When an Indian resident has Overseas Direct Investment (ODI) in a foreign entity, the compliance does not end when the money is remitted or the shares are acquired. The overseas investment framework also requires periodic reporting of the foreign entity's performance through an Annual Performance Report (APR), where the requirement applies. For finance teams and Chartered Accountants, the practical questions are usually the same: who must file, which foreign entities need an APR, what is the due date, when is the filing exempt, whose financial statements should be used, and what happens if the report is late.
The primary legal source is RBI's Foreign Exchange Management (Overseas Investment) Regulations, 2022. RBI's current Master Direction - Overseas Investment, updated as on 1 April 2026, provides the operational framework and clarifications. The current Master Direction on Reporting under FEMA, updated as on 24 June 2026, is the companion source for FEMA reporting instructions.
Who is required to submit an APR?
Regulation 10(4) applies to a person resident in India who has acquired equity capital in a foreign entity and the investment is reckoned as ODI. Where the requirement applies, an APR must be submitted for each foreign entity every year through the designated Authorised Dealer bank.
This is important because APR is linked to ODI, not merely to the fact that money has moved overseas. A resident with only an Overseas Portfolio Investment should not automatically treat the APR rule as applicable. The starting point is therefore to classify the investment correctly and identify the foreign entities against which ODI is recorded.
What is the APR due date?
The general rule is 31 December every year. There is a special timing rule where the foreign entity itself follows a calendar-year accounting period ending on 31 December: in that case, the APR is due by 31 December of the following year.
Simple timeline example
Assume an Indian company has ODI in a foreign subsidiary whose accounting year ends on 31 March. If APR is otherwise applicable, the report for that accounting year is due by 31 December of the same calendar year. Now assume the foreign entity's accounting year ends on 31 December. The Regulations specifically allow the APR to be submitted by 31 December of the next year. The foreign entity's accounting year therefore matters when the compliance calendar is prepared.
When is APR not required?
The Regulations contain two specific exemptions that should be checked before preparing a filing:
- Small non-controlling equity holding: APR is not required where the Indian resident holds less than 10% of the equity capital, has no control in the foreign entity, and has no other financial commitment other than equity capital.
- Foreign entity under liquidation: APR is not required where the foreign entity is under liquidation.
The first exemption is narrower than a simple "below 10%" test. All three conditions must coexist: the holding must be below 10%, there must be no control, and there must be no other financial commitment beyond equity. For example, a 7% holding may still require closer analysis if contractual rights give control or if the investor has extended a permitted debt or guarantee that constitutes another financial commitment.
Which financial statements should support the APR?
As a rule, the APR is based on the audited financial statements of the foreign entity. The Regulations provide a practical exception where the Indian resident does not have control and the law of the host country or jurisdiction does not require the foreign entity's books to be audited. In that case, the APR may be based on unaudited financial statements, but those statements must be certified as unaudited by the statutory auditor of the Indian entity or, where statutory audit is not applicable, by a Chartered Accountant.
RBI's Overseas Investment Master Direction separately clarifies that where statutory audit is not applicable, including in the case of a resident individual, the APR is to be certified by a Chartered Accountant. This makes the evidence trail important: the file should explain why audited statements are or are not available and who has certified the financial information used.
Who files when several Indian residents invest in the same foreign entity?
Where more than one person resident in India has made ODI in the same foreign entity, the Regulations place the APR responsibility on the person holding the highest stake. If the holdings are equal, the APR may be filed jointly. RBI also clarifies that where joint filing is required, one investor may be authorised by the others to file, or the investors may file jointly.
Finance teams should document this arrangement rather than assume another investor has filed. A short annual confirmation among the Indian investors can prevent duplicate work on one side and missed reporting on the other.
What changes in the overseas structure should be captured?
APR is not only a set of performance numbers. The Regulations require the resident investor to report, through the APR, details of acquisition, setting up, winding up or transfer of a step-down subsidiary and alterations in the shareholding pattern of the foreign entity during the reporting year. Group-structure changes should therefore be reconciled with the financial information before the APR is finalised.
APR is different from the FLA return
An Indian entity that has made ODI also has a separate obligation to submit the Annual Return on Foreign Liabilities and Assets (FLA) within the timeline prescribed by RBI. APR and FLA are therefore different reporting obligations. Filing one should not be treated as automatic compliance with the other. The compliance calendar should list them separately and identify the team responsible for each.
What happens if APR is filed late?
The Regulations allow delayed filings to be regularised with a Late Submission Fee (LSF), subject to the prescribed framework and time limit. RBI's current Overseas Investment Master Direction places APR in the category of periodic reports for which the stated LSF is ₹7,500 per return. The LSF facility is available up to three years from the due date, subject to the RBI framework.
Delay can also affect future transactions. Regulation 12 restricts further financial commitment or transfer of the overseas investment until the reporting delay is regularised. A missed APR should therefore be treated as an active transaction-control issue rather than only as a year-end filing backlog.
Practical APR preparation checklist
- Map every ODI foreign entity. Start from the UIN and overseas-investment register and identify each foreign entity for which ODI remains outstanding.
- Test the exemption carefully. Check percentage holding, control and whether any debt, guarantee or other financial commitment exists.
- Confirm the foreign accounting year. Use it to determine the applicable 31 December filing timeline.
- Obtain the right financial statements. Prefer the audited financial statements; if the permitted unaudited route is used, document why it is available and obtain the required certification.
- Reconcile ownership and structure. Capture changes in the foreign entity's shareholding and relevant step-down subsidiaries during the reporting year.
- Coordinate multiple Indian investors. Identify the highest-stake investor or document the agreed joint-filing arrangement.
- Route the filing through the designated AD bank. Keep acknowledgements, supporting statements, certification and correspondence together with the UIN records.
- Track APR and FLA separately. They are distinct FEMA reporting obligations.
- Escalate delay immediately. If an APR is overdue, assess LSF regularisation before planning further financial commitment or transfer.
Common mistakes to avoid
- Assuming every overseas shareholding requires APR without first distinguishing ODI from OPI.
- Using only the "less than 10%" threshold and ignoring the no-control and no-other-financial-commitment conditions.
- Applying the same due-date logic without checking whether the foreign entity's year ends on 31 December.
- Using unaudited financial statements merely because audited accounts are delayed, without satisfying the regulatory exception.
- Failing to report step-down-subsidiary or shareholding changes in the APR.
- Assuming another Indian investor has filed without documenting responsibility.
- Treating APR and FLA as the same return.
- Ignoring an overdue APR until the next remittance or transfer is blocked by the reporting regularisation requirement.
Practical takeaway
A reliable FEMA APR workflow is: identify ODI foreign entities → test the exemption → determine the accounting-year-based due date → obtain the correct financial statements and certification → reconcile ownership and step-down-subsidiary changes → coordinate the responsible Indian investor → file through the designated AD bank → preserve evidence and separately track FLA. For any material overseas investment, confirm the latest RBI Overseas Investment and FEMA Reporting directions before filing because forms, operational processes and late-filing mechanics can change.
