Introduction
An Indian company that takes money from a foreign investor starts a reporting relationship with the Reserve Bank of India the day the funds arrive. Most FEMA filings come with short windows, some as tight as 30 days, and a missed date turns into a late fee or a compounding application.
This checklist covers the filings a company with FDI investment in India needs to track, the deadlines that apply in 2026, and how a FEMA penalty in India is calculated when a filing slips. It is written for founders, CFOs and company secretaries who handle the compliance side of foreign funding.
Who Needs to Follow This Checklist
The Foreign Exchange Management Act, 1999 and the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 apply to every Indian company or LLP that has issued shares, compulsorily convertible instruments or convertible notes to a person resident outside India. The checklist also applies if your company:
- has existing foreign shareholders, even if no fresh money came in this year
- is foreign-owned or controlled and invests in another Indian entity (downstream investment)
- has raised external commercial borrowings (ECB)
- holds an overseas subsidiary or other overseas direct investment (ODI)
If any of these fit, the filings below are mandatory. The RBI does not send reminders.
Before the Funds Arrive
A large share of FEMA contraventions start before a single form is filed. Check these points at the term sheet stage:
Sector and entry route. Confirm the sectoral cap and whether the investment falls under the automatic route or needs government approval. Investors from a country sharing a land border with India, or with beneficial owners in such a country, need government approval regardless of sector.
Pricing. For unlisted companies, shares issued to a non-resident cannot be priced below fair value worked out on an internationally accepted pricing method. The valuation has to come from a chartered accountant, a SEBI-registered merchant banker or a practising cost accountant. On a transfer, a resident selling to a non-resident cannot go below fair value, and a non-resident selling to a resident cannot go above it.
Banking channel. Funds must come through normal banking channels or from the investor’s NRE/FCNR(B) account. Ask your authorised dealer (AD) bank for the FIRC and KYC report early, since FC-GPR cannot be filed without them.
The 60-day allotment rule. Shares must be allotted within 60 days of receiving the money. If allotment does not happen in that time, the amount has to be refunded within 15 days after the 60 days end. Late allotment is one of the most common contraventions we see in compounding work.
The Core FEMA Filings Checklist
All foreign investment reporting goes through the Single Master Form on the RBI’s FIRMS portal, except the FLA return (FLAIR portal) and ECB/ODI returns filed through your AD bank.
| Filing | When it applies | Deadline | Who files |
|---|---|---|---|
| FC-GPR | Fresh issue of equity shares, CCPS, CCDs or share warrants to a non-resident | 30 days from allotment | Indian investee company |
| FC-TRS | Transfer of capital instruments between a resident and a non-resident | 60 days from transfer or receipt/remittance of funds, whichever is earlier | Resident transferor or transferee |
| Form ESOP | ESOPs or sweat equity issued to non-resident employees or directors | 30 days from issue | Indian company |
| Form CN | Convertible notes issued by a startup to a non-resident | 30 days from issue | Startup company |
| Form DI | Downstream investment by a foreign-owned or controlled company (FOCC), or a resident company becoming an FOCC | 30 days from the investment, or from acquiring FOCC status | Indian entity making the investment |
| LLP-I / LLP-II | Foreign investment into an LLP / disinvestment or transfer of that interest | 30 days from receipt of funds / 60 days from transfer | LLP |
| FLA return | Any company or LLP with outstanding FDI or ODI as on 31 March | 15 July every year | Company or LLP, on FLAIR |
| ECB 2 return | Outstanding external commercial borrowing | Monthly | Borrower, through AD bank |
| Annual Performance Report | Overseas direct investment | 31 December every year | Indian investor, through AD bank |
Two points from this table cause repeated trouble.
The FLA return is due every year as long as foreign investment sits on your balance sheet. A company that raised one round in 2021 and nothing since still files by 15 July. If your accounts are not audited by then, file on provisional figures and submit a revised return by 30 September.
On FC-TRS, the obligation sits with the resident party. Indian sellers often assume the foreign buyer or the company will handle it. Neither does, and the late fee lands on the resident.
On the company law side, the allotment also needs Form PAS-3 with the Registrar of Companies within 30 days, and foreign shareholders must be shown correctly in the annual return. These are separate from FEMA filings but are usually checked together during due diligence.
FEMA Penalty in India: How the Numbers Work
There are three levels of consequence, and which one applies depends on how late the filing is and what went wrong.
Level 1: Late Submission Fee (LSF)
For reporting delays up to three years from the due date, the RBI lets you regularise by paying a Late Submission Fee. For FC-GPR, FC-TRS, ESOP, CN, DI and LLP forms, the formula is:
LSF = Rs 7,500 + (0.025% × A × n)
Here A is the amount involved and n is the delay in years, rounded up to the nearest month and expressed to two decimals. The LSF cannot exceed 100% of the amount involved.
Example: a company receives Rs 10 crore and files FC-GPR one year late. The LSF is Rs 7,500 + (0.025% × Rs 10 crore × 1) = Rs 7,500 + Rs 25,000 = Rs 32,500.
A late FLA return attracts a flat LSF of Rs 7,500.
The LSF only covers the delay. If the filing itself shows a problem, such as an issue price below fair value or an allotment after 60 days, that is a separate contravention and goes to compounding.
