A Comprehensive Guide to FLA Return Filing: Obligations, Process, and Exemptions

 

The Foreign Liabilities and Assets Annual Return (FLA Return) is a mandatory filing requirement for Indian companies that have received foreign direct investment (FDI) or made overseas investments. The Reserve Bank of India (RBI) introduced this reporting mechanism to gather information about the financial assets and liabilities of Indian entities with regard to their foreign investments and borrowings.

 

The FLA Return is applicable to all Indian companies that have received FDI or made outbound investments (direct investments, portfolio investments, and other investments) during a financial year, regardless of the amount involved. This includes both listed and unlisted companies, as well as companies owned by individuals, trusts, partnership firms, or other entities.

 

The purpose of the FLA Return is to capture and monitor the country's external sector statistics, as well as to assess the overall exposure and risks associated with foreign investments and borrowings. It helps the RBI and other regulatory authorities in formulating policies and analyzing trends related to foreign investments.

 

Companies subject to FLA Return filing are required to submit the information online to the RBI through the designated FLAIR (Foreign Liabilities and Assets Information Reporting) portal. The filing deadline for the FLA Return is typically July 15th of each year for the previous financial year (April to March).

 

The FLA Return typically includes details such as:

 

1. Foreign assets and liabilities of the company.
2. Equity capital, reinvested earnings, and other capital.
3. Financial derivatives.
4. External commercial borrowings (ECBs) and trade credits.
5. Overseas direct investments (ODIs) and overseas portfolio investments (OPIs).
6. Other related financial information.

 

Who needs to file FLA Annual Return?

 

Under the regulations of the Foreign Exchange Management Act (FEMA), 1999, the following entities are required to file the FLA Annual Return:

 

Companies: Any company that has made Overseas Direct Investment (ODI) or received Foreign Direct Investment (FDI) is obligated to file the FLA Annual Return. This includes reporting the assets and liabilities for the current financial year as well as the previous year(s). Even if a company does not have any foreign assets or liabilities in the current year but has outstanding FDI or ODI from previous year(s), it must file the FLA return indicating the outstanding assets or liabilities.

 

Partnership Firms: Partnership firms that have received FDI or made ODI are also required to file the FLA Annual Return. The Reserve Bank of India (RBI) will issue a dummy CIN (Corporate Identification Number) upon request by the partnership firm, which will be solely used for filing the FLA Annual Return. If a dummy CIN has already been issued, the partnership firm will utilize the same for filing the FLA return.

 

It's important for these entities to adhere to the FLA Annual Return filing requirements to comply with FEMA regulations and provide accurate information regarding their foreign investments and liabilities to the RBI.

 

Filing of FLA return

 

The FLA Annual Return is filed using an Excel sheet as the prescribed method. It must be completed by all companies that fall under the criteria mentioned earlier. The filing deadline for the FLA Annual Return is before July 15th of the respective year, and it should include data on Foreign Direct Investment (FDI) or Overseas Direct Investment (ODI) received or made by the company for the current and previous year(s).

 

The completed form should be sent via email by any authorized member of the company from their email ID to the official email ID of the RBI, which is fla@rbi.org.in. The members of the company authorized to file the FLA return are the Company Secretary, Chief Financial Officer, and Directors. The details provided should include financial information and other required details in accordance with the company's audited accounts.

 

If a company's accounts are not audited by July 15th, they should still file the FLA return based on unaudited accounts and have their accounts audited afterward. If there are any changes to the details filed after the audit, the company must submit another form with the updated information before the last day of September of the same year. Once the FLA return is filed, the RBI will send an acknowledgement email to the authorized person's email ID. The format for filing the FLA return can be found on the RBI's website at https://www.rbi.org.in/Scripts/BS_ViewFemaForms.aspx. For any queries, you can send an email to fla@rbi.org.in.

Important points to be kept in mind for filing FLA return

 

Here are some important points to keep in mind when filing the FLA return:

 

Timely Filing: It is crucial to file the FLA return within the given deadline to avoid penalties. Failure to file within the specified time can result in penalties.

 

Penalties: If the FLA return is not filed within the deadline, the company may be liable to pay a penalty. The penalty amount is three times the sum involved in the contravention. If the contravention is not quantifiable, a penalty of Rs 2,00,000 will apply. If the contravention continues, a daily penalty of Rs 5,000 may be imposed.

 

Due Date: The due date for filing the FLA return is July 15th of the respective year. It is essential to submit the return on or before this date.

 

Revised Form for Audited Accounts: If the FLA return is initially filed based on unaudited accounts, a revised form must be filed based on audited accounts before the end of September of the same year. This ensures that the information provided is accurate and up to date.

 

Regional Offices and Contraventions: The regional offices of the RBI have the power to compound contraventions without any limit. However, this authority does not apply to the regional offices of Kochi and Panaji.

 

It is crucial to comply with these points to fulfill the FLA return filing requirements and avoid penalties or non-compliance issues.

 

Companies exempted from filing FLA return

There are certain exemptions from filing the FLA Annual Return. They are as follows:

 

Non-Repatriable Shares: Companies that have only issued shares on a non-repatriable basis to non-residents of India are exempt from filing the FLA return. If the company has not engaged in any other foreign investments or liabilities, it is not required to file the FLA return.

 

No Outstanding Balance: Companies that do not have any outstanding balance of Foreign Direct Investment (FDI) or Overseas Direct Investment (ODI) by the end of the financial year are exempt from filing the FLA return. If there are no existing foreign investments or liabilities at the end of the financial year, the company is not obligated to submit the FLA return.

 

Share Application Money Only: Companies that have only received share application money and have not received any FDI or made any ODI are exempt from filing the FLA return. If the company has not undertaken any foreign investments but has received share application money, it is not required to file the FLA return.

 

These exemptions apply to specific scenarios where the company's involvement in foreign investments or liabilities is limited or nonexistent. It is important to note that if the company falls under any of these exemptions, it is not required to file the FLA return.

 

Conclusion

Ensuring compliance with the annual return on Foreign Liabilities and Assets (FLA) requirements is crucial for companies that have received Foreign Direct Investment (FDI) or made Overseas Direct Investment (ODI). If you are a foreigner interested in starting a business in India, we are here to assist you. Contact us for expert guidance and support.

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Article Compiled by:-

Mayank Garg

(LegalMantra.net Team)

+91 9582627751

Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including newspapers, Journals, Bare Acts, Case Materials , Charted Secretary, RBI etc.

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