FLA Return Filing

As more companies get involved in foreign investments, following the rules of the Foreign Exchange Management Act (FEMA) has become very important for their operations. The FLA (Foreign Liabilities and Assets) Return is a yearly requirement for companies with foreign investments or those investing in foreign businesses, either through partnerships or as complete owners, known as Overseas Direct Investment (ODI). This report, mandated by the Reserve Bank of India (RBI), aims to gather information on foreign liabilities and assets reflected in the entities' balance sheets. It operates under the guidelines set forth by the Foreign Exchange Management Act, 1999 (FEMA).

At IndiaFilings, our team of experts is equipped to assist you with the filing of your FLA Return, ensuring that your submission is compliant with the regulations set forth by the Foreign Exchange Management Act (FEMA).Contact us today to ensure seamless compliance!

What is FLA?

FLA, standing for Foreign Liabilities and Assets, is a crucial annual disclosure that Indian entities, including companies and LLPs, are required to submit to the Reserve Bank of India (RBI) when they have foreign direct investments (FDI) or have invested overseas through Overseas Direct Investments (ODI). It provides a detailed account of an entity's foreign financial engagements, documenting all foreign assets and liabilities on their balance sheet as of the financial year-end.

The FLA plays a significant role in ensuring adherence to the Foreign Exchange Management Act (FEMA) regulations and aids the RBI in monitoring India's position in terms of foreign investments.

Introduction to FLA Annual Return

As mentioned above, The FLA (Foreign Liabilities and Assets) return is an annual filing with the Reserve Bank of India (RBI), mandated for entities under specific provisions of the Foreign Exchange Management Act, 1999 (FEMA). The filing criteria apply to:

  • Entities that have received Foreign Direct Investment (FDI) in the form of shares and/or External Commercial Borrowings (ECB);
  • Entities that have undertaken Overseas Direct Investment (ODI) in foreign ventures, either as a Joint Venture (JV) or a Wholly Owned Subsidiary (WOS).

This obligation extends to any entity with foreign assets and/or liabilities on its balance sheet, including those that may not have initiated new FDI or ODI transactions in the current year but maintain outstanding foreign investments from prior years.

This detailed annual report, which companies need to send directly to the Reserve Bank of India (RBI), covers all foreign investments made by or to the company. It's a key part of ensuring companies meet FEMA's regulations, helping the RBI keep track of companies' foreign assets and liabilities.

Applicability of FLA Return

The FLA Return applies to following types of entities:

  • Entities registered as companies under the Companies Act, 2013
  • Limited Liability Partnerships (LLPs) established according to the Limited Liability Partnership Act, 2008
  • Various other organizations such as Alternative Investment Funds (AIFs) recognized by SEBI, Partnership Firms, and Public Private Partnerships (PPPs).

Special Instructions for Partnerships

Partnership firms involved in FDI or ODI transactions must obtain a dummy Corporate Identification Number (CIN) from the RBI to file their FLA return. If a dummy CIN has already been issued, it should be used for the filing process.

The Significance of FLA Return Filing for Indian Entities

Filing the FLA (Foreign Liabilities and Assets) return is of paramount importance for entities in India with foreign direct investments (FDI) or overseas direct investments (ODI) due to several reasons:

  • Regulatory Compliance: It ensures compliance with the Foreign Exchange Management Act (FEMA), thereby avoiding potential legal penalties and financial sanctions for non-compliance.
  • Data Accuracy: The FLA return provides the Reserve Bank of India (RBI) with accurate and comprehensive data on foreign investments, which is crucial for formulating monetary and financial policies.
  • Transparency: Filing the FLA return promotes transparency in financial reporting and corporate governance, enhancing the credibility of the entity with investors, regulators, and other stakeholders.
  • Economic Analysis: The aggregated data from FLA returns are used for economic analysis and policy-making, contributing to a better understanding of the country's foreign investment position and its impact on the economy.
  • Risk Management: It helps in assessing and managing the risks associated with foreign liabilities and assets, including currency risk, country risk, and compliance risk.
  • Investor Confidence: Timely and accurate filing can boost investor confidence by demonstrating the entity's commitment to regulatory adherence and financial transparency.

