A Bengaluru company that has just received foreign money has two routes. Report the transaction on time through the bank that received it, or leave it and settle later through a compounding application to the Reserve Bank of India. The first route costs a filing and a fortnight of attention. The second can cost up to three times the amount involved, with ₹5,000 more for every day a continuing default stays open. Reporting on time wins for anyone still inside the deadline. Compounding is for the company that already missed it, and for that company it is the only route back.
What does a late or missing FEMA filing do to a Bengaluru company?
The penalty is the smaller half of it. A contravention can be penalised up to three times the sum involved, and a continuing default keeps adding ₹5,000 a day until somebody closes it. That is real money against a seed round.
The harder cost arrives in a data room eighteen months later. Foreign investors and acquirers run FEMA diligence before they wire anything, and an unfiled FC-GPR from an earlier round reads as an open contravention. Open contraventions get rounds repriced. A form that takes an afternoon to prepare can hold up a term sheet.
Nothing about this is Karnataka specific, and that is exactly the point. FEMA is central law, so the rule that catches a Whitefield exporter is the rule that catches everyone. What is local is the paperwork underneath it: the Karnataka registrations, the invoices and the bank branch that handled the remittance.
Who in Bengaluru is inside the FEMA net, and from which rupee onward?
There is no turnover threshold to clear. FEMA attaches to the transaction and not to the size of the business, so one inward remittance or one allotment to a foreign investor is enough to bring you in. A company with no foreign shareholder and no export invoice is outside it completely. These are inside:
- An IT services and business process operator in Electronic City invoicing overseas customers, where the proceeds have to come back inside the realisation window.
- That same operator again once it takes foreign investment, because the annual FLA return then follows the holding rather than the turnover.
- A D2C fashion label in Jayanagar selling through overseas marketplaces and collecting settlement in foreign currency.
- A Koramangala software company that allotted shares to a foreign fund last quarter and has not touched FC-GPR yet.
- A Bengaluru engineering business running a subsidiary abroad, which owes an Annual Performance Report for that entity every year.
Which desk ends up holding your file?
Not a Karnataka desk. FEMA reporting moves through your authorised dealer bank, meaning the branch that received or sent the money, and that bank submits it to the Reserve Bank of India on the FIRMS portal. Your address decides nothing here. The sequence is short and it rarely varies:
- The remittance lands and your bank issues the inward remittance certificate naming the payer and the purpose.
- You allot the shares, draw the loan or raise the export invoice, and the reporting clock starts from that act.
- We build the form, the valuation certificate where the transaction needs one, and the investor KYC the bank has to confirm.
- The bank reviews the file, submits it on FIRMS and returns the acknowledgement you keep for diligence.
The Karnataka file is a separate one, and it is the file people forget. A Bengaluru GST application is assigned to either a Karnataka state officer or a central officer, and either can raise clarifications and verify the principal place of business. The Karnataka Commercial Taxes Department administers state GST and runs profession tax alongside it. A Karnataka GST registration number carries the state's own two digit code at the front, and we confirm the number the department issues you before it goes on an export invoice.
Which dates govern a FEMA year?
Cross border work runs on a small set of fixed clocks. We calendar them from the day the transaction is signed rather than the day someone notices, because every one of them starts on an act and not on a reminder.
| Filing | What starts the clock | When it is due |
|---|---|---|
| FC-GPR | Shares allotted against foreign investment | 30 days from allotment |
| FLA return | FDI received, or an overseas investment held | 15 July, on the 31 March position |
| ECB-2 | An external commercial borrowing on the books | Every month while the loan runs |
| Export realisation | Goods or services shipped and invoiced | 9 months from shipment |
| Import remittance | Goods brought into India | 6 months from import |
The FLA return is the one Bengaluru founders drop, because it outlives the funding event that created it. A company that raised once and nothing since still files every 15 July for as long as the foreign holding sits on its balance sheet.
What does FEMA compliance cost in Bengaluru, and what sits inside the fee?
Standard filing work starts at ₹12,000 and runs 10 to 15 days from the point your documents are complete. The fee covers the consultation and a document list built around your actual transaction rather than a generic checklist. It covers preparing the form, reconciling every figure against your books, and coordinating with the valuer and with your bank branch. The filing itself and every acknowledgement returned to you sit inside the same number.
Two things sit outside it. A valuation certificate from a registered valuer is a separate professional charge. Compounding applications and multi entity overseas structures are quoted on the size of the contravention, because that is what the work actually turns on. For a Bengaluru company weighing the two, the honest comparison is a four figure filing fee now against a penalty measured as a multiple of the transaction later.
Where does Karnataka profession tax sit next to your FEMA work?
Directly next to it, and it catches the same companies. Karnataka levies the tax under Karnataka Act 35 of 1976 and runs the whole thing on e-Prerana at ptax.karnataka.gov.in. There are two certificates, not one. The enrolment certificate, the EC, covers the entity's own liability. The registration certificate, the RC, covers tax deducted from staff.
Any Karnataka GST registrant owes ₹2,500 a year on enrolment, and so does a company registered under the Companies Act 2013. Where more than one Schedule entry catches you, the tax is payable once and not once per entry. Payment on an existing enrolment falls due before 30 April, and within one month of enrolment where the enrolment comes later in the year. Apply within thirty days of commencing business, because applying late costs an employer ₹1,000 and anybody else ₹500. There is no fee for enrolment, and the certificate you pull off the portal carries neither seal nor signature. That is what the government order says, not a portal fault.
On payroll the line is a salary of ₹25,000 a month and above. Deduct ₹200 in each of the eleven months from April to January and March, then ₹300 in February, which comes to ₹2,500 for the year. The employer then files a monthly statement in Form 5-A within twenty days of the month closing. None of this is a FEMA rule. It is simply the next folder an investor's counsel opens.
Why work with LegalX India in Bengaluru?
Because the FEMA file and the Karnataka file usually sit with different people, and nobody spots the gap until diligence does. Our CA and CS team runs both together. We hold the FC-GPR clock against your board minutes and keep 15 July standing for as long as foreign money sits on your books. The profession tax and GST position gets checked in the same pass, so a Bengaluru company walking into a round has nothing open behind it. Everything is handled online, with documents uploaded and acknowledgements returned digitally. For the position across the country, read FEMA compliance in India explained.