FEMA Compliance and Advisory
FDI, ODI, ECB, NRI accounts and LRS — advisory benchmarked against the Foreign Exchange Management Act, 1999 and current RBI directions
What Is FEMA Compliance?
N D Savla & Associates provides FEMA Compliance advisory to NRIs, foreign companies investing in India, and Indian companies investing abroad. The Foreign Exchange Management Act, 1999 regulates virtually every cross-border transaction involving foreign exchange in India — how residents hold foreign assets, how businesses receive foreign investment or invest overseas, how NRIs operate their Indian bank accounts, and how money is repatriated in either direction. FEMA is administered by the Reserve Bank of India, and violations carry real financial consequences: civil penalties up to three times the amount involved, confiscation of the foreign exchange in question, and penalties that continue accruing daily until the contravention is resolved.
This page explains the main FEMA frameworks that come up most often, our advisory services across each, and what happens when a transaction falls out of compliance. If your business or personal finances involve any cross-border element — foreign investment, an NRI bank account, or an overseas remittance — this is where to check your position.
Key FEMA Frameworks at a Glance
FEMA compliance requirements differ significantly depending on the type of transaction involved. The table below summarises the frameworks we work with most frequently:
| Transaction Type | Applicable 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 |
What Our FEMA Advisory Services Include
FDI Structuring and Filing
We advise on FDI entry routes — automatic versus government route — sector caps, valuation requirements, and FCGPR and FC-TRS filing with RBI within the prescribed timelines.
ODI Compliance
We advise on Overseas Direct Investment by Indian companies and resident individuals — Form ODI filings, financial commitment limits tied to net worth, Annual Performance Reporting, and downstream investment rules.
NRI Bank Account Advisory
We advise on NRE, NRO, and FCNR(B) account rules — permissible credits and debits, repatriation limits, tax treatment of interest, and how accounts must be redesignated on a change of residential status.
LRS Compliance
We advise on Liberalised Remittance Scheme transactions — permissible purposes, the USD 250,000 annual limit, TCS implications under Section 206C(1G), and end-uses that remain prohibited under the scheme.
FEMA Violation Compounding
Where a contravention has already occurred, we assist with compounding applications to RBI or the Adjudicating Authority — preparing the application, computing the likely penalty, and handling post-compounding compliance certification.
NRI Property Transactions
We advise NRIs buying and selling immovable property in India on permissible property types, repatriation of sale proceeds, TDS on the sale, and Form 15CA/CB preparation for remitting proceeds abroad.
Where an NRI is dealing with assets received from family, this work runs alongside our inheritance advisory for legal heirs and our gift taxation desk, both of which frequently share the same repatriation and documentation trail.
Where FEMA Contraventions Most Often Happen
- FCGPR or FC-TRS filings missed past the 30-day or 60-day deadline, most often because the trigger date was tracked incorrectly.
- NRO account funds repatriated above the USD 1 million annual limit without the required Chartered Accountant certification in place beforehand.
- LRS remittances made for a purpose the scheme doesn't actually permit, or without accounting for TCS obligations that apply above the threshold.
- Overseas Direct Investment structured without confirming the transaction stays within the financial commitment limit tied to the investor's net worth.
- Agricultural land inadvertently purchased by, or transferred to, an NRI through a transaction structured without FEMA advice.
How FEMA Compounding Works Once a Violation Has Occurred
FEMA compounding lets a person who has contravened FEMA provisions approach RBI or the Adjudicating Authority to settle the matter by paying a compounding fee, rather than going through formal adjudication and penalty proceedings. Compounding is available for most FEMA violations, other than those involving serious offences or national security concerns. The application is filed with RBI, which computes the fee — typically calculated as a percentage of the amount involved, factoring in the duration and nature of the contravention.
FEMA and the regulations made under it are administered by the Reserve Bank of India, which publishes the master directions and compounding framework our advisory work is benchmarked against.
Compounding regularises the past violation and closes off further adjudication proceedings, but it doesn't remove the need to fix the underlying process that caused the contravention in the first place. Reviewing this alongside your DTAA position, where the same cross-border transaction has tax implications, ensures the fix addresses both the FEMA and the tax side together rather than one at a time.
