Every FEMA question Indian founders ask about funding, structuring, and running a Singapore company - LRS, ODI, APR, FC-GPR, valuations, ESOP, repatriation, round-tripping, and penalties - answered in one place. FEMA is the single most common area where Indian founders get tripped up, so this guide is deliberately thorough.
This guide is for general information only. Tax, FEMA, and corporate rules change and depend on your specific facts. Engage a qualified CA and a Singapore corporate services provider before acting.
LRS - funding as an individual
What is the LRS and how does it apply to a Singapore company?
The Liberalised Remittance Scheme lets a resident Indian individual remit up to USD 250,000 per financial year for permissible capital and current account transactions, including subscribing to equity in a foreign company such as a Singapore Pte Ltd. It is the simplest route for an individual founder to fund a Singapore company.
Is the LRS limit per person or per company?
Per person. Each resident individual has their own USD 250,000 annual limit. Two co-founders can collectively remit USD 500,000 per financial year into the same Singapore company under their separate limits.
Does the LRS limit reset each year?
Yes, every Indian financial year (April-March). Unused limit does not carry forward. Track your usage with our FEMA LRS Tracker tool to avoid exceeding it.
What is TCS on LRS remittances?
Tax Collected at Source applies to LRS remittances - generally 20% on the amount exceeding ₹10 lakh in a financial year (confirm the current rate and threshold). TCS is creditable against your income tax, so it is a cash-flow cost, not a permanent extra tax.
What form do I file for an LRS remittance?
Form A2 with your authorised dealer bank at the time of remittance, declaring the purpose. Investment into foreign equity also requires the relevant reporting (e.g. the overseas investment filings) - your CA and AD bank guide the documentation.
ODI - funding through an Indian company
What is ODI?
Overseas Direct Investment - the FEMA route for an Indian entity (or individual, in defined cases) to invest in or establish a foreign entity. It governs an Indian company funding or becoming the parent of a Singapore company.
How much can an Indian company invest abroad under ODI?
Under the automatic route, up to 400% of the Indian company's net worth in a financial year. Beyond that, or in restricted sectors (financial services, etc.), RBI approval is required.
What is Form ODI?
The filing made with your authorised dealer bank before remitting an overseas direct investment. It records the investment details and generates a Unique Identification Number (UIN) that must be maintained for all future filings related to that investment.
When do I use ODI instead of LRS?
Use LRS when you, the individual founder, are investing personally (up to USD 250,000/year). Use ODI when your Indian company is making the investment, or when you need to invest more than the LRS limit allows. The flip structure (Indian opco becoming a subsidiary of a Singapore holdco) typically involves the ODI framework.
FC-GPR, valuations, and the flip
What is Form FC-GPR?
FC-GPR (Foreign Currency-Gross Provisional Return) reports the issue of shares by a company to a foreign investor. In the flip context and related filings, it must generally be filed within 30 days of share allotment. Late filing attracts penalties.
Do I need a valuation to set up the flip?
Yes. When Indian shareholders swap Indian company shares for Singapore company shares, RBI requires a valuation of the Indian company shares by a SEBI-registered merchant banker or a chartered accountant, to ensure the swap is at fair value.
What is the 30-day rule I keep hearing about?
Several FEMA filings have a 30-day deadline from the triggering event - notably reporting share allotment. Missing these deadlines is a common, avoidable contravention. Build the filing calendar into your process from day one.
Can I do the flip myself or do I need a CA?
You need a FEMA-qualified CA on the India side. The flip involves valuation, ODI/FC-GPR filings, RBI compliance, and tax analysis. The Singapore side (incorporation, nominee director, corporate secretary) is handled by an ACRA filing agent like Karman; the two sides coordinate.
APR and ongoing compliance
What is the Annual Performance Report (APR)?
An annual FEMA filing due by 31 December covering the overseas entity's audited financial performance and dividends received, for every Indian party holding an overseas investment. It is mandatory and frequently missed.
What documents do I need for the APR?
The Singapore entity's audited or certified financial statements for the relevant period, details of any dividends received, and updates to ownership or directorships. Ensure your Singapore accounts are ready before the December deadline - engage your Singapore accountant early.
What happens if I miss the APR deadline?
Missing the APR is a FEMA contravention that can attract penalties and compounding interest, and it surfaces during due diligence in fundraising. If you have missed APRs, a FEMA CA can help with compounding (regularisation) - do it before it is discovered.
Do I need to disclose my Singapore company in my Indian tax return?
Yes. India-resident shareholders generally must disclose foreign assets, including shares in a Singapore company, in Schedule FA of their Indian income tax return. Non-disclosure carries serious penalties under the Black Money Act.
ESOP, repatriation, and round-tripping
Can I give ESOPs in my Singapore company to India-resident employees?
Yes, but it is a FEMA transaction. Indian-resident employees can hold ESOPs in a foreign parent under FEMA's ESOP provisions, generally where the foreign company holds the requisite stake in the Indian company and the scheme is properly approved. Get specific FEMA advice - this is commonly done incorrectly.
How do I bring profits back to India from my Singapore company?
Via dividends. The Singapore company pays a dividend (zero Singapore withholding under the one-tier system); the India-resident shareholder includes it in Indian income, taxable at their slab rate with credit for Singapore taxes. The DTAA reduces withholding on dividends from an Indian subsidiary to a Singapore parent to 10%.
What is round-tripping and why is it prohibited?
Round-tripping is routing Indian money out and back into India through a foreign entity to circumvent Indian rules. FEMA prohibits it. A genuine Singapore holdco over an existing Indian opco, set up through the regulated flip, is not round-tripping - but artificial structures are scrutinised under FEMA and GAAR.
Can my Singapore company invest back into India?
Only within FEMA and Indian FDI rules, and not as disguised round-tripping. A Singapore holdco owning an Indian opco established via a compliant flip is permitted; using the Singapore entity to re-route Indian funds back as FDI to dodge rules is not. Get specific advice.
Penalties and getting it right
What are the penalties for FEMA contraventions?
Penalties can be up to three times the sum involved where quantifiable (or up to ₹2 lakh otherwise), plus daily compounding interest for continuing contraventions. Many contraventions can be regularised through RBI's compounding process.
How do I fix a past FEMA non-compliance?
Through compounding - a formal RBI process to regularise contraventions by paying a compounding amount. A FEMA-specialist CA prepares the application. Doing this proactively, before the issue is discovered in due diligence or an audit, is significantly cheaper and cleaner.
How can I avoid FEMA problems from the start?
Engage a FEMA-qualified CA before you remit any money or set up the structure, route all funds through proper channels (never informal transfers like hawala or undocumented Wise transfers for equity), file FC-GPR and APR on time, and keep a compliance calendar. The Singapore side and India side must coordinate.
FEMA is governed by RBI's Foreign Exchange Management Act and the Overseas Investment Rules 2022, with the LRS limit at USD 250,000 per individual per financial year as of June 2026. RBI periodically updates reporting requirements and TCS rates. Always engage a FEMA-qualified CA before funding or structuring a Singapore company, and use Karman's FEMA LRS Tracker to monitor your remittance headroom. Karman handles the Singapore side and coordinates with your India-side CA on all FEMA documentation.