Understanding FEMA Rules on Foreign Investment Income: The 180-Day Repatriation Rule Explained
As global investing becomes increasingly common for Indian residents—especially through ESOPs, international stocks, ETFs, and mutual funds—understanding the FEMA framework governing such income is essential to remain compliant and financially prudent.
What Qualifies as Overseas Portfolio Investment (OPI)?
As per the FEMA (Overseas Investment) Rules, 2022, Overseas Portfolio Investment (OPI) includes:
Listed equity investments abroad (where ownership is <10%),
Listed foreign debt securities,
International mutual funds or ETFs,
And importantly, reinvestment of income from existing foreign investments
🔁 Reinvestment Is Allowed—But With Boundaries
Schedule III of the Overseas Investment Rules, 2022, allows resident individuals to reinvest dividends or proceeds from foreign securities—offering flexibility to grow your overseas portfolio without immediate repatriation.
✅ Examples of permissible reinvestment:
Reinvesting Microsoft or Apple dividends into other U.S. stocks,
Using foreign brokerage accounts to acquire new foreign securities,
Transferring income between platforms (e.g., Morgan Stanley to Interactive Brokers) to reinvest.
⏱ The 180-Day Rule: Repatriate or Reinvest
As per Regulation 7 of FEMA (Realisation and Repatriation) Regulations, 2015:
Any foreign exchange received/realised, unless reinvested, must be repatriated to India within 180 day
🔔 Key implications:
The 180-day countdown begins from the date of receipt of income.
Merely holding the funds abroad does not count as reinvestment.
Partial reinvestment is allowed; the remaining balance must be repatriated.
🧾 Real-World Scenarios
🔹 Example 1: ESOP Dividends An Indian employee receives quarterly dividends on Microsoft RSUs via a U.S. brokerage:
They may reinvest in U.S. equities within 180 days, or
Repatriate to their Indian bank account before the deadline.
🔹 Example 2: Direct Foreign Equity An investor holding Alphabet or Amazon stock under LRS:
Can use the income to buy more foreign shares,
Or remit the funds back to India within 180 days.
🔹 Example 3: Foreign Mutual Funds Quarterly distributions from a global ETF:
Can be used to purchase new units or similar ETFs,
Or must be returned to India as per FEMA rules.
⚠️ Compliance Matters
Non-compliance with the 180-day repatriation requirement may attract penalties under Section 13 of FEMA. Also, remember:
💡 All global income is taxable in India, regardless of whether it's repatriated. Relief under Double Tax Avoidance Agreements (DTAA) can be claimed for taxes paid abroad.
🧭 Final Takeaway
FEMA offers Indian investors the flexibility to build and reinvest in their global portfolios—but this comes with the responsibility of complying with the 180-day repatriation rule.
📝 Plan your global investment flows wisely. Whether you choose to reinvest abroad or bring your earnings home, stay informed and compliant.