The revised ODI framework introduced significant new obligations. A practitioner’s guide to what changed and what it means for resident investors with overseas exposure.
The Overseas Investment Rules, 2022 and the accompanying FEMA (Overseas Investment) Regulations represent the most comprehensive overhaul of India’s overseas investment framework in two decades. More than a year on from implementation, a significant number of businesses and individuals who made investments under the old framework have still not fully assessed what the change means for their existing positions.
The most significant structural change is the replacement of the ODI and OPI categories with a cleaner two-tier structure: Overseas Direct Investment (financial commitment of 10% or more in a foreign entity) and Overseas Portfolio Investment (below 10%). The distinction matters because the compliance obligations, reporting requirements, and permitted activities differ significantly between the two.
For existing investments, the transition provisions are important. Investments made under the old FEMA (Transfer or Issue of Foreign Security) Regulations are grandfathered, but any subsequent action — additional investment, restructuring, or divestment — must be evaluated under the new framework. Doing something under the old framework assumptions when the new framework applies is one of the more common errors we are seeing.
The annual performance report (APR) requirement has been retained and is now more strictly enforced. The APR must be filed for each foreign entity in which an Indian resident has made an ODI, within the prescribed timeline. Late filing or non-filing triggers compounding liability, and the RBI’s enforcement posture on this has become notably more active.
The practical implication for anyone with overseas investments is a structured review: confirm whether each investment is classified correctly under the new framework, verify that APRs are current, and assess whether any subsequent transactions or corporate actions have created reporting obligations that may not have been addressed.