Money does not move freely between GIFT City’s IFSC and mainland India – every crossing is a FEMA event that must travel a named route. Three matter most: inbound foreign direct investment into Indian companies under the Non-Debt Instruments Rules 2019; resident outbound investment – ODI or OPI – under the Overseas Investment Rules and Regulations 2022, under which an IFSC entity is treated as foreign; and external commercial borrowing, the debt route, amended in February 2026, under which an IFSC banking unit or finance company is now an expressly recognised lender. Each route has its own governing rule, its own conditions and limits, and its own RBI reporting form. This page sets out those mechanics as a matter of law – which route, which rule, which form, what condition – building on, and not repeating, our GIFT City & FEMA note on the framework itself. It is general legal information, not advice; the FEMA rules (the ECB framework especially) change frequently, so verify at the time of use.
The routes at a glance
- Inbound FDI: Non-Debt Instruments Rules 2019 – Form FC-GPR (30 days) / FC-TRS (60 days) via FIRMS
- Direct listing: NDI Amendment Rules 2024 – Indian-company equity on India INX / NSE IFSC
- Resident outbound: ODI / OPI under the Overseas Investment Rules & Regulations 2022; Form FC + annual report
- ECB (debt): Borrowing & Lending Regulations 2018, as amended 16 February 2026 – an IFSC unit is a recognised lender
- Round-tripping: Permitted within a two-layer cap (Rule 19(3))
- Reporting: A missed filing is a FEMA contravention → RBI compounding; enforcement by the ED
- Scope: Route mechanics as law – not vehicle, cost or tax
1. The three corridor routes, and how each crosses the line
Our GIFT City & FEMA note explains why the IFSC is treated as outside India for exchange control, and why every movement across the IFSC–mainland boundary is a FEMA event. This page picks up where that leaves off: which route a given flow must travel, and on what terms. The starting classification is always the same – is the party a resident or a non-resident, and in which direction is the money moving? – and from it follow three principal routes.
Money coming into an Indian company from outside (including from an IFSC entity, which is treated as foreign) is foreign direct investment. Money going out from a resident into a foreign entity – and an IFSC entity counts as foreign – is overseas investment, either direct (ODI) or portfolio (OPI). And debt raised by an Indian borrower from a foreign or IFSC lender is an external commercial borrowing. The sections below take each in turn, with the rule that governs it, the conditions that bound it, and the form that reports it.
2. Inbound FDI: the Non-Debt Instruments Rules 2019
Inbound equity investment is governed by the Foreign Exchange Management (Non-Debt Instruments) Rules 2019. A non-resident – or an IFSC unit, treated as non-resident – investing into an Indian company enters by one of two routes: the automatic route, which needs no prior approval and is available up to the foreign-investment cap fixed for the sector, or the government (approval) route, which applies to sensitive or capped sectors. A standing condition of note: an investor from a country that shares a land border with India (or whose beneficial owner is so situated) requires government approval regardless of sector.
Two further conditions bound the route. Pricing guidelines apply – an issue or transfer to a non-resident must respect a fair-value floor (on issue) or ceiling (on exit), determined by an internationally accepted valuation methodology. And the consideration must come through proper banking channels in foreign currency, consistent with the IFSC’s foreign-currency character. The detail of the caps sits in the NDI Rules read with the consolidated foreign-investment policy, and shifts from time to time, so the current sectoral position should be confirmed.
3. The 2024 direct-listing route: equity on India INX and NSE IFSC
A development specific to GIFT, and easily missed, opened a new inbound avenue. The FEM (Non-Debt Instruments) Amendment Rules 2024, notified on 24 January 2024 (with the companion Ministry of Corporate Affairs rules), permit eligible Indian public companies to list their equity shares directly on the permitted international exchanges in the GIFT IFSC – the India International Exchange (India INX) and the NSE International Exchange (NSE IFSC) – raising foreign capital in foreign currency without a domestic listing first.
One accuracy point to carry: the scheme was operationalised first for unlisted public companies; the leg enabling already-listed Indian companies to use the route awaited the securities regulator’s framework. The current status of the listed-company leg should therefore be checked before a company relies on it. The route is a genuine addition to the corridor – a way for Indian companies to tap international investors through GIFT – rather than a variation on ordinary FDI.
4. FDI reporting: Form FC-GPR, Form FC-TRS and the FIRMS portal
Inbound investment is only compliant if it is reported, on time, by the Indian company. On an issue of equity instruments to a non-resident, the company files Form FC-GPR within 30 days of the issue. On a transfer of equity instruments between a resident and a non-resident, Form FC-TRS within 60 days of the transfer or receipt of funds, whichever is earlier. Both are filed through the Single Master Form on the RBI’s FIRMS portal, via the authorised-dealer bank.
These deadlines are not formalities: a late or missed filing is itself a contravention of FEMA (Section 8), with the compounding consequences set out below. The reporting layer is where most FDI problems actually arise, and it is the cheapest part of the route to get right.
