FEMA Compliance and Advisory in India | NRI and Cross-Border Foreign Exchange | Expert CA

FEMA Compliance and Advisory in India

Foreign Exchange Management Act Advisory for NRIs, Businesses and Overseas Investors

The Foreign Exchange Management Act (FEMA) 1999 regulates all cross-border transactions involving foreign exchange in India -- governing how Indian residents hold foreign assets, make overseas investments, repatriate money from India, and receive foreign funds. FEMA is administered by the Reserve Bank of India (RBI). Violations attract civil penalties up to three times the amount involved, confiscation of foreign exchange, and ongoing daily penalties. Our team advises NRIs, foreign companies investing in India, and Indian companies investing abroad on FEMA compliance covering FDI, ODI, ECB, NRI bank account rules, and LRS transactions. We work closely with DTAA advisory and international tax services.

Key FEMA Frameworks

Transaction Type	Applicable FEMA Regulation	Key Compliance
FDI into India	FEMA 20(R)	Automatic or government route; FCGPR filing with RBI within 30 days
Overseas Direct Investment (ODI)	FEMA OI Rules 2022	Form ODI filing; 400% net worth limit for financial commitment
External Commercial Borrowings (ECB)	FEMA ECB Framework	RBI reporting; end-use restrictions; all-in cost limits
NRI Remittance (LRS)	FEMA 1 / LRS Guidelines	USD 250,000 per year per individual; Form A2 for banks
NRE / NRO Accounts	FEMA 5(R)	NRE freely repatriable; NRO repatriation up to USD 1 million per year
Immovable Property (NRI)	FEMA 21(R)	NRIs can buy residential/commercial (not agricultural) property in India

Our FEMA Advisory Services

FDI Structuring and Filing

Advisory on FDI entry routes (automatic vs. government), sector caps, valuation requirements, and FCGPR/FC-TRS filing with RBI within prescribed timelines.

ODI Compliance

Advisory on Overseas Direct Investment by Indian companies and resident individuals -- Form ODI filings, financial commitment limits, annual performance reporting, and downstream investment rules.

NRI Bank Account Advisory

Advisory on NRE, NRO, FCNR(B) account rules -- permissible credits, debits, repatriation limits, tax treatment of interest, and conversion on change of residential status.

LRS Compliance

Advisory on Liberalised Remittance Scheme (LRS) transactions -- permissible purposes, USD 250,000 annual limit, TCS implications under Section 206C(1G), and prohibited end-uses.

FEMA Violation Compounding

Assistance in compounding of FEMA violations with the RBI or Adjudicating Authority -- preparation of compounding application, computation of penalty, and post-compounding compliance certification.

NRI Property Transactions

FEMA advisory for NRIs buying and selling immovable property in India -- permissible property types, repatriation of sale proceeds, TDS on property sale proceeds, and Form 15CA/CB for remittance abroad.

Frequently Asked Questions

What is the difference between an NRE account and an NRO account?

An NRE (Non-Resident External) account holds funds remitted from abroad or earned abroad by the NRI. The principal and interest are freely repatriable outside India, and interest is fully exempt from Indian income tax. An NRO (Non-Resident Ordinary) account holds Indian-sourced income of an NRI -- rent from Indian property, dividends from Indian investments, or Indian salary. NRO funds can be repatriated up to USD 1 million per financial year after payment of applicable taxes. NRO account interest is taxable in India (TDS at 30%). On return to India, NRE accounts must be redesignated as resident accounts within a reasonable time.

Can an NRI purchase agricultural land in India?

No. Under FEMA Regulation 21(R), NRIs (including Persons of Indian Origin / OCI cardholders) are not permitted to purchase agricultural land, plantation property, or farmhouses in India through purchase. However, NRIs can inherit agricultural land from a person resident in India, or gift such land to a person resident in India or another NRI. Residential and commercial immovable property (other than agricultural land) can be freely purchased by NRIs in India without any RBI permission, and the purchase consideration must be remitted through normal banking channels.

What is the LRS limit and what transactions are permitted?

Under the Liberalised Remittance Scheme (LRS), resident individuals (including minors) can remit up to USD 250,000 per financial year abroad for any permissible current or capital account transaction. Permitted purposes include overseas education, medical treatment, travel, maintenance of close relatives abroad, purchase of property abroad, investment in foreign shares or bonds, and opening of foreign bank accounts. Prohibited purposes include remittances for margins on foreign commodity exchanges, lottery winnings, remittances to countries notified by the Financial Action Task Force (FATF), and purchase of Foreign Currency Convertible Bonds. From October 2023, TCS at 20% (reduced to 5% for medical/education purposes) applies on LRS remittances above Rs 7 lakh per year.

What is FEMA compounding and when is it required?

FEMA compounding is a process by which a person who has contravened FEMA provisions can approach the RBI or the Adjudicating Authority to settle the violation by paying a compounding fee -- in lieu of formal adjudication and penalty proceedings. Compounding is available for most FEMA violations (except those involving serious offences or national security). The application is filed with the RBI, which computes the penalty (typically a percentage of the amount involved based on the duration and nature of the violation). Compounding provides regularisation of the past violation and prevents further adjudication proceedings.

Need FEMA Advisory? We Ensure Full RBI Compliance for Your Cross-Border Transactions.

From FDI structuring and ODI filings to NRI account advisory and FEMA violation compounding -- our specialists handle all FEMA compliance requirements.