Rules 1 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The Foreign Exchange Management (Overseas Investment) Rules, 2022 are the Central Government's rules on investment outside India by a person resident in India. They replace two older sets of regulations, are administered by the Reserve Bank, switch off for a short list of cases, keep earlier investments alive and bar everything they do not allow. This article covers the preamble and rules 1, 3, 4, 6, 8 and 20, and then maps the remaining rules and Schedules to our other articles.
The Rules are quoted as notified on 22 August 2022 (G.S.R. 646(E)); no amendment is in the texts consulted. Amendments after that date should be checked in the Gazette. The Rules were made under sub-section (1) and clauses (aa) and (ab) of sub-section (2) of section 46 and sub-section (3) of section 47 of the Foreign Exchange Management Act, 1999; see our articles on section 46, section 6 and section 4 of the Act. For an overseas investment by an Indian company, LLP or individual, our overseas direct investment reporting service covers the filings that follow.
The Rules are made "in supersession of" the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 and the Acquisition and Transfer of Immovable Property Outside India Regulations, 2015, except for things done before. The Reserve Bank administers them and may issue directions, circulars, instructions and clarifications. They do not apply to investment by a financial institution in an IFSC, or to investment out of an RFC Account, out of foreign currency held abroad by a person employed in India for not more than three years, or under section 6(4) of the Act. Rule 8 bars every other investment or financial commitment outside India unless the Act, the Rules, the Regulations or directions allow it.
The preamble: what the Rules replace
The notification, G.S.R. 646(E) dated 22 August 2022, is made by the Ministry of Finance (Department of Economic Affairs) "in supersession of" 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, "except as respects things done or omitted to be done before such supersession". Anything an older article or guide says by reference to those two sets of regulations has to be read against that.
Rule 1: title and commencement
Rule 1 gives the short title, the Foreign Exchange Management (Overseas Investment) Rules, 2022, and says they come into force on the date of their publication in the Official Gazette. The Gazette date is 22 August 2022.
Rule 3: administration
Rule 3(1) says the Rules shall be administered by the Reserve Bank. Rule 3(2) says the Reserve Bank may issue such directions, circulars, instructions and clarifications as it may deem necessary for the effective implementation of the Rules. The Reserve Bank has used this to issue the Overseas Investment Regulations, 2022 and the Master Direction - Overseas Investment, whose cover note says that directions to Authorised Persons are issued under section 11 of the Act, and that the Master Direction reads with the Rules and the Regulations. The Master Direction was issued on July 24, 2024 and, as consulted on 2 October 2026, is "Updated as on April 01, 2026". For section 11 see our article on sections 11 and 12 of the Act.
Rule 4: where the Rules and the Regulations do not apply
Rule 4 says "Nothing in these rules or the Foreign Exchange Management (Overseas Investment) Regulations, 2022 shall apply to":
| Clause | Case |
|---|---|
| (a) | Any investment made outside India by a financial institution in an IFSC |
| (b)(i) | Acquisition or transfer of any investment outside India made out of a Resident Foreign Currency (RFC) Account |
| (b)(ii) | Acquisition or transfer of any investment outside India made out of foreign currency resources held outside India by a person employed in India for a specific duration (irrespective of length) or for a specific job or assignment, the duration of which does not exceed three years |
| (b)(iii) | Acquisition or transfer of any investment outside India made in accordance with sub-section (4) of section 6 of the Act |
The Explanation says "financial institution" has the meaning in the International Financial Services Centres Authority Act, 2019. The Master Direction, in its paragraph 2, repeats that the provisions of the Rules, Regulations and Directions do not apply and that general permission is available for such acquisition or transfer; its Part I also gives the Reserve Bank's own explanations of terms, which are covered in our article on the defined terms. Sub-section (4) of section 6 of the Act, on assets held across a change of residence, is explained in our article on section 6(4) to (6) of the Act.
Rule 6: continuity
Rule 6 says any investment or financial commitment outside India made in accordance with the Act or the rules or regulations under it and held on the date of publication of the Rules in the Official Gazette is deemed to have been made under the Rules and the Overseas Investment Regulations, 2022. An investment made under the 2004 regime and held on 22 August 2022 therefore does not need to be unwound; it is treated as made under the new Rules.
Rule 8: prohibition on investment outside India
Rule 8 says: "Save as otherwise provided in the Act or these rules or the regulations made or directions issued under the Act, no person resident in India shall make or transfer any investment or financial commitment outside India." It is the default. Every permission in the Rules, from rule 9 onward, is an exception to it. The Master Direction's paragraph 3 reads this as general permission, or automatic route, for overseas investment within the Rules, Regulations and Directions; the approval and automatic route are explained in our article on automatic route, approval route and NOC.