5. Resident outbound: ODI and OPI under the Overseas Investment Rules 2022
When a resident invests into a foreign entity – and an IFSC entity is foreign for this purpose – the governing framework is the overseas-investment package notified on 22 August 2022: the FEM (Overseas Investment) Rules 2022, the FEM (Overseas Investment) Regulations 2022 and the RBI’s Overseas Investment Directions. The first question is which of two kinds of investment it is. Overseas Direct Investment (ODI) is the acquisition of unlisted equity of a foreign entity at any level, or of 10% or more (or any stake carrying control) of a listed foreign entity. Overseas Portfolio Investment (OPI) is investment in foreign securities that is not ODI.
The IFSC is treated more liberally than other outbound destinations: a resident individual or an Indian entity may make OPI into the units and instruments of an IFSC fund or vehicle, and the Rules carry a dedicated, more permissive treatment for investment into an IFSC. The point for a GIFT structure is the counter-intuitive one: a resident putting money into a GIFT entity is making an outbound overseas investment, reported on Form FC at the time of the commitment and tracked through an Annual Performance Report filed by 31 December each year – not an inbound FDI filing.
6. The round-tripping limit and the resident-individual conditions
Two conditions inside the overseas-investment route deserve to be stated precisely, because they are widely misunderstood. The first is round-tripping. It is no longer prohibited outright: under Rule 19(3) of the Overseas Investment Rules 2022, a resident may make a financial commitment in a foreign entity that in turn invests back into India, provided the structure does not exceed two layers of subsidiaries. Within that two-layer cap, the structure is permitted without prior RBI approval; beyond it, approval is required. The right framing is therefore “permitted within a limit,” not “forbidden.”
The second is the resident-individual condition. A resident individual may make ODI into an operating foreign entity that is not engaged in financial-services activity and that has no subsidiary or step-down subsidiary in which the individual has control (Schedule III) – an anti-layering guard. And an individual’s ODI and OPI together run within the Liberalised Remittance Scheme limit of USD 250,000 a financial year; our GIFT City & FEMA note covers the LRS, including the 2024 reform that put the IFSC at par with other offshore destinations.
7. ECB into India: the 2026 amendment
The debt route changed more than any other in the last year, so the current position must be stated carefully. External commercial borrowing – an Indian borrower raising debt from a foreign or IFSC lender – is governed by the FEM (Borrowing and Lending) Regulations 2018, as amended by the First Amendment Regulations 2026, in force from 16 February 2026, which consolidated the ECB rules into the Regulations and moved the regime from a prescriptive, ceiling-driven model to a more outcomes-based one. The headline changes are significant:
- Recognised lenders widened. ECB may now be raised from any person resident outside India, a foreign branch of an RBI-regulated lender, or a financial institution set up in an IFSC – so an IFSC banking unit or finance company is expressly a recognised lender. The FATF/IOSCO lender-residence requirement is removed; related-party ECB must be at arm’s length.
- All-in-cost ceiling abolished, replaced by a market-referenced “cost of borrowing” with no fixed cap.
- Uniform minimum average maturity of three years for all ECBs (with limited exemptions).
- A new Regulation 3A consolidates the end-use negative list, while removing the old working-capital and general-corporate-purpose restrictions.
- Borrowing limit raised to the higher of USD 1 billion or 300% of net worth; INR-to-foreign-currency conversion now permitted.
For GIFT the takeaway is that the IFSC’s role as a lending corridor into India now rests on a firmer, more liberal statutory footing. But the cost-of-borrowing benchmarks and the end-use carve-outs are market-referenced and will move through RBI circulars, so this is the route on the page most in need of a contemporaneous check.
8. Reporting and consequences: the forms, and what a missed filing costs
Every route carries its reporting, and the discipline is the same across all three. FDI is reported on Form FC-GPR and FC-TRS through FIRMS. Overseas investment is reported on Form FC with an Annual Performance Report. ECB requires a Loan Registration Number before drawdown, the loan reported on Form ECB (revised in February 2026) and a monthly Form ECB 2 return; the revised reporting applies to existing loans as well as new ones.
The consequence of getting the reporting – or the route – wrong is real. A cross-border flow with no permitted route, or a missed or late filing, is a contravention of FEMA that must be compounded with the RBI (under the current compounding rules), with enforcement by the Directorate of Enforcement. Because GIFT structures are, by their nature, made of cross-border flows, the routing and the reporting are not back-office detail – they are the compliance spine of the structure, and they reward being planned at the outset rather than reconstructed after the fact.
| Route | Governing rule (with date) | Reporting form | Key condition / limit |
|---|---|---|---|
| Inbound FDI | Non-Debt Instruments Rules 2019 | FC-GPR (issue, 30 days); FC-TRS (transfer, 60 days), via FIRMS | Automatic up to sectoral cap, else government route; pricing guidelines; land-border approval |
| Direct listing | NDI Amendment Rules 2024 (24 Jan 2024) | Within the FDI / FIRMS framework | Permitted exchanges India INX, NSE IFSC; unlisted public companies first (verify listed-company leg) |
| Outbound ODI | Overseas Investment Rules & Regulations 2022 (22 Aug 2022) | Form FC; Annual Performance Report (by 31 Dec) | Unlisted = ODI at any level; 10% / control for listed; commitment up to 400% of net worth |
| Outbound OPI | Overseas Investment Rules & Regulations 2022 | Reported via the AD bank / SMF | Foreign securities other than ODI; OPI into IFSC fund units permitted |
| ECB (debt) | Borrowing & Lending Regulations 2018, as amended by First Amendment Regs 2026 (in force 16 Feb 2026) | Loan Registration Number; Form ECB; monthly Form ECB 2 | 3-year minimum maturity; no all-in-cost ceiling; Reg 3A end-use; limit USD 1bn / 300% net worth; IFSC unit a recognised lender |
Frequently asked questions
Which FEMA route applies when an IFSC fund or holding company invests into a mainland Indian company?
