Annual Return on Foreign Liabilities and Assets (FLA) is mandatory to be filed by all such Companies which have received Foreign Direct Investment(s) and/or foreign investment abroad in any of the previous years, if any, including current year (July 15th every year) including Outstanding Foreign Investments.
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Another major annual compliance requirement is the Foreign Liabilities and Assets (FLA) Return form, which is part of the reporting requirements imposed by the Reserve Bank of India (RBI) on Indian firms, entities, and recipients of foreign direct investment (FDI) or direct foreign investments abroad (ODI). Through the FLA Return, RBI can track the international investment position (IIP) in India and the outflows of funds abroad.
Legal Framework and Authority
Authority: Reserve Bank of India (RBI)
Regulations: Under registration as FEMA (Foreign Exchange Management Act) 1999
Guideline Issuance: RBI comes up with guidelines on yearly basis on their website and the Foreign Exchange Department.
Purpose of FLA Return
The FLA Return is very relevant to the RBI, Ministry of Finance and international institutions such as IMF to:
This was the compilation of India International Investment Position II (IIP)
Observing both Inflow and outflow of foreign investments
Knowledge of the amount and pattern of inter-country asset and liability position of the Indian firm
Applicability
Parties who have to fill the FLA return are:
Indian companies, which have already obtained FDI in the past years, such as the current year
Public companies which have alienated the shares /compulsorily convertible debentures to non residence.
Firms that have undertaken foreign investment (ODI) whether as a 100 percent subsidiaries, or joint ventures overseas
Any LLP as well as other entities that are foreign invested or overseas invested
Note: Although, there have been no changes in foreign assets/liabilities within the year, still the foreign investments must be the one to file a return.
Key Components of the FLA Return
Identification Information: CIN, PAN, Name Company, Contact Information
Foreign Liabilities:
Cash in hand of the non-residents
Other capital (e.g. intercompany loans)
Reinvested earnings
Foreign Assets:
Owner direct investment in overseas firms (ODI)
Other investments such as loans and trade credits to foreign organisations
Financial Details:
The balances of the Assets, liabilities and net worth in the balance sheet of Company
Reserves and surplus
Company profit/Loss
Filing Process
Registration : The entities should enroll themselves to the FLAIR (Foreign Liabilities and Assets Information Reporting) system, which was launched by RBI in the year 2019.
Submission Deadline
Due Date: 31st July annually on the previous financial year that ends on 31 st March
Late filing can be subjected to sanctioning measures within FEMA
Mode of Filing
It is filing through online RBI FLAIR Portal
It is filled in Excel format of return and uploaded
Upon validation, the system gives out an Acknowledgment Receipt
Documents Required
Verified or interim balance sheet of the company on 31 st March
Information regarding FDI and ODI deals
Shareholding pattern Details
Foreign subsidiary or JVs (where ODI) fins 0
Consequences of Non-Compliance
Late filing of the FLA return or failure to file this type of return will result in possible:
Penal actions under FEMA Monetary punitive acts
Having a hard time getting future approvals of RBI
Not eligible to automatic route of future foreign investment
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The Foreign Liabilities and Assets (FLA) Return is an annual return that must be filed with the Reserve Bank of India (RBI) by Indian entities that have received Foreign Direct Investment (FDI) or have made Overseas Direct Investment (ODI). It reports details of foreign assets and liabilities of the company as on 31st March of every year.
FLA Return must be filed by:
Companies that have received FDI in previous years (even if no new FDI during the year)
Companies or LLPs that have made overseas investment (ODI)
Entities with outstanding foreign liabilities or foreign assets
Even if the company did not receive fresh foreign investment during the year, filing is still mandatory if past foreign investment exists.
The FLA Return must be filed on or before 15th July every year based on the financial data as of 31st March of the relevant financial year. Late or non-filing may lead to penalties under FEMA regulations.
Non-filing or late filing of the FLA Return is considered a violation under FEMA (Foreign Exchange Management Act). The company may face:
Monetary penalties
Compounding proceedings by RBI
Compliance issues during future foreign transactions
