APR Filing Recovery for Non-Compliant US Investment
₹3 Lakh in FEMA Penalties Avoided Through Emergency APR Rectification
Key Metrics
Introduction
Indian founders with US investments often focus on initial ODI filing but overlook the mandatory Annual Performance Report (APR) that must be submitted to RBI every year by December 31st. This ongoing compliance requirement catches many entrepreneurs off-guard, leading to years of non-filing, accumulated penalties, and frozen investment accounts.
CountSure, a US Certified Public Accounting firm specializing in cross-border compliance, assisted a Pune-based tech founder who incorporated a Delaware LLC in 2020 but never filed APR for 3 consecutive years (FY 2020-21, 2021-22, 2022-23). The founder discovered the violation only when attempting to make an additional capital infusion of $100,000 in 2023 which was blocked by their AD bank due to non-filing status.
Through emergency APR rectification and coordinated RBI regularization, CountSure successfully cleared 3 years of pending APR filings within 45 days, avoiding ₹3 lakh in FEMA penalties and unblocking the capital infusion.
Scope of Work
Historical Financial Statement Reconstruction
Retrieval and conversion of 3 years of US LLC financial statements into RBI-compliant INR format
Currency Conversion & Audit Coordination
Application of historical exchange rates and coordination with US CPA for audit certifications
Form APR Preparation
Completion of 3 separate APR forms with detailed schedules covering assets, income, and dividend data
AD Bank Coordination & Submission
Direct liaison with Authorized Dealer bank for acceptance of delayed filings with explanation letters
Penalty Mitigation Strategy
Preparation of condonation applications and regularization requests to minimize FEMA penalties
APR Recovery Methodology: Retrospective Compliance Approach
Rationale for Emergency Rectification Strategy
- The Emergency APR Rectification method was selected because immediate action was required to unblock capital infusion and avoid escalating penalties. This approach allows founders to:
- Clear accumulated non-compliance through simultaneous multi-year filing
- Minimize FEMA penalties through proper condonation applications
- Restore good standing with RBI and AD bank within 45-60 days
- Unblock frozen transactions including capital infusions and repatriation
- Establish ongoing compliance calendar to prevent future violations
- The founder faced immediate pressure as the $100,000 capital infusion was time-sensitive for a customer acquisition campaign.
Non-Compliance Assessment and Financial Reconstruction
Violation Scenario
- Years of Non-Filing: FY 2020-21, 2021-22, 2022-23 (3 years)
- Original Investment: $75,000 in Delaware LLC
- Blocked Transaction: Additional $100,000 capital infusion
- Discovery Timeline: November 2023 (1 month before current year deadline)
- The founder faced potential penalties of ₹1 lakh per year (₹3 lakh total) plus transaction blockage.
CountSure's Resolution
- When addressing the non-compliance crisis, CountSure:
- Retrieved historical US financials from the LLC's QuickBooks and US CPA records for all 3 years
- Applied historical RBI reference rates for INR conversion on each year's balance sheet date
- Reconstructed APR-compliant schedules showing total assets, income, profit/loss for each year
- Prepared condonation letters explaining oversight and demonstrating no intent to violate FEMA
- Filed all 3 APRs simultaneouslythrough AD bank with supporting audit reports and explanations
- This cleared the compliance backlog while positioning for penalty waiver consideration.
Process Implementation
- CountSure followed a crisis-resolution timeline:
- Emergency Audit (Days 1-5) - Assessment of non-compliance extent, financial data availability, penalty exposure
- Financial Reconstruction (Days 6-20) - Currency conversion, balance sheet reclassification, RBI format alignment for 3 years
- US CPA Coordination (Days 15-25) - Securing audit certifications and director declarations for historical periods
- APR Form Preparation (Days 21-35) - Completion of Form APR with all annexures for FY 2020-21, 2021-22, 2022-23
- AD Bank Submission (Days 36-40) - Filing with condonation applications and explanation letters
- Follow-Up & Clearance (Days 41-45) - RBI acknowledgment receipt and capital infusion unblocking
- This enabled immediate transaction resumption while regularizing historical compliance.
Conclusion
This case demonstrates the critical importance of proactive APR compliance management for Indian founders with US investments. Through emergency retrospective filing and strategic penalty mitigation, CountSure cleared 3 years of non-compliance within 45 days, avoiding ₹3 lakh in FEMA penalties and unblocking essential capital transactions.
The engagement highlights the risks of overlooking annual RBI reporting requirements. For Indian founders, establishing automated APR compliance calendars and integrated US-India financial reporting prevents costly violations and ensures continuous transaction capability for business growth.