Inbound FDI, under the Non-Debt Instruments Rules 2019. Because an IFSC entity is treated as a non-resident for FEMA, its investment into an Indian company is foreign direct investment – entering through the automatic route up to the sector’s cap, or the government route otherwise, subject to pricing guidelines, and reported by the Indian company on Form FC-GPR.
What is the difference between the automatic route and the government route, and where do sectoral caps come from?
The automatic route needs no prior approval and is available up to the foreign-investment cap fixed for the sector; the government (approval) route applies to sensitive or capped sectors and to investors from countries sharing a land border with India. The sectoral caps and conditions sit in the NDI Rules 2019 read with the consolidated foreign-investment policy.
How is FDI into India reported, and what are the FC-GPR and FC-TRS deadlines?
On an issue of equity instruments to a non-resident, the Indian company files Form FC-GPR within 30 days; on a transfer of equity instruments between a resident and a non-resident, Form FC-TRS within 60 days. Both are filed through the Single Master Form on the RBI’s FIRMS portal via the authorised-dealer bank. A late filing is itself a contravention.
Can an Indian company list its equity shares directly on a GIFT IFSC exchange, and under what rules?
Yes, under the framework introduced by the FEM (Non-Debt Instruments) Amendment Rules 2024 (24 January 2024), which let eligible Indian public companies list equity directly on the permitted international exchanges in GIFT IFSC – India INX and NSE IFSC. The scheme was operationalised first for unlisted public companies; the leg for already-listed companies awaited the securities regulator’s framework, so confirm the current position before relying on it.
What is the difference between ODI and OPI under the Overseas Investment Rules 2022?
Overseas Direct Investment is the acquisition of unlisted equity of a foreign entity at any level, or of 10% or more (or any stake with control) of a listed foreign entity; Overseas Portfolio Investment is investment in foreign securities that is not ODI. Both run under the Overseas Investment Rules and Regulations 2022, with the IFSC treated as foreign – so investing into a GIFT entity is outbound investment for an Indian resident.
Is investing into a GIFT IFSC entity treated as overseas (outbound) investment for an Indian resident?
Yes. Because an IFSC entity is treated as foreign for FEMA, a resident investing into it uses the outbound Overseas Investment framework (ODI or OPI), not the inbound FDI rules – and the 2022 Rules treat investment into an IFSC on more liberal terms than other outbound investment, including OPI into the units of IFSC funds.
Is round-tripping permitted – can a resident invest out into a structure that invests back into India?
Within limits. Under Rule 19(3) of the Overseas Investment Rules 2022, a resident may invest into a foreign structure that in turn invests back into India provided the structure does not exceed two layers of subsidiaries; beyond that, prior RBI approval is needed. Round-tripping is therefore permitted up to the two-layer cap, and must be kept within it – not prohibited outright.
What special conditions apply when a resident individual makes ODI into a foreign or IFSC entity?
A resident individual may make ODI into an operating foreign entity that is not in financial-services activity and that has no subsidiary or step-down subsidiary in which the individual has control (Schedule III). The individual’s ODI and OPI run within the Liberalised Remittance Scheme limit of USD 250,000 a year; our GIFT & FEMA note covers the LRS.
Can an IFSC banking unit or finance company be a recognised lender for an ECB into India, and what changed in 2026?
Yes – and the position is now firmer. The external-commercial-borrowing regime was amended by the FEM (Borrowing and Lending) (First Amendment) Regulations 2026, in force 16 February 2026, which expressly recognises a financial institution set up in an IFSC as a lender, removed the FATF/IOSCO lender-residence requirement, abolished the all-in-cost ceiling in favour of a market-referenced “cost of borrowing,” set a uniform three-year minimum maturity, and consolidated the end-use restrictions in a new Regulation 3A. The cost and end-use specifics are market-referenced and move, so verify at the time of use.
What reporting do these routes require, and what happens if a filing is missed?
Each route carries its reporting: FC-GPR and FC-TRS for FDI (via FIRMS), Form FC and the annual performance report for overseas investment, and the Loan Registration Number with Form ECB and the monthly ECB 2 return for borrowings. A flow with no permitted route, or a missed or late filing, is a contravention of FEMA that must be compounded with the RBI, with enforcement by the Directorate of Enforcement.
Last reviewed: July 2026. This page provides general legal information, not legal advice on any specific matter.