.

Even secondary transfers — such as between family-held companies or offshore parents — must be reported if they involve a non-resident party.

3. Annual FLA Return (Foreign Liabilities and Assets Return)

Every Indian company that has received FDI or made overseas investment must file an Annual FLA Return with the RBI by 15 July following the end of the financial year.
It captures:

• Foreign shareholding details.
• Outstanding external liabilities.
• Changes in foreign investment during the year.

This return is filed online through the RBI FLAIR portal and applies even if there were no new transactions during the year.

The FLA return is RBI’s annual census of India’s foreign investment ecosystem — missing it means falling off the regulator’s radar. — CS Prashant Kumar

Professional Filings and Certificates Required

Completing FEMA filings is a collaborative process involving multiple professionals and institutions:

Role of the Company Secretary’s Certificate (Now Mandatory)

A Company Secretary in practice must issue a certificate confirming that:

• Share allotment or transfer is duly authorised by the Board.
• Shares are issued in compliance with the Companies Act, 2013 and FEMA/FDI rules.
• Statutory registers (MGT-1, SH-1) are updated and stamp duty has been paid.
• Investor KYC and remittance details are verified.

This certification, uploaded on the RBI FIRMS portal, assures the regulator that the company’s filings are consistent and compliant — reducing the risk of RBI queries or rejection.

A FEMA certificate by a practising CS is not a formality — it’s your company’s shield against regulatory friction. — CS Prashant Kumar

Common Mistakes to Avoid

1. Assuming small FDI doesn’t need reporting — even ₹1 received from a foreign shareholder requires FC-GPR filing.
2. Mismatch between MCA and RBI data — the number of shares and face value must match across platforms.
3. Missing the 30-day filing window — late filings require compounding, which can take months.
4. Ignoring FLA return — RBI actively tracks non-filers and issues reminders through AD banks.
5. Not coordinating with the AD bank — incorrect bank KYC or SWIFT copy can delay filing approvals.

Penalties for Non-Compliance

Under Section 13 of FEMA, penalties include:

• Up to three times the amount involved in the contravention, or ₹2 lakh (whichever is higher).
• ₹5,000 per day for continuing default.
• Possible compounding before RBI for delayed filings.

Beyond monetary penalties, FEMA non-compliance can delay further investment rounds, block dividend repatriation, and trigger queries during due diligence.

Best Practices for Smooth FEMA Compliance

• File FC-GPR immediately after allotment — don’t wait till the 30-day deadline.
• Maintain parallel data consistency between MCA filings (PAS-3) and RBI portal.
• Keep KYC reports, FIRC copies, and Board Resolutions ready for upload.
• Engage a CS in practice to certify the filing and handle coordination with the AD bank.
• File FLA return annually, even if there were no fresh transactions.

Summary: FDI Compliance Is Not Optional

FEMA and FDI compliance may look procedural, but they define your company’s credibility with both regulators and investors.
Every foreign-funded company in India — even with nominal FDI — must ensure timely FC-GPR, FC-TRS, and FLA filings with proper certification.

In 2025, with AI-integrated data matching across MCA, RBI, and PAN systems, inconsistencies are instantly flagged.
Non-filing can freeze your company’s ability to raise funds, repatriate profits, or even remain compliant under Indian law.

FEMA compliance is not about paperwork — it’s about proving your capital is clean, transparent, and compliant. — CS Prashant Kumar

For More Clarity, See Our Related Articles

• Post-Incorporation Compliance Checklist for Indian Companies (2025 Guide)
  Complete timeline of post-registration filings and FEMA coordination.
• Filing of Commencement of Business – Form INC-20A
  Learn why INC-20A approval is required before any FEMA filing.
• Issue of Share Certificates & Payment of Stamp Duty in India
  Ensure ownership proof and stamp duty payment before FEMA submissions.

Together, these guides form the Post-Incorporation Compliance Series by Pratham Legal — India’s most comprehensive resource for new companies navigating legal compliance.

About the Author

Prashant Kumar is a Company Secretary, Published Author, and Partner at Eclectic Legal, a full-service Indian law firm advising on corporate, regulatory, and transactional matters.

He has led compliance and governance functions for Woodland, IndoBevs, and Deesan Group, and advised GMR Group, Medanta Hospitals, Ahuja Group, Mantri Group, Isprava, and The Ashoka Hotels.

He helps businesses build credible, compliant, and sustainable governance systems, aligning legal discipline with business growth.
📧 prashant@eclecticlegal.com | 📞 +91 98210 08011