Reverse flip to India: fast-track merger, RBI rules and the tax bill

A reverse flip from Delaware or Singapore to India in 2026 takes one of three routes: an inbound merger of the foreign parent under section 234 of the Companies Act 2013, on the section 233 fast track where the Indian company is wholly owned; a share swap that makes the Indian company the parent; or an asset transfer. The merger can be tax-neutral in India if it meets the amalgamation definition, the swap is a taxable transfer, and the US leg is tested under 26 U.S.C. 367 and 7874.

Why the parent is coming home

The Delaware flip was built for US venture money and a US listing. Companies choosing an Indian listing now run it in reverse. Entrackr reported on 29 May 2025 that the Regional Director, Hyderabad had approved the amalgamation of Razorpay Inc. with Razorpay India ahead of a targeted 2026-27 IPO, that PhonePe, Zepto, Dream11 and Groww had completed reverse flips, and that Meesho and Pine Labs were awaiting approvals. Outlook Business reported on 14 January 2025 that PhonePe paid around USD 1 billion in capital gains tax on its move from Singapore and that Groww incurred USD 160 million in taxes as restructuring costs. The route back drives the size of that bill. Everything below is stated as at 29 September 2026.

Three routes back to India

Schedule A sets the routes side by side: the inbound merger is the route the Razorpay and Zepto amalgamations took and the only one with a tax-neutral path; the share swap is the flip run backwards; the asset transfer is a sale.

Schedule A · Reverse flip routes compared, as at 29 September 2026
Route	Corporate law step	RBI position	India tax	Watch
Inbound merger, fast track	Foreign holding company merges into its Indian wholly owned subsidiary under section 234 read with section 233 and rule 25A(5) (G.S.R. 555(E), effective 17 September 2024)	Rule 25A(5)(i): prior RBI approval by both companies. Regulation 9 of the 2018 Regulations: a compliant merger is deemed approved on a director and company secretary certificate	Within sections 70(1)(e) and 70(1)(f) of the Income-tax Act 2025 if the section 2(6) definition is met; neither leg a transfer	Wholly owned only; 90 per cent of members and nine-tenths of creditors by value; Tribunal referral still possible within 60 days
Inbound merger, Tribunal route	Section 234 merger sanctioned by the Tribunal where the fast-track classes do not fit; consideration may be cash, Depository Receipts or both	Prior RBI approval under section 234(2); regulation 9 deemed approval where the 2018 Regulations are followed	Same section 2(6) test	Zepto’s Singapore merger reached an NCLT order reported on 14 January 2025
Share swap	The foreign parent’s shareholders swap its shares for Indian shares under rule 9A of the NDI Rules (inserted 16 August 2024), with Government approval wherever applicable	NDI pricing and reporting; OI Rules 2022 for resident founders; no scheme, no certificate	A transfer; capital gains at a rate that turns on holder and holding period	The foreign parent survives and must be wound down or kept
Asset or business transfer	The parent sells assets, contracts and IP to the Indian company	Ordinary inbound payment rules; no scheme	A taxable transfer, priced between related parties	For a parent holding little more than IP

The fast-track inbound merger, step by step

Section 233 covers small companies and a holding company merging with its wholly owned subsidiary. G.S.R. 555(E) of 9 September 2024 inserted sub-rule (5) into rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules 2016 for a foreign holding company merging into its Indian wholly owned subsidiary, effective 17 September 2024. G.S.R. 603(E) of 4 September 2025 widened the rule 25 classes further; its conditions are not restated here.

