Reporting compliance under FEMA ACT,1999

REPORTING COMPLIANCE
UNDER FEMA ACT,1999
CA HENAL SHETH
Email Id:- cashethhenal@gmail.com

Overview and Background
 FEMA Bill :- FEMA deals with foreign exchange with an objective of facilitating external trade and
payment and orderly development & Maintenance of foreign exchange market in India.
 RBI have a controlling role in management of foreign exchange, to supervise those transaction and
fine tuning the policy, it has prescribed various reports and forms for such transaction which are
regulated under FEMA.
 The Master Direction-Reporting under Foreign Exchange Management Act,1999 consolidates the
various reports/Forms required to be submitted under FEMA
CA Henal Sheth Email Id:- cashethhenal@gmail.com

Part II Liberalised Remittance Scheme (LRS)
Part-I Remittance Facilities
Part III Establishment of Branch Office (BO)/Liasion Office(LO)/Project Office (PO)
Part IV Foreign Investment in India (FDI)
Part V External Commercial Borrowing (ECB)
Part VI:- Non Resident Foreign Account
Part VII Immovable Property
Part VIII Overseas Direct Investment (ODI)
Part IX Trade
Part X Guarantees
Part XI Compounding
Part XII Licensing of NBFCs

Foreign Direct Investment in India
(FDI)
CA HENAL SHETH

Form Foreign Currency-Gross Provisional Return (FC-GPR): An Indian company issuing Capital
instruments to a person resident outside India and where such issue is reckoned as Foreign Direct Investment,
defined under the rules, shall report such issue in Form FC-GPR, not later than thirty days from the date of issue
of capital instruments. Issue of 'participating interest / rights' in oil fields shall be reported in Form FC-GPR.
No reporting- Allotment of share under IPO or Qualified Institution Placement under applicable SEBI
regulation
Form Foreign Currency-Transfer of Shares (FC-TRS)
a) Form FCTRS shall be filed for transfer of Capital instruments in accordance with the rules, between:
 a person resident outside India holding Capital instruments in an Indian company on a repatriable basis and
person resident outside India holding Capital instruments on a non-repatriable basis; and
 a person resident outside India holding Capital instruments in an Indian company on a repatriable basis and a
person resident in India,
The onus of reporting shall be on the resident transferor / transferee or the person resident outside India
holding Capital instruments on a non-repatriable basis, as the case may be
Note: Transfer of Capital instruments in accordance with the rules by way of sale between a person resident
outside India holding Capital instruments on a non- repatriable basis and person resident in India is not required
to be reported in Form FC-TRS
Reporting Requirement under FDI

b) Transfer of Capital instruments on a recognised stock exchange by a person resident outside India shall
be reported by such person in Form FC-TRS
c) Transfer of Capital instruments on deferred basis, shall be reported in Form FC-TRS on receipt of
every tranche of payment. The onus of reporting shall be on the resident transferor / transferee
d) Transfer of 'participating interest / rights' in oil fields shall be reported Form FC-TRS
e) Indian Company buying back shares in a scheme of merger/de-merger/amalgation of Indian companies
approved by NCLT/competent authority
The form FCTRS shall be filed within sixty days of transfer of capital instruments or receipt / remittance
of funds whichever is earlier
Reporting of conversion of ECB into equity
 In case of Full conversion, the company shall report the conversion in FORM FC-GPR & FORM
ECB-2 ( with clear indication “Wholly converted to equity”)
 In case of partial conversion of ECB the company shall report the converted portion in FORM
FC-GPR as wall as in FORM ECB-2

