FDI Reporting to RBI

The reporting sequence

• Advance reporting of the inward remittance to the authorised dealer bank, on receipt
• A Know Your Customer report on the remitter, obtained from the remitting bank
• Allotment of shares within sixty days of receiving the funds
• Form FC-GPR filed within thirty days of allotment
• Form FC-TRS within sixty days, for any transfer of shares between a resident and a non-resident
• Annual return on foreign liabilities and assets by 15 July

The sixty-day allotment rule

Shares must be allotted within sixty days of receiving the money. Where they are not, the funds must be refunded to the investor within the following fifteen days.

Money sitting in the account beyond that period without allotment is treated as a deposit accepted in contravention of the rules, which is a considerably more serious position than a late filing. Investors and their counsel usually watch this date closely.

Pricing and valuation

Shares issued to a non-resident must be priced at or above fair value, determined by a chartered accountant or merchant banker using an internationally accepted methodology. Issuing below that value is a contravention.

On a transfer from a resident to a non-resident, the price must be at or above fair value. On a transfer the other way, it must be at or below. The direction of the test reverses, and getting it wrong is a common error in secondary transactions.

Sector rules come first

Before any of the reporting, the investment must be permissible. Most sectors allow up to one hundred per cent through the automatic route, but some are capped and others require government approval.

A separate rule requires government approval for investment from countries sharing a land border with India, and it applies by reference to the ultimate beneficial owner rather than the immediate investor.

How we handle it

1. 1 Checking permissibility The sector rules, caps and the land-border requirement are checked against the ownership chain before funds are received.
2. 2 Advance reporting The inward remittance is reported to the authorised dealer bank on receipt.
3. 3 Valuation The fair value is established so the issue price is compliant.
4. 4 Allotment within sixty days Shares are allotted inside the window, and the return of allotment filed with the Registrar.
5. 5 Filing FC-GPR The form is filed within thirty days of allotment with the valuation and compliance certificates.
6. 6 Annual reporting The FLA return is set up as a recurring July obligation.

Frequently asked questions