Rules 20 and 22 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.
Two short rules in Chapter VIII of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 close the loop on a foreign investment. Rule 20 says the reporting requirements are as the Reserve Bank specifies. Rule 22 says all transactions run through banking channels and subject to applicable taxes, and sets the conditions on which sale proceeds may be sent out of India.
This article is based on the Rules as notified on 17 October 2019 (S.O. 3732(E)) as amended by the notifications named in this article; the latest amendment consulted is S.O. 4870(E) dated 2 September 2026. Rules 20 and 22 are as notified on 17 October 2019; none of the 19 amending notifications up to 2 September 2026 changes them. Amendments made after that date should be checked in the Gazette. There is no official consolidated text. For the transfer reporting that goes with a sale, see our FC-TRS reporting page.
Rule 20: reporting requirements for investment are as specified by the Reserve Bank. Rule 22(1): all transactions under the Rules go through banking channels in India and are subject to applicable taxes, duties and levies. Rule 22(2): no remittance of sale proceeds of an Indian security held by a non-resident except in accordance with the Rules, the Schedules and the Reserve Bank; an authorised dealer may remit the proceeds net of taxes if the security was held on repatriation basis and was sold in compliance with the pricing guidelines or with Reserve Bank approval.
Rule 20: reporting requirements
Rule 20 is headed "Reporting requirements". It reads: "The reporting requirements for any investment in India by a person resident in India shall be as specified by the Reserve Bank."
One line on the text. The rule speaks of investment in India "by a person resident in India", while the heading of the Chapter and the rest of the Rules are about investment in India by a person resident outside India. The Rule is quoted here as printed. It reads most naturally as the reporting rule for the investments the Rules govern; the reader should confirm the wording against the official text.
The Rule prescribes no form, time limit or fee. The forms and the late submission fee are in the Mode of Payment and Reporting of Non-Debt Instruments Regulations, 2019, explained in our articles on Form FC-GPR, Form ESOP, Form DRR and the LLP returns, Form FC-TRS for transfers of equity instruments, the FLA return, LEC, InVi and convertible note returns and Form DI and the late submission fee. Rule 2A, explained in our article on rules 1 to 5, is the source of the Reserve Bank's power to specify.
Rule 22(1): banking channels and taxes
Rule 22(1) is headed "Taxes": all transactions under the Rules shall be undertaken through banking channels in India and subject to the payment of applicable taxes and other duties or levies in India. The Rule does not name any tax, rate or section; for the tax treatment of a transaction, see our income-tax guides. The Reserve Bank's Master Direction - Foreign Investment in India, updated up to June 15, 2026, repeats the rule in paragraph 10.1.1.
Rule 22(2): remittance of sale proceeds
Rule 22(2) is headed "Remittance of sale proceeds" and has two clauses.
Clause (a). No remittance of sale proceeds of an Indian security held by a person resident outside India shall be made otherwise than in accordance with the Rules, the conditions prescribed in the relevant Schedule and as specified by the Reserve Bank.
Clause (b). An authorised dealer may allow the remittance of sale proceeds of a security (net of applicable taxes) to the seller of shares resident outside India, provided that:
- the security was held by the seller on repatriation basis; and
- either the security has been sold in compliance with the pricing guidelines, or the Reserve Bank's approval has been obtained in other cases for sale of the security and remittance of the sale proceeds.
| Question | Answer under rule 22(2) |
|---|---|
| Who may remit | An authorised dealer allows the remittance to the non-resident seller |
| Net of what | Applicable taxes |
| Basis of holding | Repatriation basis only |
| Sale price | In compliance with pricing guidelines, or Reserve Bank approval where it is not |
| Other conditions | Those in the Rules, the relevant Schedule and as the Reserve Bank specifies |
"Investment on repatriation basis" in rule 2(ad) means an investment whose sale or maturity proceeds, net of taxes, are eligible to be repatriated out of India; the opposite is investment on non-repatriation basis. See our article on FDI, foreign portfolio investment and the sectoral cap. The pricing guidelines in rule 21 are explained in our articles on pricing of shares issued to non-residents and pricing of share transfers and swaps. Where the sale is by a non-resident to a resident, the sale price must not exceed the ceilings in rule 21(2)(c).
The Master Direction repeats the sub-rule in paragraphs 10.2.1 and 10.2.2. It also says, in paragraph 11, that requests for clarification on the foreign investment framework may be made to the authorised dealer bank concerned, which may forward them to the Reserve Bank's Regional Office; that is a statement of the Master Direction and not a rule.
For remittance questions outside shares, such as sale of immovable property, the Rules have a separate provision (rule 29, explained in our article on repatriation of property sale proceeds). For general background, see our guides on repatriation of funds from India and NRO account features, TDS and repatriation.
A worked example
Nordvik Holdings, a company incorporated abroad, bought shares of Lakshya Components Private Limited on repatriation basis and now sells them to Mr. Rao, a resident, at a price within the ceiling in rule 21(2)(c). Nordvik's authorised dealer may remit the sale proceeds, net of applicable taxes, under rule 22(2)(b). If instead the sale was at a price outside the pricing guidelines, remittance would require Reserve Bank approval of the sale and of the remittance. If Nordvik had held the shares on non-repatriation basis, clause (b) does not apply and the proceeds are not remittable under it. The sale must also be reported as the Reserve Bank specifies.
Need help with reporting and remitting sale proceeds?
A remittance depends on repatriable status, pricing and the transfer report being in order. Our FC-TRS reporting team can check these before the authorised dealer is approached.
Key takeaways
- Rule 20 leaves reporting requirements to the Reserve Bank; it prescribes no form or fee.
- Rule 22(1) requires banking channels and payment of applicable taxes, duties and levies.
- Rule 22(2)(b) lets an authorised dealer remit sale proceeds net of taxes only for repatriation-basis holdings sold in compliance with pricing guidelines or with Reserve Bank approval.
- Neither rule has been amended by the 19 notifications to 2 September 2026.
- Rule 20 says "person resident in India" as printed; confirm the wording against the official text.
Read next
- Rule 21(2)(b) and (c) of the FEM (Non-debt Instruments) Rules, 2019: pricing of share transfers and swaps
- Rule 9(1) to (3) of the FEM (Non-debt Instruments) Rules, 2019: sale of shares between residents and non-residents
- Rule 29 of the FEM (Non-debt Instruments) Rules, 2019: repatriation of property sale proceeds
- Repatriation of funds from India: rules and limits
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.