Form LLP (I): A Limited Liability Partnerships (LLP) receiving amount of consideration for capital contribution and
acquisition of profit shares shall file Form LLP (I), within 30 days from the date of receipt of the amount of
consideration
Form LLP (II): The disinvestment / transfer of capital contribution or profit share between a resident and a non-
resident (or vice versa) shall be filed in Form LLP(II) within 60 days from the date of receipt of funds. The onus of
reporting shall be on the resident transferor/transferee
Annual Return on Foreign Liabilities and Assets (FLA): An Indian Company which has received FDI or an LLP
which has received investment by way of capital contribution in the previous year including the current year, shall
submit form FLA to the Reserve Bank on or before the 15th day of July of each year.
Explanation: Year for this purpose shall be reckoned as April to March
FLA Return should be submitted based on unaudited (provisional) account, If the company’s accounts are not audited
before the due date of submission Once the accounts get audited and there are revisions revised FLA return based
on audited accounts by end–September
The company does not have any outstanding investment in respect of inward and/or outward FDI as on end-March of
reporting year, then the company need not submit the FLA return even if company has received only share application
money.

Reporting by Foreign Venture capital investor (FVCI)
Investment in capital instrument by FVCI’s is required to be reported in FORM FC-GPR and
Transfer of capital instrument between an FVCI’s and Person resident in India is required to be filled in FORM FC-
TRS
Form DI-Downstream Investment An Indian entity or an investment vehicle making downstream investment in
another Indian entity which is considered as indirect foreign investment for the investee Indian entity in terms of the
Rules, shall notify the, DPIIT within 30 days of such investment and shall file Form DI with the Reserve Bank within
30 days from the date of allotment of equity instruments To be filed by Indian Entity making downstream investment.
Form Employees' Stock Option (ESOP): An Indian company issuing employees' stock option to persons resident
outside India who are its employees / directors or employees / directors of its holding company / joint venture /
wholly owned overseas subsidiary / subsidiaries shall file Form-ESOP, within 30 days from the date of issue of
employees' stock option.
Form Depository Receipt Return (DRR): The Domestic Custodian shall report in Form DRR, the issue / transfer
of depository receipts issued in accordance with the Depository Receipt Scheme, 2014 within 30 days of close of the
issue

Form Convertible Notes (CN): The Indian start-up company issuing Convertible Notes to a person resident outside
India shall file Form CN within 30 days of such issue.
A person resident in India, who may be a transferor or transferee of Convertible Notes issued by an Indian start-up
company shall report such transfers to or from a person resident outside India, as the case may be, in Form CN within
30 days of such transfer.
Form InVI: An Investment vehicle which has issued its units to a person resident outside India shall file Form InVI
within 30 days from the date of issue of units (This is not available in SMF)
Provided further that unless otherwise specifically stated in these regulations all reporting shall be made through or by
an Authorised Dealer bank, as the case may be.

Amount involved in reporting
(in Rs.)
Late Submission Fee
(LSF) as % of
amount involved *
Maximum amount of LSF applicable
Up to 10 million
0.05 percent
Rs.1 million or 300% of the amount involved,
whichever is lower
More than 10 million
0.15 percent
Rs.10 million or 300% of the amount involved,
whichever is lower
* The % of LSF will be doubled every twelve months
The floor (minimum applicable amount) for LSF will be Rs 100
No refund of amount deposited as LSF
 The person / entity responsible for filing the above reports shall be liable for payment of late submission
fee(LSF), as may be decided by the Reserve Bank, in consultation with the Central Government, for any delays
in reporting.
 The LSF shall be applicable for the transactions undertaken on or after November 7, 2017.
 The payment of LSF is an option for regularizing reporting delays without undergoing the compounding
procedure
 LSF is levied by RBI vide email for payment and time limit for payment, once payment is made
acknowledgment email will be received.
The amount of LSF will be as per the following Matrix
FDI-Delay in Reporting

