LRS, ODI and OPI are not three alternatives. The Liberalised Remittance Scheme (LRS) is the route a resident individual uses to send money abroad, up to $250,000 a year. ODI (overseas direct investment) and OPI (overseas portfolio investment) are the two kinds of investment you can make with that money.
Buying listed shares or ETFs through a brokerage account is OPI. Buying unlisted shares, such as a stake in a foreign startup, or 10% or more of a listed company, is ODI, which comes with extra conditions and reporting. Below is how to tell them apart and what each means for you.
Table of contents
- What are ODI and OPI, and how do they relate to LRS?
- How do ODI and OPI differ for individuals?
- Is your investment ODI or OPI?
- What do you need to report for ODI and OPI?
What are ODI and OPI, and how do they relate to LRS?
Since 2022, overseas investment by Indian residents has been governed by the FEMA (Overseas Investment) Rules, which the RBI's Master Direction on Overseas Investment puts into practice. The rules split every overseas investment into two kinds:
- ODI (overseas direct investment): buying unlisted equity in a foreign company, buying 10% or more of the paid-up equity of a listed foreign company, or any investment that gives you control.
- OPI (overseas portfolio investment): any investment in foreign securities that is not ODI. For most individuals, that means listed shares, ETFs, mutual funds and listed bonds.
LRS is the route for both. As a resident individual, every rupee you send abroad to invest, whether it ends up as ODI or OPI, goes out under LRS and counts towards your $250,000 annual limit. The LRS for investments guide covers the remittance side.
Note: "Control" here means the right to appoint a majority of the directors or to control management or policy decisions. Holding 10% or more of the voting rights also counts as control.
How do ODI and OPI differ for individuals?
| OPI | ODI | |
|---|---|---|
| What it covers | Listed shares below 10% of the company, ETFs, mutual funds, listed bonds | Unlisted shares of any size, 10% or more of a listed company, or any stake with control |
| Typical investor | Someone buying US stocks or ETFs through a brokerage account | An angel investor in a foreign startup, or a founder setting up a company abroad |
| Route for the money | LRS, within $250,000 a year | LRS, within $250,000 a year |
| Limits on what you can buy | No unlisted debt instruments | Only an operating company, not one in financial services |
| Reporting to the RBI | No separate form for your own purchases; your bank reports the remittance | Form FC through your bank, plus an Annual Performance Report each year |
| TCS | 20% above ₹10 lakh a year | 20% above ₹10 lakh a year |
In practice, the line is simple. Listed shares and funds, held below 10% of the company, are OPI. Anything unlisted, 10% or more of a listed company, or with control, is ODI.
Note: Shares you receive through an employer's ESOP or RSU plan are treated as OPI when they are no more than 10% of the company, in the RBI's wording, and give you no control, even if the company is unlisted.
Is your investment ODI or OPI?
Check three things in order: is the security listed, how big is your stake, and does it give you control?
| Investment | Listed? | Your stake | ODI or OPI |
|---|---|---|---|
| $20,000 of Apple shares through a brokerage account | Yes | Below 10% | OPI |
| A US-listed ETF or a UCITS fund | Yes | Below 10% | OPI |
| $25,000 for a 0.5% stake in a US startup's seed round | No | 0.5% | ODI |
| 12% of a small company listed in Singapore | Yes | 12% | ODI |
| Setting up your own company in Dubai | No | 100% | ODI |
Example. Suppose you send $25,000 under LRS to invest in a friend's startup in Delaware, for a 0.5% stake. The stake is small and gives you no control, but the shares are unlisted, so it is ODI. Your bank reports it in Form FC, you file an Annual Performance Report each year, and the startup must be an operating business, not a financial services firm.
The result: the same $25,000 in listed shares would be OPI, with no Form FC and no annual report
The size of the cheque does not decide the category. Whether the shares are listed, and how much of the company you own, does.
What do you need to report for ODI and OPI?
For OPI, you don't file a separate RBI form for shares or funds you buy yourself. Your bank reports the remittance from your Form A2, under the investment purpose code.
For ODI, the Master Direction requires more:
- Form FC: you report the investment in Form FC through your bank when you make it. The RBI allots a Unique Identification Number for the foreign company, which is quoted on every later remittance and report.
- Annual Performance Report: you file one every year for as long as you hold the investment. If the foreign company has no statutory audit, a chartered accountant certifies it.
- Equity only: as an individual you can invest only in the company's equity. You cannot lend to it or guarantee its borrowings.
- No later control: if you invested without control and the company later sets up or buys a subsidiary, you must not take control of it.
For both, the investment goes in Schedule FA of your income-tax return for every year you are resident and ordinarily resident, and the TCS on the remittance is claimed in the same return.
Note: Missing ODI filings can lead to late submission fees under FEMA. If you are not sure whether an investment is ODI, ask your bank before you remit.
About Paasa
Paasa is a global investing platform for Indian residents and NRIs. It gives you direct access to stocks on their home exchanges in the US, Canada, the UK, Germany, France, Switzerland, the Netherlands, South Korea, Japan, Hong Kong and Singapore, along with ETFs and UCITS funds.
- Portfolio investing, kept simple: listed stocks, ETFs and UCITS funds bought on Paasa are OPI, so there is no Form FC or annual report to file.
- A dedicated relationship manager: one point of contact for questions about your account and your investments.
- Tax reports in one place: capital gains, dividends and Schedule FA workings, ready for your return.
