The Indian legal framework regulating overseas direct investment from India is evolving to adapt to the challenges put forth by the increase in outward investment. In this context, the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 govern the setting up of step-down subsidiaries by an overseas Joint Venture (JV) or Wholly Owned Subsidiary (WOS) of Indian residents. The Regulations, while prohibiting the setting up of step-down subsidiaries by an overseas JV/WOS of an individual, allow the same in the case of overseas JV/WOS of other entities. This article argues that the reasons for this differential treatment include the historically restrictive approach of the Reserve Bank of India towards individuals and its concerns against the roundtripping of funds. The article lays down the context in which the Regulations operate by looking at the reasons that influence outward direct investment in India. It then analyses the regulatory approach governing the setting up of overseas step-down subsidiaries vis-à-vis individuals and other entities, highlighting the underlying concerns of curbing the menace of round-tripping of funds. The article concludes with critiquing the differential treatment between individuals and entities, and the restrictive approach taken in curbing the problem of round-tripping of funds.