A S BANKA ADVISORS

Key Takeaways

• If you hold equity in a foreign entity as overseas direct investment, an Annual Performance Report is due for each foreign entity every year by 31 December. It is not tied to your Indian financial year, and it is per entity, not per company.
• A late annual report carries a flat late submission fee of Rs 7,500 per return, and that late-fee route is only available for up to three years from the due date. After that you are outside the simple fix.
• The consequence founders feel first is not the fee. It is the tap. Your bank will not facilitate any further outward remittance or financial commitment towards that foreign entity until the delay is regularised.
• Two obligations come before the annual one: Form FC and an identification number for the foreign entity before your first remittance, and evidence of the investment to your bank within six months, failing which the money you sent has to be brought back.
• There is a narrow exemption. No annual report is required where you hold less than 10 per cent of the equity capital without control and have no other financial commitment beyond that equity, or where the foreign entity is under liquidation.

The call usually comes in the second year, and it almost never starts with the word “reporting”. It starts with a payment that did not go through. The founder has a live Singapore or Delaware or Dubai entity, a small team on the ground, an invoice from the local accountant to settle, and a bank in India that has suddenly stopped being helpful. Somewhere in the back and forth, someone finally says the actual reason: last year’s annual report on the overseas entity was never filed.

This is the part of going global that nobody budgets for. Setting the foreign company up is a project with a deadline and an invoice, so it gets done. Annual RBI reporting for a foreign subsidiary is a recurring obligation with no invoice attached, so it quietly becomes nobody’s job. This article sets out exactly what India expects back from you once you own a foreign entity, when each thing is due, what it costs when it slips, and the seven-point check you can run on your own file this week.

What actually triggers this, and when it starts

The trigger is ownership, not activity. The moment an Indian company or resident acquires equity capital in a foreign entity in a way that counts as overseas direct investment, a set of continuing obligations attaches to that holding and stays attached for as long as you hold it. A dormant foreign entity that did no business last year is still a foreign entity you own. It still reports.

That is the single most common misreading we see. Founders treat the overseas company as switched off between funding rounds and assume the reporting is switched off with it. The obligation follows the shareholding, not the trading.

When is the Annual Performance Report due?

The Annual Performance Report, usually just called the APR, must be submitted for each foreign entity every year by 31 December. That is the date in the overseas investment regulations, and it is worth reading the two details attached to it, because both catch people out.

It is per entity. If you have a holding company in Singapore and an operating company under it in the United States, you are not filing one report about your international operations. Each foreign entity you hold is reported on separately.

Where the foreign entity’s own accounting year ends on 31 December, the report is due by 31 December of the next year. This is the provision that quietly saves a lot of founders, and the one they are most likely to over-claim. It is not a general extension. It applies where the overseas entity’s books close on 31 December, which is common in the United States, in much of Europe and in the Gulf, and uncommon for an Indian group that has aligned everything to a March year end.

The report is based on the audited financial statements of the foreign entity. Where you do not have control of the foreign entity and the host country does not require its books to be audited at all, the report may go in on unaudited numbers, certified as such by the Indian entity’s statutory auditor, or by a chartered accountant where statutory audit does not apply to the Indian entity. Where the statutory audit does not apply, the report itself has to be certified by a chartered accountant.

One more that matters for groups: if more than one Indian resident has invested in the same foreign entity, the one holding the highest stake files the report. Where the holdings are equal, it can be filed jointly. This is the provision co-founders most often get wrong, because both assume the other one did it.

Who does not have to file it?

The exemption is real but narrow. No annual report is required where:

• you hold less than 10 per cent of the equity capital, without control in the foreign entity, and you have no other financial commitment to it beyond that equity; or
• the foreign entity is under liquidation.

Note the “and” in the first one. A small stake plus a loan to the same entity, or a small stake plus a guarantee you gave for its lease, is not a small stake for this purpose. Founders reach for this exemption more often than it actually applies to them.

What happens if you miss 31 December?

You do not lose the ability to fix it, and this is genuinely better news than most founders expect. You file late and pay a late submission fee through your bank.

For the annual report and returns of that kind, the fee is a flat Rs 7,500 per return. It does not scale with the amount you invested. It is per return, so three missed years on one entity is three fees, and two entities missed for two years each is four.

Three conditions on that route are worth knowing before you rely on it:

• The late-fee option is available for up to three years from the due date. Beyond that window it is no longer the simple administrative fix, and you are into a materially heavier process.
• Once your bank issues an advice for payment of the fee, it must be paid within 30 days. If it is not, that advice is treated as null and void, and if you come back later the clock restarts from the date of the fresh application.
• An incomplete filing is treated as non-submission. Filing something to stop the emails does not stop the clock if it is not complete.

If you want to see how quickly delay-based exposure compounds across the wider set of exchange control obligations, our FEMA penalty calculator models it.

The consequence founders actually feel: the tap closes

Here is the part that turns a filing question into a business problem, and it is the reason the call comes in the second year rather than the fifth.

Your bank will not facilitate any further outward remittance or further financial commitment towards that foreign entity until the delay in reporting is regularised.

Read that in operational terms. Your foreign subsidiary needs its next tranche to make payroll. Your bank cannot send it. Not because of a dispute, not because of a limit, and not because anyone thinks you have done anything wrong, but because a report from last year is open. The entity abroad has no independent way to fund itself, so the problem lands on the local team within days.

The fee is Rs 7,500. The delay in getting the money out is what actually costs you.

The two obligations that come before the annual one

Before the annual cycle even begins, two things have to have happened at the front end. Both are frequently done correctly by the bank at the time and then forgotten by the founder, which matters because the founder is the one who has to answer for them at diligence.