Overall, the FLA return filing is a critical aspect of financial and regulatory discipline for entities engaged in international financial transactions, contributing to the overall health and stability of the Indian economy.

Non-Applicability of FLA Return

  • Entities without any foreign direct investment (FDI) received or overseas investments made in the current or previous years.
  • Entities whose only foreign investment is in the form of share application money, without any outstanding FDI or overseas direct investment by the end of March of the reporting year.
  • Entities where non-resident shareholders have transferred shares to residents within the reporting period, and shares issued to non-residents are strictly on a non-repatriable basis.

Due Date for filing FLA return

The FLA Return must be filed by July 15th each year. If the accounts have not been audited by this deadline, the return should be filed using unaudited or provisional accounts. Subsequently, should the accounts be audited, a revised FLA Return is required to be submitted by September 30th of that year.

The FLA Return must be filed by July 15th each year. If the accounts have not been audited by this deadline, the return should be filed using unaudited or provisional accounts. Subsequently, should the accounts be audited, a revised FLA Return is required to be submitted by September 30th of that year.

Procedure for FLA Return Filing

Entities obligated to submit the FLA Return must initially register on the RBI. Once registered, entities can access the portal with their credentials and a One-Time Password (OTP) dispatched to their registered email. This enables them to commence the FLA Return filing process by selecting "FLA Online Form" followed by "Start Filing FLA Form.

Sections of the FLA Return

The FLA Return comprises five distinct sections, each serving a specific purpose in the reporting process:

Section I: Identification Particulars

This initial section gathers basic identification information about the entity, including its name, Permanent Account Number (PAN), Corporate Identification Number (CIN), contact details, the nature of its business, and its listing status.

Section II: Financial Details

In this section, entities report their financial metrics, covering aspects like the total paid-up capital, details from the profit and loss statement, reserves and surplus, and transactional data on sales and purchases over the financial year.

Section III: Foreign Liabilities

This part focuses on the entity's foreign liabilities, detailing the foreign direct investments (FDI) received within India, including specifics on non-resident equity and the percentage of participating preference shares held by non-residents.

Section IV: Foreign Assets

Here, the reporting extends to the entity's foreign assets, emphasizing overseas direct investments (ODI) and other assets abroad, such as holdings in equity and debt securities under portfolio investment.

Section V: Variation Report

The final section is automatically populated based on the inputs from the preceding sections. It's essential for entities to review this auto-generated variation report for accuracy and completeness before final submission of the FLA Return.

Penalty for Non Compliance

Non-filing of the FLA Return before the due date is considered a violation of FEMA, and penalties may be imposed.

  • For infringements of FEMA provisions or submission of incorrect information, penalties can reach up to 300% of the sum implicated in the contravention.
  • In cases where the transgression cannot be quantified, a flat penalty of Rs. 2 Lakh may be levied.
  • Furthermore, for ongoing violations, a daily fine of Rs. 5,000 might be imposed for each day the violation persists beyond the initial occurrence.

Why choose IndiaFilings for FLA Return?

Choosing IndiaFilings for your FLA Return filing offers several advantages:

  • Expertise: IndiaFilings has a team of experts well-versed in FEMA regulations and RBI compliance requirements, ensuring accurate and efficient filing.
  • Time-saving: With IndiaFilings handling the intricacies of your FLA Return, you can save valuable time and focus on your core business activities.
  • Compliance Assurance: Our experts understanding of the latest regulatory changes guarantees that your filings are always in compliance, minimizing the risk of penalties.
  • Customized Support: IndiaFilings provides personalized service tailored to your specific needs and circumstances, offering step-by-step guidance throughout the process.
  • Convenience: The ease of access to expert services and the ability to handle most processes online with IndiaFilings simplifies the filing procedure for you.
  • Comprehensive Services: Beyond FLA Return filing, IndiaFilings can support various aspects of business compliance, finance, and legal services, making it a one-stop solution for your business needs.

Ready to streamline your FLA Return process? Contact us today for expert guidance and ensure hassle-free compliance!

FLA Return Filings FAQ's

What is the purpose of the FLA Return?

The FLA Return, or Foreign Liabilities and Assets Return, is an annual requirement mandated by the RBI for Indian entities to report their foreign investments and financial engagements, including Foreign Direct Investments (FDI) and Overseas Direct Investments (ODI). It aims to provide a comprehensive overview of India's foreign investment position to aid in economic analysis and policy formulation.

