Companies, Limited Liability Partnerships (LLPs), and other Indian entities that have made or received overseas direct investment (ODI) or foreign direct investment (FDI) in the preceding year are required to file the Foreign Liabilities and Assets (FLA) Return on an annual basis. The purpose of this return is to give the Reserve Bank of India (RBI) details about the foreign assets and liabilities of Indian firms.
The international Exchange Management Act (FEMA) laws and its observance become increasingly important to the operations of enterprises as more of them engage in international investments. One of the compliances required of businesses engaged in Foreign Direct Investments (FDI) or Overseas Direct Investments (ODI)—investing in foreign enterprises through joint ventures or wholly owned subsidiaries—is the FLA annual return. The company must directly submit the FLA annual return to the Reserve Bank of India, including all foreign investments made by the company or to the company.
Who needs to file FLA Annual Return?
Any business that has made ODI or received FDI is required by FEMA, 1999 regulation to file the FLA annual return. The firms are required to provide the FLA for the current fiscal year in addition to the assets and liabilities from the prior year or years. A corporation must file the FLA annual return stating its outstanding assets or liabilities if it has outstanding FDI or ODI from the prior year or years but no foreign assets or liabilities for the current year.
In accordance with FEMA requirements, partnership entities that have made or received FDI are also required to file an annual FLA return. When a partnership firm requests one, the RBI will provide a fake CIN that will only be used to file the FLA annual return. The partnership firm will utilize the fake CIN, if one has already been issued, to file the FLA return.
Filing of FLA return
Excel sheets are the recommended format for filing the FLA yearly return. All companies that meet the previously listed conditions are required to file it. The FLA annual return must be filed by July 15 of that year and include information about foreign direct investment (FDI) or overseas direct investment (ODI) that the company has made or received for any prior year(s) and the current year.
Any authorised employee of the business must transmit the form to fla@rbi.org.in, the official email address of the RBI, using their own email address. The firm's directors, chief financial officer, and company secretary are the individuals authorized to file the FLA return. The information submitted must include the financial information as well as any other information needed in line with the audited accounts of the company.
If the company's accounts aren't audited by July 15th, they must file the FLA return using the unaudited financial statements and then get their accounts audited. If after the audit there are any modifications to the information submitted, the business must submit a new form with the revised information by the end of September of the same year. An acknowledgement email will be provided by the RBI to the designated person's email address upon the filing of the FLA return.
Penalty For Late Filing of FLA Return
Penalties under the Foreign Exchange Management Act (FEMA) may arise from filing the FLA Return after the deadline or not filing at all.
Late Submission Fee (LSF): An INR 7,500 Late Submission Fee may be assessed if the FLA Return is not submitted before the July 15th deadline. If the return is filed after the deadline but before any enforcement action is initiated, there will be a fine.
Penalty amount: If the violation amount cannot be determined, there is a minimum of Rs. 2 lakh and a maximum of 300% of the sum involved in the violation.
Continued Non-compliance: Should the infraction go unnoticed after the first day, there could be a daily fine of Rs. 5,000 for each additional day it is detected.
Information Required for Filing FLA Return
- The FLA Return has been divided into five sections by the Reserve Bank of India (RBI) in order to fully capture the foreign assets and liabilities held by Indian entities:
- Section I: Identifying informationPrefilled Data: Upon successful user creation, the company name, PAN, CIN, and email address of the institution's head are automatically filled in.
- Contact Information: Give the contact person's name, phone number, email address, cell number, position, website, and account closure date.
- NIC Number: For industry specifications, see National Industrial Classification (NIC) -2008 codes. Choose the main activity that generates revenue if there are several going on.
- Details about the Company: Provide information on the company's technological partnerships abroad, asset management company listing, and business operations throughout the most recent fiscal year. Additionally, describe the type of FDI participation.
Section II – Financial details
- Capital: Declare the entire amount of paid-up capital, making a distinction between share capital that is participating and non-participating.
- Profit and Loss Account: Describe the profit or loss for the April–March period, both before and after taxes, dividends paid, and any applicable taxes.
- Reserves and Surplus: Distinguish the amounts for reserves and surplus from the total profit and loss accounts.
- Sales and Purchases: Based on the profit and loss account, including sales and purchases of products and services, both domestically and internationally.Employee Information: Indicate how many people the Indian reporting company employs.
Section III – Foreign Liabilities
- Provide information on the number of foreign direct investors, the date of the initial FDI receipt, investor details, equity holding percentages, and obligations to direct investors, including disinvestments, for FDI in India (10% or more equity participation).
- Less than 10% equity ownership by foreign investors in India: The same information as before applies to entities with less than 10% equity held by foreign investors.
- Investment in Portfolios in India: List the debt and equity securities that non-resident investors own, FDI excluded.
- Additional Debt: Report financial obligations to unaffiliated foreign parties; do not include domestic obligations, even if they are denominated in foreign currency.
Section IV – Foreign assets
- 10% or more of total investments are made overseas; provide information on the number of Direct Investment Enterprises (DIE) there, their investments, equity holdings, sales, purchases, personnel counts, and claims made on DIE, including disinvestments.
- If the Indian business holds less than 10% stock in the DIE, provide comparable information for those investments (ODI).
- Debt Securities and Portfolio Investment Abroad: Under portfolio investment abroad, include the reporting company's holdings in bonds and money market instruments.Other Assets: Do not include domestic assets when reporting financial assets held with unrelated foreign parties.
Section V – Variation Report
A report highlighting differences between the data from the current year and the prior year is automatically generated in this part. The company is unable to change this section.
Procedure for FLA Return Filings
The yearly FLA return submission process has moved from an email-based reporting format to a web-based system as of June 2019. Entities can use the FLAIR gateway to navigate this system in the following ways:
Creating a Business User Account on the FLAIR Portal
- FLAIR Portal: Visit the FLAIR portal's main website.Sign up with Us as a New Entity To start the registration process, click the "Registration Form for New Entity User."
Fill in the Entity Details
- Give complete information about your organization, such as your company name, PAN number, registered address with PIN, corporate identification number (CIN) or registration number, and contact information. Verify any modifications made to the company name or CIN/Registration Number during the most recent fiscal year that concluded in March.
Authorised Person’s Information
- Enter the authorised person's information, such as name, PAN, and contact details.Place Documents Online: Enclosed are copies of the PAN cards for the entity and the authorized individual, as well as verification and authority letters.
Preparing and Submitting the FLA Return
- Create and Verify Business User: To begin preparing the FLA return, log in after completing the registration process and obtaining your password through email from the RBI. For thorough reporting, the return is divided into five pieces.Once the FLA return is completed, download it, check it for completeness, and submit it online using the FLAIR site.
After Submission
Recognition: Following a successful submission, an acknowledgement indicating that the FLA return has been processed successfully for the year will be generated by the FLAIR portal.