Summary of Forms for FDI reporting & Time Lines
1 Forms Particular Timelines
1. FORM FC-GPR Issue of equity Instruments by Indian Co. 30 days from the date of issue of equity
instrument
2. FORM FC-TRS Transfer of Instrument 60 days from ,Earlier of
1. Transfer of equity instrument or,
2. Receipt/Remittance of funds
3. FORM FLA Annual Return on Foreign Liabilities & Assets 15th July of each year
4. FORM LLP-I FDI in LLP through Capital contribution 30 days from the date of receipt of amount
of consideration
5. FORM LLP-I Disinvestment/ transfer of capital contribution and
profit shares in LLP
60 days from the date of receipt of funds
6. FORM ESOP Issue of ESOPs/ Sweat equity shares/shares against
ESOPs
30days from the date of issue of
ESOPs/Sweat Equity
7. FORM CN Issue or transfer of convertible notes by startup 30days from issue of CN
8. FORM DRR Issue/ Transfer of Depository Receipt 30 days of close/issue of program
9. FORM DI Reporting of downstream investment (indirect
foreign investment) in company or LLP
30 days from the date of allotment of capital
instruments
10. FORM InVI Reporting of investment by a person resident outside
India in an Investment vehicle
30 days from the date of issue of units

 Previously, physical forms were filled (FORM ARF, FCGPR, FCTRS etc)
 However, from February 2016, online filling of those form were made through ebiz portal and Few Forms
were still required to submit with the AD Bank
 Later RBI provides online application FIRMS (Foreign Investment Reporting and Management system)
(Website URL https://firms.rbi.org.in) which provide Single Master Form (SMF) subsuming many existing
reports required to file for various type of Foreign investment
 SMF currently subsuming 8 Forms Viz FC-GPR, FC-TRS, LLP-I, LLP-II, CN, ESOP, DRR and DI
FIRMS were made online in two phases
 The Phase I was made available for data entry between 28th June, 2018 with extended period till 20th July,2018
to provide existing foreign investment details, however if entity were not able to register may do so from 1st
September, 2018 with reason for delay.
 The Phase II was made available from 01st September,2018 and Five forms were made available FC-GPR, FC-
TRS, LLP-I, LLP-II and CN. From 23rd October,2018 other Three new forms ESOP, DRR and DI were made
available.
Register
Entity
Master
Phase
I
Single
Master
File(SMF)
Phase
II
Mode of Filling through application FIRMS

Registration/Creation Process for Entity Master
Registration
of Entity User
Email of
Approval/Reje
ction of
registration by
RBI will be
received.
If approved
User Name &
Password will
be provided
Change of
password
Update Entity
Master details
Update
Foreign
Investment
details
Entity User
 An Entity User is a person authorized by the entity (company/ LLP/startup) to register an entity in the Entity
Master of FIRMS application and to add/update the foreign investment details of an Entity in the Entity
Master and would be entirely responsible for the data entered.
 One entity can have only one entity user. If the entity wishes to change the Entity user, it may contact RBI
helpdesk
 One person can also be an entity user for more than one entity. However, the person has to obtain separate
registrations
 Authority letter from the entity must be submitted at the time of registration

Landing Page of FIRMS Website (Website URL https://firms.rbi.org.in)

Sample email from RBI for approval

 The authorization letter cannot be signed by the person nominated by the company. It should be signed by
another person from the company as given in prescribed format and dated on or after June 28, 2018, entity
seal/ stamp should be affixed and on the letter head of entity
 PAN No & Copy card should be attached of the entity user and not of entity
 In case of Rejection and at the time of fresh registration use another User Name
 In case If the user does not receive the mail notification for approval/rejection of the registration within the
next 48 hrs or account getting locked/blocked send a email to helpfirms@rbi.org.in
Points to be consider while registration of Entity Master

Registration Process before filing Single Master FORM(SMF)
Business User (BU)
 BU is the applicant who will be authorized person reporting the transaction in Single Master Form
 If the person wants to act as a BU for another entity, he must register himself separately
 BU has to be eKYC verified before any reporting can be made in the Single Master Form and while registration it has to
select the IFSC code of the bank which would approve the eKYC
Registration of
Business User
Email of
Approval/Rejecti
on of the
registration by
AD will be
received
If approved User
Name &
Password will be
provided
Change of
password
File & Submit the
Form

