The Foreign Liability and Assets (FLA) return is a mandatory filing requirement for all Indian companies, Limited Liability Partnerships (LLPs), and similar entities that have received foreign direct investment (FDI) in India or made overseas direct investment (ODI). This return is an essential component of India’s regulatory framework for monitoring foreign investments and ensuring compliance with the Foreign Exchange Management Act (FEMA). Every year, entities subject to this requirement must submit their FLA returns to the Reserve Bank of India (RBI) by July 15th. This guide provides a comprehensive overview of the FLA return filing process, penalties for non-compliance, and key considerations for ensuring accurate and timely submission.
DUE DATE OF FILING FLA RETURN: By 15th July of every year.
REGISTRATION WITH THE FLAIR PORTAL FOR FILING OF FLA RETURN:
The Companies on which FLA return filing is applicable are required to register them on RBI FLAIR PORTAL (https://flair.rbi.org.in/fla/faces/pages/login.xhtml).
After filing in the details of the applicant on https://flair.rbi.org.in/fla/faces/pages/EntityUser.xhtml, upload verification letter and authority letter as instructed at the end of the page.
In case of any issues in registration, you can mail on [email protected] with your grievance.
PENALTY FOR NON – FILING:
Late Submission Fee (LSF): If the FLA return is not filed by the due date, a Late Submission Fee of Rs. 7,500/- may be imposed. This fee applies if the return is filed late but before any enforcement action is taken.
Penalties for Violations: If an entity fails to file the FLA Return or files false information, penalties under FEMA can be severe, including:
Monetary Penalty: Up to 300% of the amount involved in the violation or a minimum of Rs. 2 Lakh if the violation amount cannot be quantified.
Continued Non-compliance: If the violation continues beyond the initial detection, a daily penalty of Rs. 5,000/- may be imposed for each day the violation persists after the first day.
PROCEDURE FOR FILING FLA RETURN:
Post login, we need to fill in the FLA return i.e. structured into five sections mentioned as below:
Section I: Identification of Particulars
Basic details such as name of the Company, PAN are prefilled and we need to fill in the business objects of the Company, no of employees, and whether that the Company is amalgamated, listed, an Asset Management Company and the like drop down details.
Section II: Financial Details
This is further divides into six sections, mentioned as following:
- Total Paid-Up Capital of Indian Company
- Details of foreign shareholding pattern of the Company
- Profit and Loss Account (from P/L Account) i.e. Profit before and after taxes
- Reserves & Surplus (from Balance Sheet)
- Sales and Purchase made during the financial year with domestic and exports/imports bifurcation
- of employees on payroll
Section III: Foreign Liabilities (Investments made in India)
Details of foreign investments done in India needs to be furnished in two sections i.e 10% or more and less than 10% in equity participant along with financial liabilities with foreign unrelated parties, excluding domestic liabilities even if in foreign currency.
Section IV: Foreign Assets
In this section, we need to give details about the overseas direct investment (ODI) made by the Indian entity.
Section V: Variation Report
On the basis of what you have filled in the previous four sections, the variance report is auto generated to show the variance of reporting between current and previous year.
IMPORTANT POINTS TO CONSIDER:
1. It is always recommended to file audited figures in FLA return and hence, audit of the entities who are required to file FLA return should be done sooner.
2. We can download the draft return for review and it is always advisable to keep a copy of the return for future reference.
3. Individuals doing investment abroad in their personal capacity are not required to file FLA return.
4. The registered email ID while doing FLA entity registration shall be entered crucially correct as OTP would be received every time on such email ID on login.
Conclusion: Filing the FLA return is a critical compliance requirement for Indian entities with foreign investments. Accurate and timely submission not only ensures adherence to FEMA guidelines but also avoids significant penalties. Companies and LLPs must prioritize the registration and filing process, utilizing audited financial figures and keeping thorough records of their submissions. By doing so, they can maintain good standing with the RBI and contribute to the overall transparency and regulation of foreign investments in India.
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{The author i.e., Mrs. Kajal Goyal is a Company Secretary in Practice and can be reached at (M) +91-9999952595 and (E) [email protected]}
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