Foreign Liabilities and Assets Annual Return (FLA Return)

The Foreign Liabilities and Assets Annual Return (FLA Return) is mandatory for companies, LLPs, and certain other entities involved in foreign investment, whether they have received FDI in India or made FDI abroad. The return is required to be submitted to the Reserve Bank of India (RBI) by 15th July every year through the FLAIR portal. Failure to file the return within the prescribed timeline may result in penalties under FEMA.

What is the Foreign Liabilities and Assets Annual Return?

The Foreign Liabilities and Assets Annual Return is a reporting requirement under the Foreign Exchange Management Act (FEMA). It applies to businesses that have received Foreign Direct Investment (FDI) or made Foreign Direct Investment (FDI) abroad. The FLA Return must generally be filed by 15th July each year.

If the financial statements of the entity have not been audited by the due date, the FLA Return can be submitted using unaudited or provisional accounts. After the accounts are audited, a revised FLA Return must be filed by 30th September.

FLA Return Applicability

The Foreign Liabilities and Assets (FLA) Return applies to various types of entities, including:

• Companies
• Limited Liability Partnerships (LLPs)
• SEBI-registered Alternative Investment Funds (AIFs)
• Partnership firms, subject to specific conditions
• Public-Private Partnerships (PPPs)

FLA Return for Partnership Firms

A partnership firm is required to file an FLA Return if it has outstanding Foreign Direct Investment (FDI) as of 31st March of the reporting year. In such cases, the firm must obtain a dummy CIN from the RBI specifically for filing the FLA Return.

The dummy CIN is issued only for FLA Return filing purposes and cannot be used for any other purpose. If the partnership firm has already obtained a dummy CIN in an earlier year, the same number can be used for filing the FLA Return for the current year.

Entities Exempted from Filing FLA Returns

A company generally does not need to file an FLA Return under the following circumstances:

• No Previous or Current Foreign Investment: The company has neither received FDI nor made overseas investments (ODI) during the current or previous years and has no outstanding foreign liabilities or assets.
• Only Share Application Money: The company has received only share application money and does not have any outstanding FDI or ODI as of 31st March of the reporting year. Share application money is not treated as foreign investment until the shares are actually issued.
• Transfer of Non-Resident Shares: All shares held by non-resident shareholders have been transferred to residents during the reporting period, resulting in no remaining foreign holding in the company, assuming the shares were issued on a non-repatriable basis.

Note: Even if there has been no fresh FDI or ODI during the latest financial year, an entity may still be required to file the FLA Return if it continues to have outstanding FDI or ODI from previous years.

Penalty for Missing the FLA Return Filing Deadline

Failure to submit the FLA Return by the due date of July 15 is considered a contravention of the Foreign Exchange Management Act (FEMA) and may attract penalties from the Reserve Bank of India (RBI). The applicable penalties for delayed filing may include:

• Penalty: The amount may be:
  • Three times the amount involved in the contravention, where the violation can be quantified.
  • ₹2 lakh, where the violation cannot be quantified.
• Additional Daily Penalty: A further penalty of ₹5,000 per day may apply for continuing non-compliance after the due date.
• Compounding: The RBI’s regional office may have the authority to compound the contravention, potentially settling the matter for a lower amount.

How to File the FLA Return Online?

The FLA Return can be submitted online through the RBI’s FLAIR portal. The filing process generally involves the following steps:

Register on the FLAIR Portal

• Visit the RBI FLAIR portal.
• Select “Registration for New Entity Users.”
• Complete the FLA user registration form with the required entity details.
• Upload the necessary documents, including the verification letter and authorization letter.
• Submit the registration request.
• The registered entity will receive a user ID and default password through email.
• Use the credentials received to log in to the FLAIR portal.

File the FLA Return

• After logging in, download the draft FLA Return form.
• Carefully review the information provided and make corrections wherever necessary.
• Complete and submit the final FLA Return to the RBI.
• After successful submission, an acknowledgment will be generated within the portal confirming receipt of the FLA information. The RBI generally does not issue a separate email acknowledgment.

FAQ’s

Q- What is the FLA return due date for 2021?

