Foreign Liabilities and Assets (FLA) Return

Foreign investment plays an important role in India’s economic growth by bringing capital, technology, and global expertise into local businesses. However, companies in India that receive foreign investment or hold foreign assets must comply with annual reporting requirements under the Foreign Exchange Management Act (FEMA), 1999. One of the most important of these is the Foreign Liabilities and Assets (FLA) Return — an annual declaration of foreign investment and overseas assets of Indian entities.

The filing obligation is not triggered by a new transaction but by the existence of outstanding foreign investment on the balance sheet at year-end. This is fundamentally different from event-based filings like FC-GPR, which is triggered by each new share allotment to a foreign investor, or FC-TRS, which is triggered by a share transfer.

An entity with no new foreign investment activity in a given year can still have a mandatory FLA filing obligation if outstanding investment from prior years remains on its books.

This return was introduced via A.P. (DIR Series) Circular No. 45 dated March 15, 2011 and is currently governed by the RBI under the Foreign Exchange Management Act, 1999.

The RBI uses the data to compile India’s Balance of Payments (BoP) and International Investment Position (IIP), and to participate in the IMF’s Co-Ordinated Direct Investment Survey (CDIS) and Co-Ordinated Portfolio Investment Survey (CPIS). Only consolidated aggregates are published in the surveys while the entity-level information is kept confidential.

Which entities are required to submit the FLA Return?

The annual return on Foreign Liabilities and Assets (FLA) is required to be submitted by the following entities which have received FDI (foreign direct investment) and/or made FDI abroad (i.e. overseas direct investment) in the previous year(s) including the current year i.e. which hold foreign assets or/and liabilities in their balance sheets;

• An Entity within the meaning of section 1(4) of the Companies Act, 2013.
• A Limited Liability Partnership (LLP) registered under the Limited Liability Partnership Act, 2008
• Others [include SEBI registered Alternative Investment Funds (AIFs), Partnership and Proprietary Firms, Public Private Partnerships (PPP) etc.]

Important Note: Even if a company did not receive new foreign investment during the year but still has outstanding foreign equity or asset positions as of March 31st, it must file the return. If a company has absolutely no foreign investment or foreign liabilities/assets as of March 31, FLA filing is not required. But this must be verified carefully before deciding not to file, as companies that once had foreign investment may still have undisclosed offshore positions.

 Entities exempt from filing FLA return

Three specific exemptions apply, as per RBI:

• Entities with no outstanding FDI or ODI as on March 31 of the reporting year
• Entities that received only share application money, with no shares allotted as on March 31.
• Entities that issued shares to non-residents only on a non-repatriable basis (shares issued on a non-repatriable basis are not treated as foreign investment under FEMA, and entities with only such shares are not required to file)

If all non-resident shareholders have transferred their shares to residents during the reporting period and no outstanding FDI or ODI remains as on March 31, the entity is also exempt for that year.

Information Required for FLA Filing

 The FLA Return requires companies to report all foreign liabilities and assets as of March 31 of the financial year. Below are the key categories of information that are typically required:

1. Foreign Equity: Details about foreign equity held in the company, including type of shares, number of shares, and valuation.

2. Foreign Direct Investment: Breakdown of FDI received, including equity and instruments that are treated as equity (like compulsorily convertible preference shares).

3. Foreign Liabilities: Details of loans, overdrafts, and credit received from non-resident entities.

4. Overseas Assets: If the company has invested abroad, such as in subsidiaries, LLPs, or joint ventures, information needs to be captured, including what was invested and how it’s classified.

5. Financial Statements Reconciliation: The foreign positions reported should be consistent with your balance sheet figures as on March 31.

What is the due date of filing FLA return to RBI?

The entities, as mentioned under question 1, are mandatorily required to submit/file FLA return under FEMA 1999 by July 15 of reporting year based on the entity’s audited or unaudited financials.

What will be the consequences in case we do not file the said FLA return by 15th July?

Non-filing of the return before due date will be treated as a violation of FEMA and penalty clause may be invoked for such violation. The Late Submission Fee (LSF) was introduced for reporting delays in Foreign Investment (FI), External Commercial Borrowings (ECBs) and Overseas Investment related transactions with effect from November 07, 2017, January 16, 2019 and August 22, 2022 respectively. It has now been decided to bring uniformity in imposition of LSF across functions. The following matrix shall be used henceforth for calculation of LSF, wherever applicable:

For more information, kindly go to the link below:

Notification No. FEMA. 395/2019-RB dated October 17, 2019

A. P. (DIR Series) Circular No.16 dated September 30, 2022.

If the accounts/financials are not audited by July 15, is it possible to file FLA return with unaudited figures?

The entity may file FLA return based on the available provisional/unaudited financial statements within due date. Once the audited financial accounts are ready, the entity is required to raise a request for permission for submission of revised/updated FLA return through the FLAIR portal, and upon approval, please file the revised FLA return for the applicable financial year(s). Care should be taken to file the revised FLA as soon as the audited financial statements are available.

In case where account closing period of the entity is different from reference period (End-March), can we report the information as per account closing period?

