What is FLA Return?
The Foreign Liabilities and Asset (FLA) Return is an annual return filed with the Reserve Bank of India (RBI), based on the applicability of certain provisions under the Foreign Exchange Management Act, 1999 (FEMA).
Applicability of the Annual FLA Return
The annual FLA Return must be submitted by entities that have received Foreign Direct Investment (FDI) and/or made overseas investments (FDI abroad) in the current or any previous year i.e., entities that hold foreign assets or/and liabilities in their balance sheets:
- A Company as defined under section 1(4) of the Companies Act, 2013.
- A Limited Liability Partnership (LLP) registered under the LLP Act, 2008.
- Other entities, including SEBI – registered Alternative Investment Funds (AIFs), Partnership Firms, Public Private Partnerships (PPPs) etc.
Even if the entity has not received any new FDI or made any new ODI during the latest financial year, it is still required to file the FLA Return if there are outstanding FDI or ODI from previous years.
Situations Where FLA Return Filing is not Mandatory:
- No Previous or Current Foreign Investment: The company has not received any Foreign Direct Investment (FDI) or made any Overseas Direct Investment (ODI) in the current or any previous financial years. Additionally, there are no outstanding foreign liabilities or assets on its balance sheet.
- Only Share Application Money: The company has only received share application money from non-residents and has not issued shares as of March 31st of the reporting year. Since share application money is not treated as foreign investment until shares are allotted, the FLA Return is not required.
- Transfer of Non-Resident Shares: During the reporting period, all non-resident shareholders of the company have transferred their shares to resident individuals or entities. As a result, there are no foreign holdings remaining in the company, and FLA Return is not applicable.
FLA Return Filing Due Date:
An eligible entity is required to file the annual FLA Return on or before July 15th each year for the previous financial year ending on March 31st
FLA Reporting Essentials:
- If the entity does not have audited accounts ready before July 15th, it must file the FLA Annual Return based on unaudited financials.
- Once the accounts are audited, and if there are any changes from the provisional data previously submitted, the entity can request approval from the RBI to revise the FLA Return. Upon receiving the approval, the revised return can be filed.
- If the company’s financial year differs from the standard reference period (April to Match), the information in the FLA Return must still correspond to the April–March period.
- There is no requirement to submit balance sheets or profit and loss accounts; only the FLA Annual Return must be submitted online through the RBI’s web-based FLAIR portal before the due date.
Quick Guide to Filing the FLA Return Online:
- Entities can submit the Annual Return on FLA through the RBI’s online web-based portal at https://flair.rbi.org.in.
- The entity must register on the portal by clicking on “Registration for New Entity Users”.
- The entity is required to fill the details in the FLA user registration form, upload the necessary documents (Verification Letter and Authority Letter), and click submit to complete the registration.
- After successful registration, the user ID and default password will be sent to the authorized person’s email ID. Using these credentials, the entity can log in to the FLAIR portal and file the FLA Return.
- A total of five sections must be filled in and validated online: SECTION I – Identification Particulars, SECTION II – Financial Details, SECTION III – Foreign Liabilities, SECTION IV – Foreign Assets and V – Variation Report.
- Detailed step-by-step instructions for filing the Annual Return on FLA is available in the “User Manuals” and “FAQ 2 for FLA” on the RBI FLAIR portal.
- Once the form is filled, the entity can download the draft Form FLA and review it before submission.
- An acknowledgment is generated upon successful online submission of the FLA Return.
- There is no requirement to get the FLA Return signed either manually or digitally – by an authorized person.
Implications of Non-Filing or Delayed Submission:
- A Late Submission Fee (LSF) of ₹7,500 is applicable in case of delay in filing the FLA Return.
- Non-filing of the return on or before the due date is considered a violation of FEMA and may attract penalties under the relevant provisions.
- The company may face difficulties in obtaining approvals for FDI, ECBs, or other regulatory filings.
- Non-compliance can raise concerns during investor due diligence or funding rounds.
Closing Remark:
In summary, the Foreign Liabilities and Assets (FLA) Annual Return is a mandatory compliance requirement under FEMA for entities that have received FDI or made overseas investments. Timely submission of the return by July 15th each year is essential to avoid penalties and ensure seamless regulatory compliance. Staying proactive with such filings not only safeguards your business from legal consequences but also builds credibility with investors and regulatory authorities.