ODI (overseas direct investment): meaning, limits and filings
ODI is investment by an Indian entity or resident in a foreign entity under the 2022 FEMA overseas investment rules, within 400% of net worth.
Short answer
ODI, or overseas direct investment, is an investment by an Indian company, LLP or resident individual in the equity capital of a foreign entity, or an investment that gives control. It is governed by the Foreign Exchange Management (Overseas Investment) Rules and Regulations, 2022, and most ODI is made under the automatic route through an authorised dealer bank.
- Rules
- FEMA (Overseas Investment) Rules and Regulations, 2022
- Automatic route limit
- Financial commitment up to 400% of net worth
- Annual report
- Annual Performance Report by 31 December
- Routed through
- Authorised dealer (AD) bank
How ODI works
An Indian entity can set up or acquire a foreign subsidiary or joint venture by remitting funds through its AD bank and reporting the investment in Form ODI. The total financial commitment, which includes equity, debt and guarantees, cannot exceed 400% of the Indian entity's net worth under the automatic route. Resident individuals invest overseas under the Liberalised Remittance Scheme instead. The foreign entity must be engaged in a bona fide business activity, and ODI in real estate business, gambling and certain financial products is not permitted.
Ongoing compliance
After investment, the Indian entity files an Annual Performance Report on each foreign entity by 31 December every year, based on its audited financial statements. Disinvestment, restructuring and changes in shareholding are also reported. The rules restrict structures where Indian money flows out and comes back as FDI through more than two layers of subsidiaries, to prevent round tripping. Late reporting attracts a late submission fee, and further ODI is restricted until reporting is regularised.
Why it matters for startups
Startups expanding abroad, or flipping to a foreign holding structure, deal with ODI rules. A flip, where Indian founders move ownership to an overseas parent, raises questions under ODI, FDI and tax law together. Get advice before setting up any foreign entity, and keep APR filings current to avoid blocking future investments.
Related services
Sources
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Can an Indian startup set up a US subsidiary?
Yes, under the automatic route if the conditions are met, with the investment reported through the AD bank in Form ODI.
What is the ODI limit for an Indian company?
The total financial commitment in foreign entities is capped at 400% of net worth under the automatic route.
Do individuals need ODI approval to invest abroad?
Resident individuals invest under the Liberalised Remittance Scheme and the overseas investment rules, which set separate conditions.