FLA Return Filing

The FLA Return is a mandatory annual filing for Indian companies, LLPs, and other entities engaged in receiving or making foreign direct investments. This includes entities involved in Foreign Direct Investment (FDI) within India or Overseas Direct Investment (ODI). Under the regulations of the Reserve Bank of India (RBI) and the Foreign Exchange Management Act, 1999 (FEMA), the FLA Return is designed to gather information on foreign liabilities and assets that are reflected in the financial statements of these entities.

At IndiaFilings, we provide expert services to help Indian Companies and LLPs efficiently handle their FLA Return filings.

Introduction to FLA Return

The Foreign Liabilities and Asset (FLA) Return is a mandatory annual report for Indian organisations that have received foreign direct investment (FDI) or have invested in FDI overseas. This report, submitted to the Reserve Bank of India (RBI), collects detailed information on the foreign liabilities and assets listed on these entities' balance sheets. Governed by the Foreign Exchange Management Act, 1999 (FEMA), the FLA Return thoroughly regulates India's foreign exchange and international financial transactions.

Applicability of FLA Return

The FLA Return must be filed by a range of entities, including:

• Companies established under the Companies Act, 2013.

• Limited Liability Partnerships (LLPs) were formed under the Limited Liability Partnership Act 2008.

• Various other organisations, such as SEBI-registered Alternative Investment Funds (AIFs), Partnership Firms, and Public-Private Partnerships (PPPs), are engaged in foreign direct investment activities within India or abroad.

Non-Applicability of FLA Return

The requirement to submit the FLA Return does not apply to entities in the following situations:

• If the entity has neither received Foreign Direct Investment (FDI) nor made any overseas investments in the current or previous years.

• If the entity’s foreign investment is limited to sharing application money without any outstanding FDI or overseas direct investment by the end of March of the reporting year,

• Suppose non-resident shareholders have sold their shares to residents within the reporting period, and the entity has only issued shares to non-residents. In that case, the invested capital cannot be converted back into foreign currency and taken out of the country.

Due Date for Filing FLA Return

The due date for filing the FLA Return is July 15th every year. If the accounts are not audited by this date, entities should file the FLA Return using unaudited or provisional figures. If the accounts are audited later, a revised FLA Return must be submitted by September 30th of the same year.

Penalty For Late Filing of FLA Return

Filing the FLA Return late or failing to file can result in penalties under the Foreign Exchange Management Act (FEMA).

• Late Submission Fee (LSF): If the FLA Return is not filed by the due date of July 15th, a Late Submission Fee of INR 7,500 may be imposed. This fee applies if the return is filed late but before any enforcement action is taken.

• Penalties for Violations: If an entity fails to file the FLA Return or files false information, penalties under FEMA can be severe, including:

• Monetary Penalty: Up to 300% of the amount involved in the violation or a minimum of Rs. 2 Lakh if the violation amount cannot be quantified.
• Continued Non-compliance: If the violation continues beyond the initial detection, a daily penalty of Rs. 5,000 may be imposed for each day the violation persists after the first day.

Information Required for Filing FLA Return 

The Reserve Bank of India (RBI) has structured the FLA Return into five distinct sections for a comprehensive capture of foreign liabilities and assets by Indian entities:

Section I – Identification particulars

• Prefilled Information: Company name, PAN, CIN, and head of the institution’s email are auto-filled post successful user creation.

• Contact Details: Provide details of the contact person, including name, phone number, mobile number, email, designation, website, and account closing date.

• NIC Code: Use National Industrial Classification (NIC) -2008 codes for industry specification. If multiple activities are conducted, select the primary revenue-generating activity.  

• Company Specifics: Indicate if the company is listed as an Asset Management Company, has technical foreign collaborations, or has conducted any business activity in the last financial year. Also, specify the nature of FDI involvement.

Section II – Financial details

• Capital: Disclose the total paid-up capital, differentiating between participating and non-participating share capital.

• Profit and Loss Account: Detail the profit/loss before and after tax, dividends issued, and any tax on dividends from the April-March period.

• Reserves & Surplus: Report reserves and surplus figures separately from accumulated profit/loss balances.

• Sales and Purchases: Include domestic and foreign sales and purchases, including goods and services, based on the profit and loss account.

• Employee Information: State the number of employees on the payroll of the Indian reporting company.

Section III – Foreign Liabilities

• FDI in India (10% or more equity participation): Provide details on the number of foreign direct investors, initial FDI receipt date, investor details, equity holding percentages, and liabilities to direct investors, including disinvestments.

• FDI in India (less than 10% equity holding): Similar details as above for entities with less than 10% equity holding by foreign investors.

• Portfolio Investment in India: Specify equity and debt securities held by non-resident investors, excluding FDI.

• Other Liabilities: Report financial liabilities with foreign unrelated parties, excluding domestic liabilities even if in foreign currency.

Section IV – Foreign assets

• Overseas Direct Investment (ODI) 10% or more: Detail the number of Direct Investment Enterprises (DIE) abroad, investment specifics, equity holdings, sales, purchases, employee numbers, and claims on DIE, including disinvestments.

• ODI (less than 10% equity holding): Provide similar information for investments where the Indian company holds less than 10% equity in the DIE.

• Debt Securities and Portfolio Investment Abroad: Include investments in money market instruments and bonds by the reporting company under portfolio investment abroad.

• Other Assets: Report financial assets with foreign unrelated parties, excluding domestic assets.

Section V – Variation Report

This section auto-generates a report comparing the current year’s data with the previous year, highlighting variations. This section is not editable by the company.

Procedure for FLA Return Filings

Since June 2019, the process for submitting the annual FLA return has transitioned from format and email-based reporting to a web-based system. Here’s how entities can navigate this system on the FLAIR portal:

Setting Up a Business User in FLAIR portal

• Access the FLAIR Portal: Access the official website of the FLAIR portal.

• Register as a New Entity User: Click on the “Registration Form for New Entity User” to begin registering.

Fill in the Entity Details

• Provide comprehensive details about your entity, including the Corporate Identification Number (CIN)/Registration Number, Company Name, PAN Number, registered address with PIN, and contact details. Confirm any changes to the CIN/Registration Number or company name during the last financial year ending in March.

Authorised Person’s Information

• Input details of the authorised person, including name, PAN number, and contact information.

• Upload Documents: Attach a verification letter, an authority letter, and copies of the PAN cards for the entity and the authorised person.

Preparing and Submitting the FLA Return

• Create and Verify Business User: Once you have successfully registered and received your password from the RBI via email, log in to prepare the FLA return. The return is structured into five sections for comprehensive reporting.

• Review and Submit: After completing the FLA return, download it, review it for accuracy, and submit it online through the FLAIR portal.

After Submission

Acknowledgement: Upon successful submission, the FLAIR portal will generate an acknowledgement stating that the FLA return has been processed successfully for the year.

IndiaFilings experts can assist you with every step of the FLA Return filing process.

Important Notes:

• The registered email ID is crucial as it will receive the password and OTP for each login attempt; ensure it’s entered correctly.

• Should there be any changes in the entity’s email ID or name during the reporting period, deactivate the current account by emailing [email protected] and creating a new one for the current year’s FLA return filing.

• If the CIN/registration number remains unchanged, previously entered data will populate in the new account, facilitating the update process.

• Before final submission to the RBI, the company can download a draft of the FLA return for review and verification. This step ensures that all information is accurate and complete.

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