Annual FLA Return on Foreign Liabilities and Assets under FEMA

This overview contains:

1. What is Annual Return on Foreign Liabilities and Assets (FLA Return)?

2. Which entities are required to file the FLA Return?

3. Which entities are exempted from filing the FLA Return?

4. What is the due date for filing FLA Return?

5. Whether the FLA Return can be filed on the basis of non-audited/provisional accounts? Whether the FLA Return can be revised once the accounts of entities get audited?

6. Whether is it mandatory to file FLA Return if there is no FDI/ODI in current year?

7. What will be the consequences in case we do not file the FLA Return by July 15, as our accounts are not yet audited, and we do not wish to file it with unaudited figures? Will there be any imposition of penalty or prosecution initiated against the entity by RBI or FEMA?

8. What is the Penalty for non-filing of FLA Return?

9. Whether compounding can be done for contravention in the filing of FLA Return?

10. What are the details needs to be disclosed in the FLA Return?

11. Can the company file the previous year FLA Return or delete/modify the FLA Return?

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

13. Is it required to submit any Financial Statements like Balance Sheet or P&L Accounts (Audited/ Unaudited) along with the FLA Return?

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

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

16. How can an Alternative Investment Fund (AIF) file the FLA Returns?

With the increasing involvements of Foreign Investments [either in form of Foreign Direct Investment (FDI) or Overseas Direct Investment(ODI)], the importance of Foreign Exchange Management Act, 1999 (FEMA 1999) Regulations and their compliance becomes a major part of one entities’ business operations. Filing of FLA Return is one of such compliance and is required to be submitted by the entities which have received FDI and/ or ODI in any of the previous year(s), including the current year.

What is Annual Return on Foreign Liabilities and Assets (FLA Return)?

Annual Return on Foreign Liabilities and Assets (FLA Return) has been notified under FEMA 1999 (A.P. (DIR Series) Circular No. 45 dated March 15, 2011) and it is required to be submitted by all entities which have received FDI and/ or made ODI in any of the previous year(s), including the current year.

Which entities are required to file the FLA Return?

FLA Return is required to be filed by the following entities which have received FDI and/or ODI in the previous year(s) including the current year i.e. who holds foreign assets or/and liabilities in their balance sheets:

• A Company 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 Firms, Public Private Partnerships (PPP)]

Which entities are exempted from filing the FLA Return?

Following entities are exempted from filing the FLA Return:

• Entity that has not made any FDI or ODI either in any of the preceding years or in the current year.
• Entity that has only received share application money and does not have an outstanding balance of FDI or ODI as of the end of the financial year.
• Entity that has issued shares on a non-repatriable basis to the non-residents of India.

What is the due date for filing FLA Return?

The due date for filing the FLA Return under FEMA 1999 based on audited/ unaudited accounts of the entity by July 15 every year.

Whether the FLA Return can be filed on the basis of non-audited/provisional accounts? Whether the FLA Return can be revised once the accounts of entities get audited?

Yes, in case the entities do not have their audited balance sheet ready, they may fill the FLA Return with the provisional/unaudited numbers.

Thereafter, once the audited numbers are ready, entities are required to submit the revised FLA Return based on audited accounts by end of September.

Whether is it mandatory to file FLA Return if there is no FDI/ODI in current year?

If an entity has not ‘received any fresh FDI and/or ODI in the current year but has outstanding FDI and/or ODI as at end-March of that financial year, then it is required to file its outstanding position as on March 31 in the FLA Return every year by July 15.

However, where the Indian entity does not have any outstanding investment in respect of FDI and/or ODI as on end-March of reporting year, they need not to file the FLA return.

What will be the consequences in case we do not file the said FLA Return by July 15, as our accounts are not yet audited, and we do not wish to file it with unaudited figures? Will there be any imposition of penalty or prosecution initiated against the entity by RBI or FEMA?

Non-filing of the FLA Return on or before due date (i.e. July 15 of every year) will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA.

