Summary: The article explains the Annual Return on Foreign Liabilities and Assets (FLA Return), an annual reporting requirement under the Foreign Exchange Management Act, 1999, introduced through A.P. (DIR Series) Circular No. 45 dated 15 March 2011 for specified Indian resident entities with outstanding foreign direct investment or overseas direct investment. It states that the return is filed through the RBI’s FLAIR portal by 15 July each year, with the due date for FY 2025–26 being 15 July 2026. The article outlines the purpose of the return, eligible entities, annual filing requirements, use of audited or provisional financial statements, revision process, registration on the FLAIR portal, reporting of March-end data, delayed filing procedure, classification of foreign investments, valuation methods, reporting of other capital, treatment of CCDs and preference shares, reporting based on the immediate investor, exclusion of domestic assets and liabilities, portal update procedures, reporting by IFSC-regulated entities, and answers frequently asked questions relating to filing, revision, valuation and compliance.
The Annual Return on Foreign Liabilities and Assets, commonly known as the FLA Return, is an annual reporting requirement under the Foreign Exchange Management Act, 1999. It was introduced through A.P. (DIR Series) Circular No. 45 dated 15 March 2011 and is applicable to specified Indian resident entities having outstanding foreign direct investment or overseas direct investment.
The return is filed through the Reserve Bank of India’s Foreign Liabilities and Assets Information Reporting portal, commonly referred to as the FLAIR portal. The due date for filing the return is 15 July of every reporting year. Accordingly, for the financial year ended 31 March 2026, the due date was 15 July 2026.
The purpose of the FLA Return is to provide the RBI with information relating to the foreign financial liabilities and assets of Indian resident entities as at the end of March. The return captures data for both the previous financial year and the latest financial year. The information is used for compilation of India’s Balance of Payments, International Investment Position, Direct Investment Position by Counterpart Economy and Portfolio Investment Position by Counterpart Economy. The entity-wise information submitted in the return is kept confidential, and only consolidated data is released by the RBI.
The filing requirement applies to Indian resident entities that have received foreign direct investment or made overseas direct investment in the current year or in any previous year and continue to have foreign assets or liabilities outstanding as at the end of March of the current or previous financial year. It may apply to companies, limited liability partnerships, SEBI-registered Alternative Investment Funds, partnership firms, proprietary concerns, public-private partnerships and other eligible Indian resident entities.
The FLA Return is not limited to the year in which foreign investment is first received or made. Where foreign investment received in an earlier year continues to remain outstanding, the return must continue to be filed annually. Since the return captures data for two financial years, filing may also be required where no foreign investment remains outstanding at the end of the current year but was outstanding at the end of the previous year.
The return may be filed on the basis of audited or unaudited financial statements. If the audit is not completed by 15 July, the entity should file the return using provisional or unaudited figures. Once the audited financial statements become available, the entity is required to obtain approval through the FLAIR portal and file a revised return. The revision is required irrespective of the amount or percentage of variation between the provisional and audited figures.
A new entity must first register on the FLAIR portal. The registration process requires submission of the prescribed registration details along with the Verification Letter and Authority Letter. After successful registration, the user ID and default password are sent to the authorised person’s email address. The authorised person can thereafter log in and complete the return online.
Alternative Investment Funds are also required to register on the FLAIR portal. However, where the online filing facility in the prescribed AIF format is not available, the AIF is required to obtain the latest Excel-based format from the RBI and submit the completed return through the specified email process. An acknowledgement is issued after validation by the RBI’s FLA team.
The FLA Return must always contain information as at the end of March. Where the entity follows a financial year different from April to March, it cannot report only on the basis of its own accounting period. The March-end figures must be prepared on the basis of internal assessment. The same principle applies where the accounting period of an overseas subsidiary or joint venture differs from the reporting period.
An entity that failed to file the return for an earlier applicable year may file it after obtaining approval from the RBI. However, delayed filing is treated as a violation of FEMA and may attract the applicable penalty provisions. The entity may also be required to regularise the delay and pay the applicable Late Submission Fee by approaching the Foreign Exchange Department of the RBI Regional Office having jurisdiction over its registered office.
