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ODI (Overseas Direct Investment) without remittance from India

ODI without remittance from India allows Indian parties to invest in foreign companies or ventures without sending funds abroad. This is particularly relevant for Indian companies, partnerships, or resident individuals who wish to participate in overseas joint ventures (JV) or wholly-owned subsidiaries (WOS) without outward remittance of Indian Rupees (INR).

All resident individuals, including minors, are allowed to remit up to USD 250,000 per financial year under the Liberalized Remittance Scheme (LRS). However, certain forms of ODI without remittance from India provide alternatives for investments using internal accruals, shares, or capital already held abroad.

Indian parties are permitted to make ODI in bonafide business activities. Sectors like banking and real estate are restricted, unless prior RBI and Department of Banking Regulation (DBR) approvals are obtained.

ODI Without Remittance from India

Forms of Entity for ODI Without Remittance from India

An Indian party can invest in a foreign entity in the form of:

Joint Ventures (JV)
 Wholly-Owned Subsidiaries (WOS)

To initiate ODI without remittance from India, the Indian party must approach a licensed Authorized Dealer (AD) Bank with Form ODI Part-I and required enclosures. The bank then procures a UIN (Unique Identification Number) for the transaction and reports it to the Reserve Bank of India (RBI).

Routes for ODI Without Remittance from India

Automatic Route

No prior RBI approval is needed if the Indian party invests in equity shares or compulsorily convertible preference shares, subject to:

  1. Investment in bonafide business activities

  2. Total financial commitment within 400% of the Indian party’s net worth

  3. Indian party not listed in RBI’s caution/defaulter list

  4. Loans or guarantees permitted only if there is existing equity participation

  5. Share valuation by a Chartered Accountant or Category I Merchant Banker for amounts above USD 5 million

All transactions routed through a single AD bank branch

Approval Route

If conditions of the automatic route are not met, prior RBI approval is required, considering:

  • Viability of the overseas JV/WOS

  • Contribution to India’s external trade

  • Financial position and track record of Indian and foreign entities

Expertise of the Indian party in the relevant business

Sources of Funds

ODI without remittance allows financial commitment without sending INR abroad, including:

  • Contribution from internal accruals

  • Transfer of shares or securities already held overseas

  • Loans or guarantees backed by existing overseas equity

Indian parties must approach RBI through the AD bank to obtain approval for non-equity contributions or acquisitions without consideration.

Transfer and Sale of Shares of Overseas JV/WOS

Indian parties can transfer shares to another Indian party or foreign resident under the following conditions:

  • No write-off of original investment
  • Sale through stock exchanges if shares are listed
  • Disinvestment via personal arrangement with valuation certified by a CA/CPA
  • No outstanding dues from the overseas entity
  • Minimum one-year operation with audited accounts submitted
    • Repatriation: Sale proceeds must be repatriated within 90 days, and supporting documents must be submitted to RBI through the designated AD bank.

    Step-Down Subsidiaries

    Indian companies with overseas JVs/WOS can form second-generation operating companies under the automated route limits. Special approvals are required for subsidiaries in the financial services sector.

    Reporting Compliance for ODI Without Remittance

    Indian parties must comply with the following:

    • One-Time: Submit Form ODI with supporting documents to the designated AD bank.

      Recurring:

      • Annual Performance Report of overseas entity to RBI

      • Annual Return on Foreign Liabilities and Assets

      • Report changes in shareholding, diversification, or step-down subsidiaries within 30 days

      Event-Based:

      • Submit share certificates or other proof of investment within 6 months

      • Repatriate dividends, royalties, or technical fees within 60 days

      Repatriate sale proceeds within 90 days

    Investment in Foreign Securities Without Remittance

    Investments in foreign securities aside from direct investment can be made:

  • By way of gift, inheritance, or ESOPs
  • Bonus or right shares of already-held foreign securities
  • Cashless employee stock option plans of foreign entities
    • All such acquisitions must be reported to RBI through the AD bank within 30 days of acquisition.

    Conclusion

    ODI without remittance from India provides Indian parties with an efficient way to invest overseas without sending funds from India. It allows the use of existing equity, shares, or internal resources while adhering to RBI and FEMA regulations, ensuring compliance and smooth international investment operations.

    Contact RMCAuditors today for expert guidance and timely compliance support.  For more details Text us on whatsApp  or call us today .

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    Common Questions

    Frequently Asked Questions

    ODI without remittance allows Indian companies or resident individuals to invest in overseas entities without sending funds from India. Investments can be made using internal accruals, existing shares, or capital already held abroad while complying with RBI regulations.

    Indian resident individuals, companies, partnerships, and LLPs are eligible to make ODI without remittance. Minors can also invest through their guardians, provided the investment is bonafide and within RBI guidelines.

    There are two main routes:

    Automatic Route: No prior RBI approval required for eligible investments in bonafide business activities, subject to net worth and other limits.

    Approval Route: Required when conditions of the automatic route are not met, such as investment in restricted sectors or higher amounts.

    Indian parties must submit Form ODI to their Authorized Dealer (AD) bank and report all transactions to RBI. Annual reports, changes in shareholding, and repatriation of dividends or sale proceeds must also be submitted as per FEMA compliance.

    Yes, shares of overseas entities can be transferred or sold under specific conditions, such as valuation by a Chartered Accountant, no outstanding dues, and repatriation of sale proceeds within 90 days through the designated AD bank.

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