Confirm the shareholder map. Rule 25A(5) requires the Indian transferee to be wholly owned by the foreign transferor, so shares held directly by founders, employees or investors move into the parent first, or the group takes the Tribunal route.
Model the tax first. Test the scheme against section 2(6) of the Income-tax Act 2025 so that sections 70(1)(e) and 70(1)(f) are available, and run the US exit under 26 U.S.C. 367 and 7874.
Settle the RBI position. Rule 25A(5)(i) says both companies obtain the prior approval of the RBI; regulation 9 of the 2018 Regulations deems a compliant merger approved on the certificate described below.
Commission the valuation. Regulation 8 requires both companies to be valued under rule 25A on an internationally accepted pricing methodology at arm’s length.
Notice, solvency and approvals. Each company invites objections or suggestions from the Registrar and the Official Liquidator within thirty days, files a declaration of solvency, and takes approval from members holding at least 90 per cent of the total shares and from a majority representing nine-tenths in value of the creditors or each class.
File with the Regional Director. The Indian company files the approved scheme, with the rule 25A(4) declaration, with the Regional Director (the Central Government’s section 233 powers are delegated by S.O. 4090(E)), the Registrar and the Official Liquidator.
Wait out the windows. The Registrar and Official Liquidator have thirty days to object. If the Regional Director considers the scheme against the public interest or creditors, an application to the Tribunal must be made within sixty days; otherwise the scheme is registered.
Run the regulation 4 housekeeping. Securities go to the foreign company’s non-resident shareholders under the inbound investment regulations; an overseas office becomes a branch of the Indian company. Within two years of sanction, inherited borrowings conform to External Commercial Borrowing or trade credit norms, assets FEMA bars an Indian company from holding are sold, and any foreign currency account closes.

Is RBI approval automatic, then? Rule 25A(5)(i) requires prior approval. Regulation 9 deems a compliant merger approved on a certificate from each company’s managing director or whole-time director and the company secretary, where the company has one, furnished with the application to the Competent Authority. The FEM (Cross Border Merger) (Amendment) Regulations 2026, FEMA 389(1)/2026-RB dated 29 May 2026 and notified in June 2026, substituted Competent Authority for the National Company Law Tribunal references, defined as any authority empowered under the Companies Act 2013 or its subordinate legislation to approve a scheme, which on its face includes the Regional Director under section 233. Nothing yet confirms that the RBI is out of the picture; whether a deemed approval satisfies rule 25A(5)(i) on a given scheme is settled with the AD bank and, where needed, the RBI.

For a Singapore parent the Indian leg is identical. Infinilex scopes the Singapore-side leg and briefs the Singapore local counsel who sign, named to you before they act.

The tax bill in India and the United States

The Income-tax Act 2025, in force from 1 April 2026, renumbers the amalgamation rules; 1961 numbers follow in brackets. Section 2(6) (formerly 2(1B)) requires all property and liabilities of the amalgamating company to pass to the amalgamated company and holders of not less than three-fourths in value of its shares to become shareholders of the amalgamated company. Where that is met, section 70(1)(e) (formerly 47(vi)) says a transfer of a capital asset to an Indian amalgamated company is not regarded as a transfer, and section 70(1)(f) (formerly 47(vii)) does the same for a shareholder allotted Indian shares. Cash consideration sits outside 70(1)(f).

The share swap has no such shelter. As the flip article sets out, the swap is a transfer for Indian tax purposes and capital gains arise at a rate that depends on the holder and the holding period. The section 9(10) indirect-transfer test and the section 6(10) place of effective management test, both covered on cross-border structuring, decide how the foreign parent was already taxed in India.

On the US side, a Delaware corporation merging into its Indian subsidiary is a United States person transferring property to a foreign corporation. 26 U.S.C. 367(a)(1) provides that, in an exchange described in section 332, 351, 354, 356 or 361, the foreign corporation is not considered a corporation for determining the extent to which gain is recognised. The active trade or business exception in 367(a)(3) was repealed for transfers after 31 December 2017, and section 367(d) treats intangibles transferred in a 351 or 361 exchange as sold for payments contingent on productivity. The IP the flip pushed into Delaware is priced on the way back out.

