The annual return on Foreign Liabilities and Assets (FLA) is a crucial requirement for entities that have received foreign direct investment (FDI) or made investments abroad. These entities, including companies under the Companies Act, 2013, Limited Liability Partnership (LLP) registered under the Limited Liability Partnership Act, 2008, and others such as SEBI registered Alternative Investment Funds (AIFs), Partnership Firms, Public Private Partnerships (PPP), etc., are mandated to submit the FLA return under FEMA 1999. The submission should be based on audited or unaudited accounts of the entity, and it must be completed by July 15 every year.
Failing to file the FLA return by the due date will be considered a violation of FEMA, and penalties may be imposed accordingly. It is important for entities to submit the return within the specified deadline. If audited balance sheets are not available, entities may fill the return using provisional or unaudited numbers. Once the audited numbers are ready, they can request a revision of the previously filed return to the RBI. Upon approval by the RBI, the entity can revise the return with audited numbers and resubmit it.
Entities have the option to submit the FLA return after the due date, but they need to seek approval from the RBI. However, late submission may incur penalties under the penalty clause.
The FLA return can be submitted through the web-based portal called Foreign Liabilities and Assets Information Reporting (FLAIR) system. The portal’s URL is https://flair.rbi.org.in/fla/faces/pages/login.xhtml. The portal is accessible using various browsers such as Internet Explorer, Google Chrome, Firefox, etc.
To register on the FLAIR portal, entities need to click on “Registration for New Entity Users” and fill in the required details in the FLA user registration form. The mentioned documents (Verification Letter and Authority Letter) should be uploaded, and the registration can be completed by clicking “submit.” Upon successful registration, the authorized person will receive a user ID and default password via email. Using these credentials, entities can log in to the FLAIR portal and file the FLA return.
It is important to note that the previous excel-based and email-based reporting systems have been replaced by the web-based format for submitting the annual FLA return since June 2019.
Upon final submission, the system will generate an acknowledgement of the FLA data. No separate email will be sent for this acknowledgment.
If an entity needs to revise the FLA return for a previous year, the following steps should be followed:
1. Login to FLAIR and click on the MENU tab on the left-hand side of the homepage.
2. Select ONLINE FLA FORM, followed by FLA ONLINE FORM.
3. Click on “Please click here to get the approval to fill the revised FLA form for the current year after the due date/previous year.”
4. Choose the desired year and click “Request.”
The status of the request will be visible in the table available on the screen. After submitting the request to RBI through the FLA portal, entities must wait for at least one working day for approval. The status of the request can be checked in the “Multiple Year Enable Screen” under the menu on the left corner. Once approved by the DSIM, RBI, the entity can revise the FLA return for the selected year.
The penalty for non-filing of FLA return is as follows:
If the company fails to file the FLA return within the specified time, it will be subject to a penalty. The penalty amount will be three times the sum involved in the contravention. If the sum is not quantifiable, a penalty of Rs. 2,00,000 will be applicable. Additionally, if the contravention continues, a penalty of Rs. 5,000 per day will be imposed on the company.
In conclusion, the FAQs on FLA Return provide comprehensive information and clarification for entities with foreign investments. Compliance with RBI regulations regarding the applicability, filing process, and requirements of the FLA Return is essential. By addressing common questions and concerns, these FAQs help businesses fulfill their reporting obligations accurately and within the specified timelines.
Direct investment, also known as foreign direct investment (FDI), involves investors putting money into businesses operating in other countries. It comprises two components: Equity Capital and Other Capital. Equity Capital includes various types of equities (excluding non-participating preference shares), acquisition of equities in Direct Investment Enterprise, and shares acquired by a DIE in its direct investor company (reverse investment). Other Capital includes receivables, payables, outstanding liabilities or claims out of borrowing, trade credit, financial leasing, share application money, investment in debt securities, and non-participating preference shares.
The classes or types that a company may have depend on the range of face values for the company’s shares. For example, if a company has shares with face values of INR 10 and INR 20, the number “2” should be indicated as the classes of shares. Similarly, if the company has partially paid-up shares, “2” should be inserted against the classes of shares.
Participating Preference Shares refer to shares that have the right to receive dividends out of surplus profit after paying the dividend. These shares also have the right to share in case of winding up, entitling them to a portion of the surplus assets remaining after repaying the entire capital.
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Disclaimer :This article provides general information existing at the time of preparation and we take no responsibility to update it with the subsequent changes in the law. The article is intended as a news update and Affluence Advisory neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this article. It is recommended that professional advice be taken based on specific facts and circumstances. This article does not substitute the need to refer to the original pronouncement
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