Article · 10 min read

Convertible Notes and SAFE Notes in India: The Dilemma

Madhavan Srivatsan · Bar & Bench Free Intermediate India

A practising senior partner spells out exactly why a raw US SAFE is dangerous for an Indian entity: it can be treated as a 'deposit' and trigger a FEMA or Companies Act violation, a landmine that only detonates when you reach Series A. It then names the compliant substitutes (iSAFE via CCPS or CCD, and the DPIIT convertible note) so you know what to actually ask your lawyer to paper.

  • A US-form SAFE is not recognised in Indian law and can be recharacterised as a 'deposit', exposing the company under FEMA and the Companies Act
  • The compliant SAFE substitute is an iSAFE structured as CCPS/CCD that compulsorily converts on a qualifying round, avoiding any redemption feature
  • The convertible note route is open only to DPIIT-recognised startups, with a 25 lakh minimum per investor and a 10-year conversion or repayment clock
Open on barandbench.com ↗

It answers 4 questions

  1. How do stacked SAFEs at different caps convert into a mess at my priced round?
  2. SAFE or convertible note or priced round: which instrument should I raise on?
  3. Can I even use a SAFE in India, or do I have to do a CCPS or convertible note?
  4. SAFE or priced round: which instrument should I use for my first raise, and does it work in India?

Read with it

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  3. This is the worked dilution example, actual numbers, not a hand-wave: a $100k SAFE with an $8M cap and a 15% discount... FundersClub Article · 6 min read Numerical Example: SAFE, Cap and Discount FundersClub
  4. This is the worked walkthrough the question demands, not theory. It runs the exact scenario you fear: two SAFEs at different... Kruze Consulting Article · 18 min read How SAFE Notes Impact Founder Dilution and Startup Equity Kruze Consulting
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  6. This is the current RBI convertible note rulebook in one place, and it reflects the 2023 FEMA amendment that most older... TaxTMI Article · 11 min read Convertible Notes for Foreign Investors in Indian Startups: The 2026 Rules Explained TaxTMI editorial
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