The due date for filing the Foreign Liabilities and Assets (FLA) return for 2021 was July 15, 2021. The FLA return is generally required to be filed annually by the prescribed due date with the Reserve Bank of India (RBI).

Q- What is the due date for filing the FLA return?

The FLA return is generally required to be filed by July 15 every year. Eligible Indian companies and other entities must submit the return online through the RBI’s prescribed reporting system.

If the company’s accounts have not been audited by the due date, the FLA return can generally be filed using unaudited or provisional figures. Once the accounts are audited, a revised return should be submitted within the applicable timeline.

Q- Who is required to file an FLA return?

An Indian company or LLP that has received foreign investment or has made overseas investment may be required to file the FLA return, subject to the applicable RBI reporting requirements.

Q- Is filing an FLA return mandatory?

Yes, entities covered by the prescribed FLA reporting requirements must file the return annually. The applicable requirements should be checked based on the entity’s foreign assets and liabilities.

Q- Can the FLA return be filed using unaudited financial statements?

Yes. If the accounts have not been audited by the FLA return due date, the return can generally be filed using unaudited or provisional figures. The information should be updated through a revised return after the accounts are audited, where required.

Q- Can an FLA return be revised after filing?

Yes. A revised FLA return can be submitted when corrections are required or when the original return was filed using provisional or unaudited figures. The revision should be made through the prescribed RBI reporting system within the applicable timeline.

Q- What happens if the FLA return is filed after the due date?

Late filing of the FLA return may result in reporting non-compliance and could attract applicable penalties or other consequences under foreign exchange regulations. Entities should complete the filing within the prescribed deadline to avoid compliance issues.

Q- Is the FLA return applicable to LLPs?

FLA reporting requirements may also apply to LLPs that meet the prescribed conditions relating to foreign assets or liabilities. The applicable RBI regulations should be checked based on the LLP’s circumstances.

Q- Where is the FLA return filed?

The FLA return is filed online through the RBI’s prescribed reporting system. The reporting entity must provide details of its foreign assets, foreign liabilities, and other financial information required under the applicable reporting framework.

Q- What information is required for filing an FLA return?

The FLA return generally requires information about the entity’s financial position, foreign assets and liabilities, foreign investment, overseas investment, and other prescribed financial details. The information should be supported by the entity’s relevant financial records.

Q- Is an FLA return required if there is no foreign investment during the year?

The requirement depends on whether the entity has reportable foreign assets or liabilities and falls within the applicable FLA reporting requirements. An entity may still need to file the annual return even if there has been no fresh foreign investment during the year.

Q- What is the purpose of filing an FLA return?

The FLA return helps the RBI collect information about India’s foreign assets and liabilities. It provides data on foreign investment and the cross-border financial position of Indian entities for regulatory and statistical purposes.

Q- What should I do if I missed the FLA return filing deadline?

If the FLA return has not been filed by the due date, the entity should complete the filing as soon as possible and address any applicable reporting or penalty requirements. The latest RBI instructions should be checked before making a delayed filing.

Q- Is the FLA return the same as Form FC-GPR?

No. The FLA return and Form FC-GPR serve different purposes. The FLA return is an annual reporting requirement covering foreign assets and liabilities, while Form FC-GPR is used for reporting the issue of capital instruments to a person resident outside India.

Q- Is the FLA return required every year?

Yes. Where an entity continues to meet the applicable reporting conditions, the FLA return is generally required every year. The return should be filed for each relevant reporting year within the prescribed deadline.

Q- What is the penalty for late filing of the FLA return?

Late submission of the FLA return may attract a Late Submission Fee or other consequences under the applicable foreign exchange regulations. The amount and applicable conditions depend on the nature and period of the delay.

Q- What is the reporting period for the FLA return?

The FLA return generally reports the foreign assets and liabilities of the reporting entity as of the end of the relevant financial year. The required financial information should be provided according to the format and instructions prescribed by the RBI.

Q- Can the FLA return be filed if the company has no transactions during the year?

Yes, an entity may still be required to file the FLA return if it continues to have reportable foreign assets or liabilities, even when there have been no new foreign investment or overseas investment transactions during the year.