 Date of filing of report/form will considered as the date on which the final form is approved
 Late filing fees is payable even if original form was filed on time, however it was rejected and date of filling the
approved is after the specified timelines, need to submit a condonation of delay letter
 It is always Advisable to file Forms at the earliest, as even if form is rejected it can be refiled on time also all the
required attachment are available at the time of filling.
 It advisable to get Business user registration and its eKYC in advance as it can weeks time or more.
Points to be considered while filling SMF

Landing Page after login to SMF

Landing Page selecting SMF (option for types of return)

Mode of Filling through application FLAIR
 Email Based annual reporting of Foreign Liabilities and Assets (FLA) was moved to Web based portal
Foreign Liabilities and Assets Information Reporting (FLAIR) from 29th June,2019 web-portal
interface https://flair.rbi.org.in
 company can file the previous year FLA form (through online FLA portal only) by taking approval from RBI.
For taking approval, they need to send mail to surveyfla@rbi.org.in
 company can delete/modify the FLA return after taking the approval from RBI (RBI will provide due date on
the FLA portal)
 the company cannot report the information as per the account closing period, in case it is different from
March closing. Information should be reported for the reference period only, i.e. previous March and latest
March
 FLA User Registration Form consist of three part (A) Entity Details; (B) Authorized Person's Details; (C)
Attachments (i.e Verification Letter & Authorised letter)
Registration of Entity
User
Providing Entity &
authorised person
details along with
attachment
Email notification to
authorised person of
registration providing
User Name & Password
OTP Based Change of
password
File & Submit FLA

Landing Page of FLAIR Website (Website https://flair.rbi.org.in)

Landing Page after login FLAIR

 While registration of New entity user, if no information is enter for 15 minutes, session shall timeout.
 If wrong password is entered for 5 time then you wont able to login and to reset your password, Click ‘Forgot
Password’ Menu. Enter the details i.e. user name, registered email ID, valid captcha code. Password will be
generated and same will be forwarded to the registered email ID
 To change the user Company needs to mail to RBI (surveyfla@rbi.org.in) for deactivating the user and again
register the new user
Points to be considered while filling FLA

Overseas Direct Investment (ODI)
CA HENAL SHETH

Form ODI:-An Indian Party(IP) and a Resident Individual(RI) making an overseas investment is required to
submit FORM ODI
Annual return on Foreign Liabilities and Assets (FLA) is required to be submitted directly by all the Indian
companies which have made FDI abroad (i.e. overseas investment) in the previous year(s) including the current
year by 15th July every year
Reporting of the overseas Investment by venture capital/ Alternate Investment Fund
Monthly reporting portfolio investment and overseas investment by Mutual Funds
Reporting ESOPs by Indian company/office/branch through AD Bank
 Annual Statement shares allotted to Indian employees/ Directors under ESOP Schemes
 Annual Statement of shares repurchased by the issuing foreign company from Indian employees/ Directors
under ESOP Schemes
Reporting Requirement under ODI

Part I – Application for allotment of Unique Identification Number (UIN) and reporting of Remittances /
Transactions:
Section A – Details of the IP / RI
Section B – Capital Structure and other details of JV/ WOS/ SDS
Section C - Details of Transaction/ Remittance/ Financial Commitment of IP/ RI.
Section D – Declaration by the IP/ RI.
Section E – Certificate by the statutory auditors of the IP/ self-certification by RI.
Part II - Annual Performance Report (APR)
Part III – Report on Disinvestment by way of
a) Closure / Voluntary Liquidation / Winding up/ Merger/ Amalgamation of overseas JV / WOS
b) Sale/ Transfer of the shares of the overseas JV/ WOS to another eligible resident or non-resident
c) Closure / Voluntary Liquidation / Winding up/ Merger/ Amalgamation of IP; and
d) Buy back of shares by the overseas JV/ WOS of the IP / RI
FORM ODI Structure