Level 2: Compounding with the RBI
Delays beyond three years, and substantive breaches, are settled through compounding. Compounding is now governed by the Foreign Exchange (Compounding Proceedings) Rules, 2024, in force since 12 September 2024, and the RBI’s directions issued on 1 October 2024 and amended on 22 April 2025.
The main points:
- The application fee is Rs 10,000 plus GST. Applications can be filed online on the RBI’s PRAVAAH portal.
- For reporting contraventions, the compounding amount is a fixed Rs 10,000 per regulation contravened plus a variable amount per year of delay that increases with the size of the transaction.
- Non-reporting contraventions (pricing, late allotment, sectoral cap breaches) start from a higher base and use a percentage of the amount involved.
- Since the April 2025 amendment, the compounding authority can cap the amount at Rs 2 lakh per contravention for the “all other non-reporting contraventions” category, taking into account the nature of the breach and any exceptional circumstances.
- The compounding amount can never exceed three times the sum involved.
- The RBI aims to pass the compounding order within 180 days of a complete application. The amount must be paid within 15 days of the order. If it is not paid, the application is treated as never made and the matter can move to adjudication.
Compounding is voluntary and usually far cheaper than adjudication, but it is not available for every breach. Contraventions under Section 3(a) of FEMA (unauthorised dealing in foreign exchange) cannot be compounded.
Level 3: Adjudication under Section 13
Where a matter goes to adjudication, Section 13 of the Foreign Exchange Management Act sets the outer limit of the penalty:
- up to three times the sum involved, where the amount can be quantified
- up to Rs 2 lakh, where it cannot
- a further penalty of up to Rs 5,000 for every day the contravention continues after the first day
The adjudicating authority can also confiscate the currency, security or property involved. Under Section 14, a person who does not pay an adjudicated penalty within the time allowed can face civil imprisonment.
On a Rs 5 crore investment that was never reported, the theoretical exposure under Section 13 is up to Rs 15 crore. That figure is the main reason companies fix delays through LSF or compounding before a notice arrives.
Mistakes we See Most Often
In our FEMA compliance and compounding work, the same problems come up again and again:
- Skipping the FLA return in a year with no new funding.
- Allotting shares after the 60-day window because the board meeting or valuation was delayed.
- Using a valuation report whose date does not line up with the allotment.
- Not reporting rights or bonus issues to existing non-resident shareholders.
- Leaving FC-TRS to the foreign buyer on a secondary sale.
- Missing Form DI when a company crosses into foreign-owned or controlled status after a funding round.
Each of these is fixable. The cost goes up the longer it sits.
What Changed in 2025 and 2026
The RBI has been active on foreign exchange management rules over the last two years. The changes most relevant to this checklist:
- January 2025: The updated Master Direction on Foreign Investment requires a company that becomes foreign-owned or controlled to report that change in Form DI within 30 days.
- April 2025: The compounding directions were amended to allow the Rs 2 lakh cap described above and to treat each compounding application as a fresh one, unlinked to earlier orders.
- 2026: The RBI notified new Foreign Exchange Management (Guarantees) Regulations and revised several reporting streams, and the Master Direction on Reporting under FEMA has been updated more than once this year.
- June 2026: The Non-Debt Instruments (Third Amendment) Rules, 2026 came into force on 12 June 2026, extending Schedule III investment benefits in listed Indian companies to all individuals resident outside India, with matching changes to payment and reporting rules.
The forms and deadlines in the table above remain in force. If your compliance calendar was built before 2025, it is worth checking against the current Master Directions.
Annual FEMA Compliance Calendar
| When | What to file |
|---|---|
| Within 30 days of each allotment | FC-GPR (FEMA) and PAS-3 (company law) |
| Within 60 days of each resident/non-resident transfer | FC-TRS |
| Within 30 days of downstream investment or FOCC change | Form DI |
| Every month | ECB 2 return, if you have ECB |
| 15 July | FLA return |
| 30 September | Revised FLA return, if audited figures differ |
| 31 December | Annual Performance Report, if you have ODI |
How A Agarwalla & Co. can Help
Our FEMA lawyers in Delhi handle FC-GPR, FC-TRS, FLA and downstream investment filings for foreign-funded companies, and prepare compounding applications where a deadline has already been missed. For structuring a fresh round, see our foreign direct investment practice. Foreign businesses planning an Indian entity can start with our page on setting up in India.
FAQs
What is the deadline for filing FC-GPR?
FC-GPR must be filed on the FIRMS portal within 30 days of allotting shares or other capital instruments to a non-resident investor.
Can a late FEMA filing be fixed without compounding?
Yes, if the delay is under three years from the due date. You file the form and pay the Late Submission Fee. Delays beyond three years, and breaches such as late allotment or wrong pricing, need a compounding application to the RBI.
Do we need to file the FLA return if no new FDI came in this year?
Yes. Any company or LLP with outstanding foreign investment as on 31 March has to file the FLA return by 15 July, whether or not it received fresh funds that year.
What is the maximum FEMA penalty in India?
On adjudication under Section 13, the penalty can go up to three times the sum involved, or up to Rs 2 lakh where the amount cannot be quantified. A continuing contravention can attract up to Rs 5,000 for each additional day.
Does paying the Late Submission Fee close the matter completely?
It regularises the delay in reporting. It does not cover substantive problems disclosed in the filing, such as an issue price below fair value. Those are treated as separate contraventions.