Who is obligated to file the FLA Return?

Any Indian company or LLP that has received FDI or made ODI in the form of shares, equity, or External Commercial Borrowings (ECB) must file the FLA Return. This includes entities with ongoing foreign liabilities or assets, even if no new transactions occurred in the current year.

What is the deadline for filing the FLA Return?

The FLA Return must be filed by July 15th of each year, reflecting the financial status as of the end of the previous March 31st.

Can the FLA Return be filed based on unaudited accounts?

Yes, if audited accounts are not available by the July 15th deadline, entities must file the FLA Return based on unaudited or provisional accounts. A revised return based on audited accounts should be submitted by September 30th, if applicable.

How is the FLA Return submitted?

Entities must first register on the RBI's FLAIR portal and then submit the FLA Return online using the designated "FLA Online Form."

What are the key sections in the FLA Return?

The FLA Return is structured into five main sections: Identification Particulars, Financial Details, Foreign Liabilities, Foreign Assets, and a Variation Report that auto-populates based on the entered data.

Are partnerships required to file the FLA Return?

Yes, partnership firms with FDI or ODI must request a dummy Corporate Identification Number (CIN) from the RBI for FLA Return filing. If a dummy CIN has been previously issued, it should be used for the filing.

What are the consequences of not filing the FLA Return?

Failure to file the FLA Return can result in penalties under FEMA, including fines up to 300% of the amount involved in the violation or a fixed penalty of Rs. 2 Lakh for non-quantifiable offenses, and a daily fine of Rs. 5,000 for continued non-compliance.

Is there an exemption from filing the FLA Return?

Entities without any FDI or ODI in the current or previous years, those with only share application money without outstanding FDI or ODI by year-end, and entities where non-resident shares have been transferred to residents on a non-repatriable basis are exempt.

How can IndiaFilings assist with FLA Return filing?

IndiaFilings offers comprehensive assistance with FLA Return filing, from understanding compliance requirements to preparing and submitting the return accurately and efficiently, ensuring adherence to FEMA regulations.

Why must companies file the FLA Return even without new FDI or ODI transactions?

The RBI requires annual updates on foreign liabilities and assets to monitor and analyze India's foreign investment position, making it essential for companies to file the FLA Return even if no new transactions have been made.

How does the RBI utilize the data from FLA Returns?

The RBI uses FLA Return data to conduct economic analysis, inform monetary policy decisions, and understand the impact of foreign investments on the Indian economy.

What steps should be taken if FLA Return details change after filing?

If there are any changes to the information after the initial FLA Return filing, entities should submit a revised FLA Return by September 30th to reflect the accurate data.

Is the FLA Return filing process entirely online?

Yes, the entire FLA Return filing process, including registration, form submission, and document upload, is conducted online through the RBI's FLAIR portal.

What documents are necessary for FLA Return filing?

Entities need to prepare financial statements, including balance sheets and profit & loss accounts, along with entity-specific documents such as PAN, CIN, and details of foreign investments.

Can IndiaFilings handle the FLA Return filing on behalf of an entity?

Yes, IndiaFilings can manage the entire FLA Return filing process for an entity, from document preparation to submission, ensuring a smooth and compliant filing experience.

How important is accuracy in FLA Return filing?

Accuracy in FLA Return filing is crucial as it directly impacts regulatory compliance and the integrity of data used for economic policymaking. Inaccuracies can lead to legal repercussions and misrepresentation of India's foreign investment status.

What happens if the FLA Return is filed after the due date?

Late filing of the FLA Return can result in penalties and fines under FEMA. Entities are encouraged to adhere to the deadline to avoid such consequences.

How can entities ensure compliance with FLA Return requirements?

Entities should regularly review FEMA regulations, maintain accurate financial records, and seek professional assistance from firms like IndiaFilings to ensure full compliance with FLA Return filing requirements.

What is the significance of the Variation Report in the FLA Return?

The Variation Report in the FLA Return, which auto-fills based on the data entered in other sections, helps entities and the RBI identify and analyze year-over-year changes in foreign liabilities and assets, providing insights into the entity's financial dynamics.

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