Foreign Exchange Management Act (FEMA) Compliances

A very stringent adherence is observed in India when it comes to laws on cross-border transactions. In a country where capital is not readily available, foreign direct investment plays a crucial role in funding companies.

FEMA compliances are complicated, and if they are not handled with the utmost diligence, you may end up facing penalties or, in some cases, scrutiny.

• the annual return on Foreign Liabilities and Assets (FLA);
• the Annual Performance Report (APR);
• External Commercial Borrowings (ECB);
• the Single Master Form;
• Form FC-GPR;
• Form FC-TRS;
• overseas direct investment (ODI) reporting.

Once the US company is incorporated, it needs an EIN, annual tax filings and maintained books of account.

For initial taxation and investment purposes — acquiring fixed assets and real estate, and maintaining liquidity — cash flow needs to be established between the Indian parent company and the US subsidiary within the framework of India's ODI policies and the Liberalised Remittance Scheme (LRS).

Complying with the FEMA and LRS provisions can be a complicated and tedious task, with issues such as multiple tax jurisdictions, remittance limits and prior RBI approvals. Cross-border transactions are also heavily scrutinised by governments nowadays, so one mistake can attract penalties.

It is important to have an experienced professional with you from the outset to walk you through these complex yet important transactions. USAIndiaCFO is a confluence of Chartered Accountants and Company Secretaries. Our nationwide and international clientele includes offline companies, tech startups and individuals, whom we have helped with their international financial issues — from accounting to taxes to complete business set-up.