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September 2022

Major Changes in Overseas Investment Regulations under FEMA

By Rutvik Sanghvi, Chartered Accountant
Reading Time 19 mins
INTRODUCTION

A revamp of the Overseas Direct Investment regulations of the Foreign Exchange Management Act, 1999 (FEMA) was under process for quite some time. Draft Overseas Investment Rules and Overseas Investment Regulations were also in the public domain for consultation. The Finance Ministry, in consultation with RBI, has now finalised the Rules and Regulations, overhauling the outward investment provisions substantially. The new rules supersede the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004, and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015.

This article highlights the significant changes in Overseas Direct Investment provisions in a simplified manner. While there are open issues due to the language adopted in the rules and regulations, such analysis of issues is beyond the scope of this article.

1. WHAT ARE THE MAJOR CHANGES BROUGHT ABOUT BY THE NEW PROVISIONS?

The new provisions have liberalised a few important areas concerning overseas investments and, more importantly, clarified quite a few aspects regarding the older provisions. Some of the significant changes brought about by the new rules and regulations are summarised below:

(i) The new provisions provide enhanced clarity to various ter
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