26 U.S.C. 7874 then asks whether the Indian company is a surrogate foreign corporation: it acquires substantially all the properties of a domestic corporation, former shareholders of that corporation hold at least 60 per cent of its stock by vote or value by reason of that holding, and the expanded affiliated group lacks substantial business activities in India compared with its total business activities. At 60 per cent taxable income is not less than the inversion gain; at 80 per cent the Indian company is treated as domestic for all purposes of the Code. Whether an India-based group clears the substantial business activities limb turns on its facts.

Who does what on a reverse flip

Infinilex counsel enrolled as advocates in India sign the India leg, the scheme, section 233, rule 25A and FEMA work, with Infinilex’s company secretary or chartered accountant signing where a statute names that professional. Infinilex counsel admitted in the US sign the section 367 and 7874 analysis. For Singapore or any other jurisdiction, Infinilex scopes the work, builds the fact record and briefs the local counsel who sign, named to you before they act. Statutory signatories stay as the statute names them: each company’s managing director or whole-time director and company secretary give the regulation 9 certificate, the transferee company makes the section 233 application, the company and its directors sign the FEMA forms, and the AD bank reports. See how engagements work.

Frequently asked questions

Is RBI approval automatic for a reverse flip inbound merger?

Two provisions sit side by side. Rule 25A(5) of the Companies (Compromises, Arrangements and Amalgamations) Rules 2016, inserted in September 2024, says both companies obtain the prior approval of the RBI before a foreign holding company merges into its Indian wholly owned subsidiary on the fast track. Regulation 9 of the FEM (Cross Border Merger) Regulations 2018 deems a compliant merger approved, on a certificate from the managing director or whole-time director and the company secretary filed with the Competent Authority. Read both against your scheme before assuming approval is automatic.

What triggers tax on a reverse flip merger to India?

The route decides it. An inbound merger that meets the amalgamation definition in section 2(6) of the Income-tax Act 2025, including holders of at least three-fourths in value of the foreign company's shares becoming shareholders of the Indian company, can fall within section 70(1)(e) for the company's assets and section 70(1)(f) for shareholders allotted Indian shares, so neither is regarded as a transfer. A share swap is a transfer, and capital gains arise at a rate that depends on the holder and holding period. The US leg is taxed separately under 26 U.S.C. 367.

Can we use the section 233 fast track if the Indian company has other shareholders?

Rule 25A(5), as inserted in 2024, covers a merger where the transferor is a foreign holding company and the transferee is its Indian wholly owned subsidiary, so shares held directly by founders, employees or investors are dealt with first, or the group takes the Tribunal route under section 234. The 2025 amendment widened rule 25 to a holding company and subsidiaries that are not wholly owned where the transferors are unlisted; whether that reaches a foreign transferor is a question for the notification text, which this page does not restate.

What are the steps for a Singapore to India reverse flip?

The Indian leg is the same as for a Delaware parent: section 234 of the Companies Act 2013 permits a foreign company to merge into an Indian company with RBI approval, rule 25A(5) opens the section 233 fast track where the Indian company is wholly owned, and the FEM (Cross Border Merger) Regulations 2018 govern the securities issued to non-resident shareholders, inherited borrowings and the two-year regularisation window. The Singapore-side steps are outside Indian law; Infinilex scopes that work and briefs Singapore local counsel who sign, named to you before they act.

What happens on the US side when a Delaware parent merges into its Indian subsidiary?

The Delaware corporation is a US person transferring property to a foreign corporation. Under 26 U.S.C. 367(a)(1), in an exchange described in section 332, 351, 354, 356 or 361 the Indian company is not treated as a corporation for gain-recognition purposes, so gain is generally recognised on the assets that move. The former active trade or business exception was repealed for transfers after 31 December 2017, and intangibles moving in a 351 or 361 exchange are treated under section 367(d) as sold for contingent payments. Section 7874 then applies its 60 and 80 per cent tests.

Next step

Planning the move back before the listing clock starts?

Send us the shareholder map of the foreign parent and the Indian company, where the IP sits and which exchange you are aiming at. We will tell you which route your facts fit and where the RBI position needs settling before anything is filed.

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