Indian founders increasingly want a Delaware C-corp on top of their Indian operating company — for US customers, for fundraising, for ESOPs to global hires. The Overseas Direct Investment (ODI) rules under FEMA, refreshed in 2022, make this entirely doable, but the structure and filings matter.
Two routes: automatic and approval
Automatic route — an Indian entity can invest up to 400% of its net worth abroad without RBI approval, provided the foreign entity is in a bona fide business activity and not in real estate or banking. Approval route — anything outside the automatic route needs prior RBI consent and typically takes 8–12 weeks.
Filings and timelines
Form FC (Foreign Currency-Direct Investment) is filed before remittance through the AD bank. Form APR (Annual Performance Report) is filed annually by 31 December for the previous calendar year's investment. Missing the APR triggers a compounding penalty under FEMA Section 13.
Round-tripping — investing into a foreign entity that then invests back into India — is restricted but not banned. Bona fide business operations abroad must precede any onward investment back, and structures need to be vetted with both tax and FEMA counsel.
The flip vs. the parallel
Most early-stage founders 'flip' the cap table — incorporating a Delaware parent that owns the Indian sub. This is now significantly harder post-2017 because of GAAR and indirect-transfer rules. The cleaner modern alternative for many is a parallel structure: Indian opco stays Indian-owned, a separate Delaware entity is incorporated, and the two run distinct businesses with appropriate transfer-pricing agreements.
About the author
Priya Menon, CA
Partner, Startups & Funding at Regikart. Want to discuss this in the context of your business?
