Foreign Direct Investment (FDI) in India is regulated by the Reserve Bank of India (RBI). Every time a foreign company or a foreign individual invests money into India by setting up a business or investing in an existing business, FDI reporting to Foreign Exchange management department or RBI is mandatory.
After the company is registered, the shareholders of the company must transfer the funds to the amount of shares they hold in the company.
For example, if Mr Tom (US National) and Mr Hanks (US National) have successfully registered a company in India with Rs 1,00,000 as capital having 50% each. After the company is set up, a bank account must be opened in the company's name for its operations. Mr Tom must transfer Rs 50,000 to the company's bank account as a part of his investment and Mr Hanks must also do the same. This investment is a Foreign Direct Investment. It must be reported to the Reserve Bank of India as a part of legal compliance.
This FDI reporting must be done within 30 days from the date of the receipt of the funds into the Indian company's Bank Account. Non-Reporting or Non-Compliance will lead to penalty and refund of the money back to the source.
Step 1 - Register the company in India.
Step 2 - Open Bank Account for the company.
Step 3 - Transfer the capital amount to the Bank Account.
[Please enter the correct purpose code while transferring and also ensure the amount is accurate. Not more not less].
Step 4 - Collect FIRC and KYC from bank.
Step 5 - File FC-GRP with RBI within 30 days from the receipt of the funds.
Non-Compliance Penalty: Any delay in reporting beyond the prescribed period (30 days from the receipt of funds shall attract a penalty of 1% of the total amount of investment subject to a minimum of Rs 5,000 and maximum of Rs 5,00,000 per month or part thereof for the first 6 months of delay and twice that rate thereafter, to be paid online into a designated account in RBI.