Establishment of Branch Office
(BO)/ Liaison Office (LO) / Project
Office (PO) or any other place of
business in India by foreign entities
CA HENAL SHETH

 Applications from foreign companies (a body corporate incorporated outside India, including a firm or other
association of individuals) for establishing BO/ LO/ PO in India
 Annual Activity Certificate (AAC) This certificate needs to be availed by BO/LO from Chartered Accountant
for the period ending 31st March along with the audited financial statements and submit to the designated AD
Category – I bank and a copy of the same to the Director General of Income Tax (International Taxation) on or
before September 30 of every year.
(Timely compliance of above will be beneficial at the time of closure of office)In case the annual accounts of the
BO/LO are finalized with reference to a date other than March 31, the AAC along with the audited financial
statements may be submitted within six months from the due date of the Balance Sheet.
In case of multiple BOs / LOs - a combined AAC in respect of all the offices in India needs to file by Nodal office
of the BOs/ LOs
Entities from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau or Pakistan which are setting up
a BO/LO/PO in India should register with the state police authorities and are required to submit an annual
report within five working days of the BO/LO/PO becoming functional to the Director General of Police (DGP)
of the state concerned in which the BO/LO/PO has established its office; If there is more than one office of such
a foreign entity, a separate annual report is required to be submitted to each of the DGP concerned of the state
where the office has been established
Reporting Requirement for (BO) / (LO) / (PO) or any other place of business in India by foreign entities

The compounding of contraventions under Foreign Exchange Management Act (FEMA), 1999 is a voluntary
process by which an applicant can seek compounding of an admitted contravention of any provision of FEMA
Forms prescribed are as below
 Application Letter (Format prescribed)
 Application Fees of Rs. 5000/-(In case the application has to be returned for any reason the application fees is
also returned)
 The details of irregularities whether relating to Foreign Direct Investment, External Commercial Borrowings,
Overseas Direct Investment and Branch Office/ Liaison Office, as applicable
 Undertaking that the applicant is not under investigation of any agency such as DOE, CBI, etc.
 Mandate and details of bank account
Compounding

ECB can be avail under two routes
i)Automatic Route and ii)Approval route
Reporting requirement
 Under Approval route:- FORM ECB for application raising ECB and availing Loan Registration
Number(LRN) for ECB
 Reporting of actual transaction of ECB- Return ECB2
 Reporting Trade credit –Form TC
 Statement on Guarantee/ Letter of Undertaking/ Letter of Comfort issued by AD banks in respect of Trade
Credit
External Commercial Borrowing

 Person resident outside India who has established in India as Branch office or other place of business as
accordance of Foreign Exchange Management (Establishment in India of a Branch Office or a Liaison Office
or a Project Office or any other Place of Business) Regulations, 2016 except Liaision office acquires any
immovable property in India, which is necessary for or incidental to carrying on such activity,
 FORM IPI required to file with the Reserve Bank, a declaration in the FORM IPI not later than ninety days
from the date of such acquisition
Acquisition of Immovable property

FORM EDF:-To declare export of goods from Non-EDI
Softex form:- All software exporters are required to file single as well as bulk SOFTEX form in excel
format to the competent authority (i.e STPI/EPZ/SEZ)for certification and declare that the software has
been developed and exported by using Authorised and legitimate datacom link
Advance Payments against Long term Exports:- for reporting long term advance of USD100 million or
more
Reporting of factoring of export receivables on a non-recourse basis in the Export Data Processing and
Monitoring System (EDPMS)
FORM EFC :-Application for opening foreign currency account with a bank in India or abroad by
exporters
All export transaction for shipping documents after February 28, 2014 should be reported in EDPMS
separate reporting of XOS has been discontinued
Trade -Export

THANK YOU
CA Henal Chetan Sheth

Reporting compliance under FEMA ACT,1999

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