Foreign Direct Investment (FDI) Reporting requirements

Foreign Direct Investment (FDI) plays a vital role in India's economic development, bringing in capital, technology, and management knowledge. To ensure transparency and maintain regulatory compliance, the Reserve Bank of India (RBI) mandates a well-defined reporting framework for FDI under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and the FEM (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019.

The Foreign Investment Reporting and Management System (FIRMS) platform facilitates this reporting, primarily through the Single Master Form (SMF). Key forms involved in the FDI reporting ecosystem include:

• Form FC-GPR (Foreign Currency-Gross Provisional Return)

• Form FLA (Annual Return on Foreign Liabilities and Assets)

• Form FC-TRS (Transfer of Shares)

• Form ESOP (Employee Stock Options)

  
  

1. Form FC-GPR: Foreign Currency-Gross Provisional Return

Purpose

This form is filed by an Indian company issuing equity instruments (shares, convertible debentures, etc.) to a person resident outside India. It confirms receipt of FDI and must be submitted within 30 days from the date of share allotment.

When It Applies

• Issuance of shares at the time of incorporation to non-resident shareholders

• Conversion of External Commercial Borrowings (ECBs) into equity

• Participating interest or rights in oil fields

Required Documents

• CA Valuation Certificate

• Form A2 and FIRC (Foreign Inward Remittance Certificate)

• Board resolution and PAS-3

• FEMA declaration and shareholding pattern

• UIN letter (if refund is involved)

• Undertakings, consent letters, and other relevant corporate documentation

Penalties for Delay

• ₹5,000 or

• 1% of the investment amount (maximum ₹5 lakh for the first six months), increasing thereafter

2. Form FLA: Annual Return on Foreign Liabilities and Assets

Purpose

This annual filing captures data on foreign liabilities and assets of Indian companies that have received FDI or have made overseas investments.

Due Date

• 15th July of every year for the preceding financial year (April to March)

Applicable Entities

• Companies with FDI

• LLPs with foreign capital contributions

3. Form FC-TRS: Foreign Currency Transfer of Shares

Purpose

Form FC-TRS is used when capital instruments are transferred between:

• A person resident in India and a person resident outside India

• Two non-residents (where at least one holds on a repatriable basis)

Filing Timeline

Must be reported within 60 days of transfer or receipt/remittance of funds, whichever is earlier.

Key Scenarios

• Gift transfers

• Private sales

• Transactions on a recognized stock exchange

• Deferred consideration in share transfer deals

Supporting Documents

• Share transfer agreement/SH-4

• Valuation certificate (not older than 90 days)

• Non-resident declarations

• FIRC/outward remittance certificate

• FC-GPR/FC-TRS acknowledgements for previous allotments

4. Form ESOP: Employee Stock Option Plan

Purpose

Reports the issue of:

• Stock options

• Sweat equity shares

• Shares under ESOPs to employees/directors resident outside India

This includes employees of:

• Indian company

• Holding/parent company

• JV or wholly-owned overseas subsidiaries

Timeline

Form ESOP must be filed within 30 days of issuing stock options/shares.

5. The Role of the Authorized Dealer (AD) Bank

Every submission is routed through an Authorized Dealer Bank, which acts as a compliance intermediary between the company and the RBI. Delays or incorrect submissions may lead to rejections, penalties, or compliance scrutiny.

6. FIRMS Portal and SMF Interface

The FIRMS portal (https://firms.rbi.org.in) is the gateway for all FDI-related reporting. The Single Master Form (SMF) consolidates various reporting forms under a unified platform for better compliance management.

Conclusion

Navigating FDI compliance in India requires detailed attention to reporting obligations and adherence to FEMA and RBI regulations. Through timely and accurate submission of FC-GPR, FC-TRS, FLA, and ESOP forms, companies not only ensure compliance but also promote transparency and trust in foreign investment activities.

The evolving digital ecosystem like FIRMS and SMF has streamlined the process, but constant vigilance and procedural diligence remain paramount to avoid penalties and foster robust foreign investment relationships.