Rule 20: requirements left to the Reserve Bank
Rule 20 says the mode of payment, deferred payment of consideration, reporting, realisation and other requirements for any investment outside India by a person resident in India shall be as per the regulations made by the Reserve Bank under the Act. That is why the Regulations, not the Rules, carry the payment and reporting detail; see our articles on deferred payment and mode of payment, reporting under regulation 10 and late submission fee and the bar on further commitment.
Map of the rest of the Rules
| Provision | Subject | Our article |
|---|---|---|
| Rule 2 | Definitions | ODI, OPI, financial commitment and control and Indian entity, net worth and strategic sector |
| Rule 5 | Debt and non-debt instruments | Same second article |
| Rules 7 and 9 | Rights issue and bonus shares; bona fide business and approval powers | Rules 7 and 9 |
| Rule 10 | No-objection certificate | Rule 10 |
| Rule 11 and Schedule I, paragraph 1 | Manner of ODI by an Indian entity | Schedule I, paragraph 1 |
| Schedule I, paragraphs 2 and 3 | Financial services; financial commitment limit | Paragraph 2 and paragraph 3 |
| Rule 12 and Schedule II | Overseas portfolio investment by an Indian entity | Schedule II |
| Rule 13 and Schedule III | Resident individuals | Schedule III, paragraph 1 and paragraphs 2 and 3 |
| Rule 14 and Schedule IV | Other residents: trusts, societies, funds, banks | Schedule IV |
| Rule 15 and Schedule V | Investment in an IFSC | Schedule V |
| Rules 16 and 17 | Pricing, transfer and liquidation | Rules 16 and 17 |
| Rule 18 | Restructuring of a loss-making foreign entity | Rule 18 |
| Rule 19 | Real estate, startups and layers | Rule 19 |
| Rule 21 | Immovable property outside India | Rule 21 |
How the three instruments fit
The Rules say what is permitted and by whom. The Overseas Investment Regulations, 2022 (twelve regulations) carry the financial commitment forms, guarantees, pledges, payment, share certificates, reporting and the late submission fee; our articles on them begin with regulations 1 to 4 on financial commitment. The Master Direction - Overseas Investment (paragraphs 1 to 28) is the Reserve Bank's instruction to banks on how the Rules and Regulations are applied. Where the Master Direction states something the Rules do not, it is the Reserve Bank's direction and not the text of the Rules. For the older guides on the subject, see overseas direct investment under FEMA.
A worked example
Ravi Menon is employed in India by a company on a three-year assignment and holds shares abroad bought out of foreign currency he holds outside India. Rule 4(b)(ii) takes that case outside the Rules and the Regulations, because the assignment does not exceed three years. If the same person bought the shares out of rupee savings, rule 8 would apply: the investment would be barred unless the Rules, Regulations or directions allowed it. The names are invented.
Need help with overseas investment?
Whether a transaction falls inside the Rules or inside one of the four exclusions is the first question, and the answer decides what must be filed. Our overseas direct investment reporting team can map the transaction against rule 4 and the Schedules.
Key takeaways
- G.S.R. 646(E) of 22 August 2022 supersedes the 2004 foreign security regulations and the 2015 immovable property regulations, except for things already done.
- The Reserve Bank administers the Rules (rule 3).
- Rule 4 excludes IFSC investment by a financial institution, RFC Account investments, foreign currency held abroad by a person employed in India for up to three years, and section 6(4) cases.
- Rule 6 deems earlier investments held on the notification date to be made under the new Rules.
- Rule 8 bars everything not otherwise allowed; rule 20 leaves payment and reporting to the Regulations.
Read next
- ODI, OPI, financial commitment and control defined: rule 2
- Bona fide business activity and approval powers: rules 7 and 9
- Immovable property outside India: rule 21
- Setting up a subsidiary abroad: Indian company guide
Disclaimer: Based on the Gazette text of the instrument this article names, as notified and as amended by the notifications named in the article (for the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 the latest amendment consulted is S.O. 4870(E) dated 2 September 2026), as consulted on 2 October 2026. There is no official consolidated text; the provisions were read with each amendment applied. Sectoral caps, entry routes, conditions, forms and time limits change by notification, press note and circular; later changes should be checked on the Gazette, DPIIT and Reserve Bank sites. This article is general information, not legal advice; check the official text before acting.