Who Typically Needs FEMA Compliance Support?
Startups Closing a Foreign Round
Indian startups and companies closing a foreign investment round for the first time, who need FCGPR filed correctly within the 30-day window.
NRIs Managing Indian Assets
NRIs managing Indian bank accounts, property, or investments from abroad, who need their account structure and repatriation approach reviewed against current FEMA rules.
Indian Investors Going Abroad
Indian companies or individuals setting up a subsidiary or making an investment abroad under the Overseas Direct Investment route.
Businesses With a Past Lapse
Businesses that have already identified a past FEMA lapse — a missed filing, an incorrect account type, an over-limit remittance — and need a compounding application prepared before the issue is flagged externally.
Foreign Companies Entering India
Foreign companies establishing an Indian presence through a liaison office, branch office, or subsidiary, who need the initial FEMA and RBI approvals structured correctly.
Where FEMA and Income Tax Compliance Overlap
A cross-border transaction rarely triggers only a FEMA obligation or only a tax obligation — it usually triggers both, and treating them as separate workstreams is where compliance gaps commonly form. A share transfer to a non-resident needs FC-TRS reporting under FEMA and, separately, capital gains reporting and TDS compliance under the Income Tax Act.
An NRI's rental income from Indian property needs FEMA-compliant repatriation through the correct account type and, separately, income tax filing and TDS deduction at source. Reviewing both sides together, rather than sequentially, is usually faster and catches issues neither review would surface on its own — a FEMA-compliant transaction that creates an avoidable tax cost, or a tax-efficient structure that happens to breach an FEMA reporting timeline, are both outcomes we specifically design against.
What to Have Ready Before a FEMA Advisory Consultation
A FEMA review moves considerably faster when the underlying documentation is assembled beforehand rather than gathered piecemeal during the engagement:
- Details of the specific cross-border transaction — investment, remittance, or account activity — including dates, amounts, and the parties involved.
- Copies of any RBI or AD Bank correspondence already exchanged on the matter, including acknowledgments of prior filings.
- Bank statements for the relevant NRE, NRO, or FCNR accounts covering the period in question.
- Any board resolutions, share transfer agreements, or investment agreements connected to the transaction being reviewed.
- A summary of the residential status timeline, particularly for individuals whose NRI or resident status may have changed recently.
Where family transfers are part of the picture — funds moved to a resident spouse or child, or assets settled within the family — the clubbing of income position should be reviewed at the same time, since the FEMA filing and the income tax return need to tell the same story.
Frequently Asked Questions on FEMA Compliance
What is the difference between an NRE account and an NRO account?
An NRE account holds funds remitted from abroad or earned abroad by the NRI, with principal and interest freely repatriable and interest exempt from Indian tax. An NRO account holds Indian-sourced income such as rent or dividends, with repatriation capped at USD 1 million per year after tax and interest subject to 30% TDS.
Can an NRI purchase agricultural land in India?
No. Under FEMA Regulation 21(R), NRIs and OCI cardholders cannot purchase agricultural land, plantation property, or farmhouses in India, though they can inherit such land or receive it as a gift from a person resident in India or another NRI.
What is the LRS limit and what transactions are permitted?
Under the Liberalised Remittance Scheme, resident individuals can remit up to USD 250,000 per financial year abroad for permissible current or capital account transactions, including education, medical treatment, travel, and investment in foreign shares or property, subject to TCS above Rs 7 lakh per year.
What is FEMA compounding and when is it required?
FEMA compounding lets a person who has contravened FEMA provisions settle the matter with RBI or the Adjudicating Authority by paying a compounding fee, instead of undergoing formal adjudication, and is available for most violations other than those involving serious offences.
How quickly must FCGPR be filed after an FDI transaction?
Form FCGPR must be filed with RBI within 30 days of allotting shares to a foreign investor, and missing this deadline requires the delay to be regularised through a compounding application.
Stay FEMA-Compliant on Every Cross-Border Transaction
FDI structuring, ODI filings, NRI account advisory, LRS compliance, and FEMA violation compounding — handled end-to-end.
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