In plain words: expanding overseas, setting up a foreign subsidiary, or investing in a company abroad? That is Overseas Direct Investment (ODI), and FEMA sets the framework.
What ODI is
ODI is investment by an Indian party — a company, LLP or resident individual — into the equity or capital of a foreign entity. It is governed by the Overseas Investment Rules and Regulations, which modernised the framework.
Who can invest, and how much
- An Indian entity can make overseas investment within an overall financial commitment ceiling linked to its net worth.
- A resident individual can invest abroad under the LRS (within USD 250,000), subject to the ODI conditions.
ODI vs OPI
The rules distinguish ODI (strategic/controlling stakes, such as a subsidiary) from Overseas Portfolio Investment (OPI) (smaller, non-controlling holdings). The conditions and reporting differ, so classify your investment correctly.
What you can and cannot do
- Invest in a bona fide business abroad — subsidiaries, joint ventures, shares.
- Restrictions apply to investment in entities in certain sectors/jurisdictions, and to round-tripping and real-estate-type activity.
Reporting and the APR
- Report the investment through your AD bank (Form FC / the applicable filings).
- File the Annual Performance Report (APR) each year for the foreign entity.
- Report disinvestment when you exit.
Missing the APR or the initial reporting is a frequent contravention — compoundable, but avoidable.
Frequently asked questions
Can an individual set up a company abroad? Within the ODI rules and the LRS limit, yes — subject to conditions.
What is the APR? The Annual Performance Report on your overseas investment.
What is round-tripping? Investing abroad in a way that routes back into India — restricted; take advice.
How Vakil Help Desk helps
Vakil Help Desk advises on FEMA compliance, remittances, NRI matters, foreign investment and compounding — and represents clients in ED FEMA proceedings. If you have a cross-border transaction or a FEMA notice, we can help you get it right.
This article is for general legal awareness, not individual legal advice. FEMA rules, limits and forms are revised by the RBI and the Government from time to time, and the right treatment depends on your facts and the current position. Please consult a professional before acting on a cross-border transaction.