Form FC and the identification number, before the first rupee moves. Form FC goes to your designated bank with supporting documents on or before you make the initial overseas investment, and the bank uses it to get a unique identification number allotted to that foreign entity. Any remittance towards the foreign entity is facilitated by the bank only after that number exists. Worth being clear about what the number is not: allotment of it is not an approval of your investment by the Reserve Bank. It records the investment. Founders sometimes wave it around in diligence as though it were a clearance.

Evidence of investment within six months. Once you have acquired the equity capital, you have six months to give your bank the evidence of that investment, typically the share certificate or equivalent proof from the foreign jurisdiction. If you do not, the funds you remitted have to be repatriated within that same six-month period. The money goes back.

This one bites specifically because of how foreign incorporations run. The money leaves India on day one because the agent abroad wants the capital in the account, and the share certificate arrives whenever the local registry gets to it. Nobody in India is tracking the gap. Six months is not long when the document is in someone else’s queue in another country.

Money has to come home, and not only when you sell

The other half of owning a foreign entity is what happens on the way back.

All dues receivable on the investment, and the proceeds when you sell or wind it up, have to be repatriated to India, in freely convertible currencies where the investment was made in freely convertible currencies. Dividends, interest, sale proceeds and liquidation proceeds are not optional to bring back and are not yours to leave parked offshore because the exchange rate looks unfavourable this quarter.

There is one clarification worth holding on to, because it removes a genuine source of panic at exit. Where you are required to repatriate all dues before disinvesting, that requirement does not extend to dues that do not arise from investment in equity or debt, such as export receivables. If your Indian company also sells to the foreign entity as a customer, those trade receivables are a different animal and run on their own clock, which we cover in our piece on the realisation period for export proceeds.

There is also a separate annual return on foreign liabilities and assets that an Indian entity which has made overseas investment has to file with the Reserve Bank. The regulations leave its timing to be set by the Reserve Bank from time to time rather than fixing a date in the text, so confirm the current date with your bank in the year you are filing rather than working from a date you remember.

The check that stops a transaction cold

One more, because it surfaces at the worst possible time. If the Indian party has an account classified as a non-performing asset, or is classified as a wilful defaulter, or is under investigation by a financial sector regulator or an investigative agency, a no objection certificate is required from the lender bank, regulator or agency concerned before making a financial commitment abroad or before disinvesting.

Founders discover this in the middle of a transaction, usually because a group company they barely think about has a legacy facility somewhere. If any entity in your group has ever had a stressed account, find out where that stands before you plan an overseas step, not during it.

A seven-point check you can run this week

1. List every foreign entity you or your Indian company hold equity in. Including the dormant one. Including the one a co-founder set up.
2. For each, find the date of the last annual report filed. Not the date it was prepared. The date it went in through your bank.
3. Count the missed years. Each missed year on each entity is a separate return and a separate fee.
4. Check where each one sits against the three-year window from its due date. That is what decides whether this is administrative or serious.
5. Confirm the identification number exists for every foreign entity, and that you can produce the evidence-of-investment documentation for each.
6. Check whether anything is sitting offshore that should have come home. Dividends declared and not remitted are the usual find.
7. Ask your bank one question in writing: is there anything open against any of our overseas entities. Get the answer before you need the next remittance, not after.

Most of this is a single afternoon with your own file. The reason it does not happen is not difficulty; it is that nobody owns it. If you are running the same check on your Indian side, our financial due diligence checklist covers what an investor opens first, and if you are still deciding where the overseas entity should sit at all, the flip and reverse flip math is the piece to read before you incorporate anything.

The obligations at a glance

Frequently asked questions

When is the Annual Performance Report due for an overseas subsidiary?

By 31 December every year, for each foreign entity in which you hold equity capital that counts as overseas direct investment. Where the foreign entity’s own accounting year ends on 31 December, the report for that year is due by 31 December of the following year.

What does it cost to file the annual report late?

A flat late submission fee of Rs 7,500 per return, paid through your designated bank. The fee does not scale with the amount invested. The late-fee route is available for up to three years from the due date, and once your bank issues an advice for payment it has to be paid within 30 days or the advice lapses.

Do I have to file if I own only a small stake in a foreign company?

Not if you hold less than 10 per cent of the equity capital without control and you have no other financial commitment to that entity beyond the equity. Both conditions have to hold. A small stake plus a loan or a guarantee to the same entity takes you outside the exemption. The reporting is also not required where the foreign entity is under liquidation.

Can I send more money to my foreign subsidiary while last year’s report is pending?

No. Your bank will not facilitate a further outward remittance or further financial commitment towards that foreign entity until the reporting delay is regularised. In practice this is what makes the issue urgent, because the subsidiary abroad usually depends on those transfers to operate.

Who signs off on the annual report?

It is based on the audited financial statements of the foreign entity. Where statutory audit does not apply to the Indian entity, the report has to be certified by a chartered accountant. If two or more Indian residents have invested in the same foreign entity, the one holding the highest stake files it, and where holdings are equal it can be filed jointly.

Where this usually ends up

Almost nobody misses these because they decided to. They miss them because the overseas entity was set up by one person, funded by another, and accounted for by a third, and the annual obligation sat in the gap between them. The fix is ownership, not expertise: one named person, one calendar entry in November, one list of entities.

If you already have a foreign entity and you are not certain what has been filed against it, that is worth a conversation before your next remittance rather than after your bank declines one. Book a quick call and we will go through what is open, what is inside the three-year window and what needs to move first. Our FEMA compliance checklist covers the wider set of cross-border obligations in one place if you would rather start on your own.

Disclaimer: This article is general information as at August 2026 and is not advice on your specific facts. Exchange control positions turn on the structure of your holding, the jurisdiction of the foreign entity and the terms of your own financial commitments. Confirm your position with your designated bank and your advisers before acting.

A S Banka Advisors Private Limited