No, the entity cannot report the information as per the account closing period, in case it is different from March. Information should be reported for the reference period only, i.e. previous March and latest March, based on the entity’s internal assessment.

If an entity wants to delete or modify the previous version of

FLA form; can the entity delete/modify the FLA return?

Yes, entity can delete/modify the information submitted in the FLA return for earlier period after taking the approval from RBI. The procedure for taking the approval is given on FLAIR portal. Without approval, entities cannot file revised FLA return.

Whether an entity needs to submit the FLA Return, if it has received only share application money?

If an entity has received only share application money and does not have any outstanding foreign direct investment or overseas direct investment as on end – March of the reporting year, then the entity is not required to submit the FLA return.

If the Indian entity has no outstanding FDI and/or ODI at the End-March of the current year. Is the FLA return still applicable for filing for the current year?

Yes, as the FLA return captures two year’s data (current year as well as previous year), if the entity has any outstanding foreign direct investment and/or overseas direct investment as on end – March of the reporting year and/ or previous year, then the entity is required to file the FLA return.

If non-resident shareholders of an entity have transferred their shares to the residents during the reporting period, then whether that entity is required to submit the FLA Return?

If all non-resident shareholders have transferred their shares to the residents during the reporting period, then the entity may file FLA return for the reporting period with details of outstanding foreign assets/liabilities as at end – March previous year, and for current year, the disinvestment needs to be shown in the appropriate fields of the FLA return (Section-III). In case, the entity does not have any outstanding investment in respect of inward and/or outward FDI as on end – March of reporting year for both previous and current year, then the entity need not submit the FLA return.

If the resident shareholder of an entity becomes a non-resident because of shifting to foreign country, should we report FLA?

Yes, The FLA return needs to be filed subject to below:

a. In case all shares are issued on non-repatriation basis only, then FLA need not be filed.

b. In case shares are issued on repatriable, FLA is required to be submitted.

 If entity had issued the shares to non-resident on non-repatriable basis, whether that entity is required to submit the FLA Return?

Shares issued by reporting entity to non-resident on non-repatriable basis is not considered as foreign investment; therefore, such companies are not required to submit the FLA Return.

Whether equity participation includes equity shares as well as compulsorily convertible debentures (CCD)?

Compulsorily convertible debentures (CCD) issued by the entity should not be included in the paid-up capital while furnishing the information in Paid-up capital (in Section II of the FLA Return). However, if the CCDs / Debentures are held by the non-resident direct investor who is holding the equity shares of Indian reporting entity, then CCD / Debentures holding should be reported in ‘other capital’ component of 1.b FDI or 2.b DI (in Section III), depending upon the per cent equity held by the non-resident direct investor. However, if the investor holds only CCD as on end March, then it should be reported in item 2.2 of 3, under Portfolio Investment in India (in Section-III). Similar treatment should be considered while reporting the compulsory convertible preference shares also.

In the FLA Return, whether FDI should be reported based on the country of immediate investor or country of ultimate holding entity? Where should we report the receivable/ payables with non-resident ultimate holding entity?

Above situation is better explained with following case:

Example: A entity incorporated in Mauritius has invested into Indian entity. The parent entity of Mauritian entity is incorporated in USA. So, whether claims and liabilities of Indian entity with parent entity incorporated in USA also needs to be disclosed in the FLA Return and if yes, where?

Solution: While filling the FLA return, FDI reporting should be based on the country of immediate investor. However, if there are any receivables/payables with the non-resident ultimate holding entity, then same should also be reported at ‘Other capital’ component of 2.b DI under Section III.

In respect of the above example, claims and liabilities of Indian entity with the parent USA Entity will be reported at ‘Other capital’ component of 2.b DI under Section III.

If the entity is following Ind AS accounting policy but last year it was not as per that. This creates difference in the amount in variation report, for many items. Kindly confirm whether the FLA data should be reported based on actual figures or as per IND-AS standards?

In the reporting year, if the entity balance sheet is as per Ind AS, then the FLA reporting is required as per the latest balance sheet only. In case last year Ind AS was not followed and this is reflected in variation report, then kindly ignore the variation, as it is due to change in accounting standard.

Whether an entity registered under International Financial Services Centre Authority (IFSCA) and operating from GIFT City is required to file the RBI’s FLA return for the financial year if it has received foreign investment or holds overseas investment?

Yes, the entity is required to file FLA return.

If a foreign entity establishes a subsidiary in IFSC Gujarat, will that investment be classified as foreign direct investment, and will FLA filing be applicable to the subsidiary?

Yes, FLA filing is applicable to the subsidiary.

Indian entity (entity A) has made investment in an entity (entity B) incorporated under the provisions of the Indian Companies Act, 2013, but is located in GIFT City, IFSC Gujarat. Is this transaction treated as foreign investment? Whether such equity investment in the form of ODI is required to be reported in the FLA return by entity A?

 Yes, the entity A is required to file FLA return giving details of ODI. Also, entity B is required to file FLA with details of the investment (done by entity A) as FDI.