An earlier return can be revised or modified only after obtaining RBI approval. The request is raised through the FLAIR portal by selecting the relevant reporting year under the “Multiple Year CIN Enable Screen”. Without approval, a revised return cannot be filed.
The FLA Return requires proper classification of inward and outward foreign investment. Foreign direct investment in an Indian entity is generally reported in the foreign liabilities section, while overseas investment made by an Indian entity is reported in the foreign assets section. The treatment depends on the percentage of equity and participating preference shares held by the investor.
Where a non-resident holds 10 per cent or more of the equity and participating preference share capital of an Indian entity, the investment is reported as foreign direct investment. Where the holding is below 10 per cent, it is reported under the relevant direct investment category. A similar distinction applies to overseas investment made by an Indian entity.
The return also captures “other capital”, which includes financial claims and liabilities other than equity and participating preference shares. This may include loans, trade credit, debentures, non-participating preference shares, accounts receivable, accounts payable and other inter-company balances.
Participating preference shares are treated as equity capital because they carry a right to participate in surplus profits or surplus assets. Non-participating preference shares do not carry such rights and are generally reported under other capital.
Compulsorily convertible debentures are not included in the paid-up capital section of the FLA Return. Where the non-resident investor also holds equity shares, the CCDs are reported under other capital, depending on the percentage of equity held. Where the investor holds only CCDs and no equity shares as at the end of March, the investment is reported under the relevant portfolio investment category. Similar treatment applies to compulsorily convertible preference shares.
For an unlisted entity, the market value of foreign equity is determined using the Own Funds at Book Value method. The broad calculation is based on the net worth of the entity multiplied by the percentage of foreign equity holding. For a listed entity, the closing market price as at the end of March is used. The relevant valuation fields are calculated automatically in the online FLA form.
Foreign investment must be reported based on the country of the immediate investor and not the country of the ultimate holding company. However, any receivables or payables with the ultimate foreign parent or other related foreign entities must also be reported under the appropriate other capital category.
Domestic assets and liabilities are not reported in the FLA Return, even where they are denominated in foreign currency. The return is intended to capture only foreign financial liabilities and assets.
Sales and purchases reported in the return should relate to the regular business operations of the entity. Sales generally include revenue from operations. Interest, commission or foreign exchange gains are included only where they form part of the entity’s primary business activity. Purchases should similarly include expenses incurred as part of regular business operations and should not ordinarily include capital expenditure, goodwill, tax payments or other non-operational items.
The FLAIR portal does not permit direct modification of certain registered details such as the authorised person, email address, entity name, entity address or head of institution. Where any such detail changes, the entity must request deactivation of the existing account and thereafter complete fresh registration. Where the same CIN, LLPIN or UIN is used, the previously filed information may be carried forward.
Where the CIN changes after the reporting date, the return for that reporting year must be filed using the old CIN. Any revised return for the same period must also be filed using the old CIN.
Entities regulated by the International Financial Services Centres Authority may also be subject to FLA reporting where they receive investment from outside India or hold investment outside India. Such entities are required to follow the instructions issued by IFSCA and are not required to file the return with the RBI. However, an Indian entity investing in an IFSC entity must comply with the applicable FEMA reporting requirements, including FLA reporting, because such investment is treated as investment in a person resident outside India for the limited purposes of FEMA.
Frequently Asked Questions
1. Who is required to file the FLA Return?
The return is required to be filed by an Indian resident entity that has received foreign direct investment or made overseas direct investment in the current year or any previous year and has outstanding foreign assets or liabilities as at the end of March of the current or previous financial year.
2. Is the return required every year after receiving FDI?
Yes. If the foreign investment continues to remain outstanding, the entity must continue to file the return annually.
3. Is filing required where no fresh FDI was received during the year?
Yes. Fresh receipt of investment is not necessary. The return is required if foreign investment received in an earlier year remains outstanding.
4. What is the due date for filing the FLA Return?
The due date is 15 July of the reporting year.
5. Can the return be filed using unaudited figures?
Yes. Where audited accounts are not available by 15 July, the return must be filed using provisional or unaudited figures.
6. Is a revised return required after the audited accounts become available?
Yes. The entity must obtain approval through the FLAIR portal and file a revised return irrespective of the amount or percentage of variation.
7. What happens if the return is not filed by 15 July?
Non-filing is treated as a violation of FEMA. The entity may be required to regularise the delay, pay the applicable Late Submission Fee and approach the jurisdictional RBI Regional Office.
8. Can a return for an earlier year be filed later?
Yes. A previous year’s return may be filed after obtaining approval from the RBI. However, delayed filing may attract the applicable penalty provisions.
9. Can an already filed return be revised?
Yes, but only after obtaining RBI approval through the FLAIR portal.
10. Is the return required where there is no outstanding FDI or ODI?
No, if there is no outstanding inward or outward foreign investment as at the end of both the current and previous financial year.
11. Is the return required where the entity has received only share application money?
No, provided there is no outstanding foreign direct investment or overseas direct investment as at the end of March.
12. Is the return required where shares are issued to a non-resident on a non-repatriation basis?
No. Shares issued entirely on a non-repatriation basis are not treated as foreign investment for FLA reporting.
13. What happens where all foreign shareholders transfer their shares to residents during the year?
The return may still be required if foreign investment was outstanding at the end of the previous year. The entity must report the previous year’s investment and the disinvestment during the current year.
14. Is the return required where a resident shareholder becomes a non-resident?
Yes, where the shares are held on a repatriable basis. It is not required where all shares are held only on a non-repatriation basis.
15. Are financial statements required to be uploaded with the return?
No. The balance sheet, profit and loss account and other financial statements are not uploaded. Only the online FLA Return is filed.
16. What if the entity follows a financial year other than April to March?
The entity must still report figures as at the end of March on the basis of internal assessment.
17. How is foreign direct investment classified in the return?
Where the non-resident holds 10 per cent or more of the equity and participating preference shares, the investment is reported as FDI. Where the holding is below 10 per cent, it is reported under the relevant direct investment category.
18. How is overseas investment classified?
Where the Indian entity holds 10 per cent or more in the overseas entity, the investment is reported as ODI. Where the holding is below 10 per cent, it is reported under the relevant direct investment category.
19. What is included in “other capital”?
Other capital includes loans, trade credits, debentures, non-participating preference shares, receivables, payables and other financial claims or liabilities between related entities.
20. Are CCDs included in paid-up capital?
No. CCDs are generally reported under other capital where the investor also holds equity. Where the investor holds only CCDs, they are reported under the relevant portfolio investment category.
21. How is equity valued for an unlisted entity?
It is valued using the Own Funds at Book Value method based on the entity’s net worth and the percentage of foreign equity holding.
22. How is equity valued for a listed entity?
The closing market price as at the end of March is used.
23. Should the investment be reported based on the immediate investor or ultimate parent?
It should be reported based on the country of the immediate investor. Any balances with the ultimate parent must be separately reported under the appropriate other capital category.
24. Are domestic assets or liabilities reported if they are denominated in foreign currency?
No. Domestic assets and liabilities are not reported even if they are denominated in foreign currency.
25. What should be reported under sales and purchases?
Only income and expenditure arising from the entity’s regular business operations should be reported.
26. Can the authorised person or email address be changed directly on the portal?
No. The existing account must be deactivated and the entity must re-register with the revised details.
27. Which CIN should be used where the CIN changes after the reporting date?
The old CIN should be used for the reporting year and for any revision relating to that year.
28. Are IFSC entities required to file the return with the RBI?
No. IFSC-regulated entities must follow the reporting instructions issued by IFSCA.
Conclusion
The FLA Return is an important annual FEMA reporting requirement for Indian resident entities having foreign investment liabilities or overseas investment assets. The obligation does not arise only in the year in which investment is received or made. It may continue for as long as the investment remains outstanding and may also apply where the investment existed at the end of the previous financial year.
Entities should ensure timely filing by 15 July, even where audited accounts are not available. In such cases, provisional figures should be used and the return should be revised after the audit is completed. Entities that have missed the deadline should take immediate steps to regularise the delay and verify whether any earlier year’s filing also remains outstanding.
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Disclaimer: This article is intended for general informational purposes only and does not constitute legal or professional advice. The applicability of the FLA Return should be examined with reference to the facts of each case and the applicable RBI directions.
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