The entity responsible for filing the FLA Return shall be liable for payment of Late Submission Fee (LSF) of INR 7500, as may be decided by the Reserve Bank, in consultation with the Central Government, for any delays in reporting. [Notification No. FEMA. 395/2019-RB dated October 17, 2019 and A.P. (DIR Series) Circular No.16 dated September 30, 2022.]

In case a person responsible for any submission or filing under the provisions of FEMA, neither makes such submission/filing within the specified time nor makes such submission/filing along with LSF, such person shall be liable for penal action under the provisions of FEMA, 1999.

What is the Penalty for non-filing of FLA Return?

As given above, where a person responsible for any submission or filing under the provisions of FEMA, neither makes such submission/filing within the specified time nor makes such submission/filing along with LSF, such person shall be liable for penal action under the provisions of FEMA, 1999.

Penalty for non-filing of the FLA Return:

Particulars	Penalty Amount
Where the Quantum is identifiable	thrice of the amount involved in the contravention
Where the Quantum is not identifiable	INR 2,00,000
Continuing Contravention	INR 5,000 per day

Whether compounding can be done for contravention in the filing of FLA Return?

Yes, compounding can be done for contravention in the filing of FLA Return. The Regional Office of the RBI has the power to compound contravention without any limit. However, this does not apply to the Regional Offices of Kochi and Panaji.

What are the details needs to be disclosed in the FLA Return?

The details need to be disclosed in the FLA Return have been divided into 5 different parts. This include:

1. Part I – Identification Particulars: Here, an entity shall furnish its identification details.

2. Part II – Financial Details: Here, an entity should furnish the financial details of the company for the financial year for which the FLA Return is being filed.

3. Part III – Foreign Liabilities: Here, an entity shall disclose the foreign liabilities outstanding as of the financial year-end. These normally include foreign direct investments, portfolio investments, etc.

4. Part IV – Foreign Assets: Here, an entity shall disclose the foreign assets that it hold as of the financial year-end. These normally include overseas investments made outside India.

5. Part V – Variation Report: This section is usually auto-filled as it reconciles the data from the previous four sections.

Can the company file the previous year FLA Return or delete/modify the FLA Return?

Yes, company can file the previous year FLA Return (through online FLA portal only) by taking approval from RBI. For taking approval, they need to send mail to surveyfla@rbi.org.in. And also, the company can delete/modify the FLA Return after taking the approval from RBI.

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

If a company has received only share application money and does not have any outstanding FDI or ODI as on end-March of the reporting year, then the company is not required to file FLA Return.

Is it required to submit any Financial Statements like Balance Sheet or P&L Accounts (Audited/ Unaudited) along with the FLA Return?

No, Balance Sheet or Profit/ Loss accounts need to be submitted. Only FLA Return through online web-based reporting portal needs to be submitted before due date.

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

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 company, then same should also be reported at ‘Other capital’ component of 2.b DI under Section III.

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

If all non-resident shareholders of a company have transferred their shares to the residents during the reporting period and the company does not have any outstanding investment in respect of FDI or ODI as on end-March of reporting year, then the company is not required to submit the FLA Return.

How can an Alternative Investment Fund (AIF) file the FLA Returns?

An AIF needs to register on the FLAIR portal. Since there is no provision for online filing of FLA Return for AIF in the prescribed format, they need to send a mail to survayfla@rbi.org.in requesting for the form for filing of FLA Return for AIF after completing registration process on the portal. Thereafter, FLA Team will send the excel form for filling FLA Return by AIF via mail to them. They need to fill the excel form and send us the same on surveyfla@rbi.org.in. Email based acknowledgement form will be sent to them by FLA Team on receiving the filled-in FLA Return.

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Disclaimer: The entire contents of this document have been prepared based on relevant provisions/regulations available at the public domain at the time of preparation. All care has been taken to ensure the accuracy, completeness, and reliability of the information provided. I assume no responsibility, therefore. Users of this information are required to refer the existing provisions/regulations of applicable Laws before drawing any conclusion.