FEMA & RBI Guidelines 2024: Complete Compliance Manual

 Keeping pace with the Reserve Bank of India’s 2024 updates to the Foreign Exchange Management Act (FEMA) is non-negotiable for any Indian entity handling cross-border money. This manual distils the latest Master Directions, circulars, and reporting norms into a single, action-oriented guide.

1. Who Must Comply?

1. Indian companies receiving Foreign Direct Investment (FDI) or making Overseas Direct Investment (ODI).
2. Businesses borrowing abroad through External Commercial Borrowings (ECB).
3. Exporters/importers of goods or services.
4. Start-ups raising foreign funds via equity, SAFE or convertible notes.
5. Individuals or firms handling inward/outward remittances under FEMA Sections 3–10.

2. 2024 RBI Master Direction Updates

Topic (Master Direction)	Key 2024 Change	Immediate Action
Foreign Investment in India	Single Master Form now demands live FEMA KYC validation before FC-GPR upload.	Verify KYC for each foreign investor with AD bank before allotment.
ODI & Financial Commitment	400% net-worth limit retained, but defaulting entities barred from new ODI until old lapses compounded.	Clear past ODI lapses or file compounding before new overseas investments.
ECB & Trade Credits	Automatic-route ECB ceiling raised to US$1.5 billion; end-use list expanded for green projects.	Update board resolutions and LRN filings to reflect new limit and purpose code.
Compounding of Contraventions	Online compounding portal launched; category-wise upfront fees published.	Submit digital application within 180 days of detecting non-compliance.
Inward Remittances	Mandatory purpose-code tagging at source; e-FIRA must reach beneficiary within 48 hours.	Train finance teams to quote correct purpose codes on every remittance.

3. Mandatory Reporting Calendar 2024-25

Form	Trigger & Timeline	Portal / Route
FC-GPR	Within 30 days of share allotment to foreign investor	FIRMS (Entity Master)
FC-TRS	Within 60 days of share transfer R↔NR	FIRMS
FLA Return	By 31 July for data as on 31 March	FLAIR
APR (ODI)	By 31 December each year	Through AD Bank
ECB-2	Within 7 working days of month-end	ECB Portal
ARF (Inward FDI)	Within 30 days of receipt	AD Bank
CN (Convertible Note)	Within 30 days of issue or transfer	FIRMS
Compounding Application	Within 180 days of spotting contravention	RBI Compounding Portal

Missing any deadline can invite penalties up to three times the transaction value or ₹200,000—whichever is higher—with an extra ₹5,000 per day for continuing default.

4. Step-by-Step Compliance Workflows

A. Receiving FDI

1. Get board approval and check sectoral cap.
2. Open SB-FC account with Authorized Dealer (AD) bank.
3. Receive funds; obtain FIRC from AD bank.
4. File ARF within 30 days of receipt.
5. Allot shares; file FC-GPR within 30 days with valuation certificate.
6. Update Single Master Form (Entity Master) to reflect new shareholding.

B. Making ODI

1. Ensure total financial commitment ≤ 400% of net worth (automatic route).
2. File Form FC through AD bank before remittance.
3. Remit funds; obtain outward remittance SWIFT copy.
4. Submit share certificates to AD bank within 6 months.
5. File Annual Performance Report (APR) by 31 December.

C. Raising ECB

1. Confirm eligibility of borrower and lender under revised norms.
2. Apply for Loan Registration Number (LRN) through AD bank.
3. Draw down funds only after LRN allotment.
4. File monthly ECB-2 return until loan is fully repaid.
5. Track minimum average maturity and permitted end-use.

D. Handling Inward Remittances

1. Quote accurate purpose code (e.g., P0802 for software services).
2. Secure e-FIRA from bank within 48 hours.
3. Match remittance against invoice; close entry on EDPMS within 14 days.
4. Retain records for at least 5 years for FEMA audit.

5. Penalty Defence & Compounding Tips

1. Self-audit quarterly to spot lapses early.
2. If a contravention occurs, file online compounding within 180 days—penalties are lighter for voluntary disclosure.
3. Prepare a chronology of events, proof of bona fide intent, and evidence of corrective action for the compounding application.
4. Pay the compounding fee within 15 days of RBI order to close the matter.

6. Best-Practice Toolkit

• Dedicated FEMA Officer: Assign one SPOC to track forms and deadlines.
• Digital Calendar Alerts: Sync all reporting dates with email/SMS reminders.
• Document Vault: Cloud repository for FIRCs, SWIFT copies, board minutes, valuation reports.
• Periodic Training: Update finance and legal teams after each RBI circular.
• External Review: Annual FEMA audit by a qualified professional to pre-empt ED scrutiny.

7. Quick-Reference FAQs

Question	Answer
Can we issue shares before receiving FDI money?	No—funds must hit the SB-FC account first, then shares issued within 60 days.
Is late submission fee (LSF) enough to regularise delayed FC-GPR?	Yes, if delay ≤ 3 years; beyond that, compounding is required.
Does the 400% ODI cap include guarantees?	Yes—financial commitment covers equity, debt, guarantees, and pledges.
Can IGST refund proceeds be used for ECB repayment?	Yes—RBI now permits export-generated forex to service ECB.

 

Final Word

RBI’s 2024 FEMA overhaul tightens KYC, speeds up e-filings, and escalates penalties for slack compliance. Treat this manual as your year-round checklist: stay ahead of deadlines, maintain watertight documentation, and engage your AD bank proactively. Robust FEMA governance isn’t just about avoiding fines—it’s a passport to seamless global business.