Since 2022, Indian founders face a legal minefield when creating US companies! RBI's Foreign Exchange Management rules have completely changed the game.
Every rupee spent on platforms like Stripe Atlas or Firstbase is now considered potential Overseas Direct Investment (ODI) requiring strict FEMA compliance.
⚠️ The stakes are high: ignore these rules and risk serious legal consequences, including ED notices and losing future funding opportunities.
US platforms like Stripe Atlas, Firstbase, and Doola don't handle India-specific RBI compliance—they skip LRS limits, Form 15CA/CB, and ODI/FLA reporting (Schedule III, ODI Directions, 2022).
⚠️ DANGER: Non-compliance risks FEMA penalties up to 3× investment amount and ED investigations!
The ODI Regulations, 2022, issued by the Reserve Bank of India (RBI), constitute India's legal framework governing how Indian residents and entities invest abroad. These rules are mandatory, not optional, and apply to both individuals and companies.
The framework consists of 3 parts:
ODI Rules – Who can invest, how much, and in what manner.
ODI Regulations – What qualifies as investment and how it must be structured.
ODI Directions – Step-by-step filing, approval, and compliance procedures.
For Indian individuals, direct foreign investment is permitted under RBI's 2022 rules, but if the US entity will invest back into India or involves multiple founders, using an Indian entity (LLP/company) as an intermediary is recommended or required for FEMA compliance.
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Most of Indian founders totally ignoring India’s strict rules like Rule 19 on round-tripping and downstream subsidiaries. [Must read]
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"The financial commitment by a person resident in India in a foreign entity that has invested or invests into India at the time of making such financial commitment or at any time thereafter, either directly or indirectly, resulting in a structure with more than two layers of subsidiaries is not permitted." — Definition of Round Tripping allowed as per FEMA Act
RBI prohibited round tripping, as does FEMA Rule 19(3) of the OI Rules for Indian companies.
⚠️ WARNING: Without RBI's blessing, you CANNOT legally send money abroad, own foreign shares, or control overseas assets—period." "Break this rule, and you're not just non-compliant—you're potentially facing penalties up to 3× your investment amount."
⚠️ This means: If you are a resident in India, you CANNOT legally: