Foreign Liabilities and Assets Annual Return (FLA Return)

What is Foreign Liabilities and Assets Annual Return?

Foreign Liabilities and Assets Annual Return comes under the Foriegn Exchange Management Act (FEMA), and it is mandatory to file for businesses who either received FDI or Made FDI abroad. FLA is required to be filed before the due date of 15th July, and if missed, it can lead to a penalty under FEMA. However, if company accounts are not audited before the due date, then an FLA return needs to be submitted based on unaudited or provisional accounts, and once its accounts are audited, the businesses have to file a revised FLA return before 30th September.

---

FLA return applicability

The Foreign Liabilities and Assets (FLA) Return applies to several types of entities:

• Companies
• Limited Liability Partnerships (LLPs)
• Other entities including:
  • SEBI-registered Alternative Investment Funds (AIFs)
  • Partnership firms (with a specific requirement)
  • Public-Private Partnerships (PPPs)

Partnership firms need to file an FLA Return only if they have outstanding Foreign Direct Investment (FDI) at the end of the reporting year (March 31st). If this applies, they must obtain a dummy CIN number from the RBI specifically for filing the FLA Return. This dummy CIN cannot be used for any other purpose. If your partnership firm received a dummy CIN in a previous year, you can use the same number again for this year's FLA Return RBI filing.

---

Entities exempted from filing FLA returns

Here are the conditions under which a company typically does NOT need to file an FLA Return RBI:

• No Previous or Current Foreign Investment: The company did not receive FDI (Foreign Direct Investment) or make any overseas investments (ODI) in the current year or any previous years. There are also no outstanding foreign liabilities or assets.
• Only Share Application Money: The company only has collected share application money and does not have any outstanding FDI or ODI as of the end of March in the reporting year. Share application money is not considered foreign investment until the shares are issued.
• Transfer of Non-Resident Shares: During the reporting period, all the company's non-resident shareholders transferred their shares to residents. This means there are no longer any foreign holdings in the company (assuming the shares were issued on a non-repatriable basis).

Note: Even if a company did not receive any new FDI or ODI in the latest year, it is still required to file an FLA Return if it has outstanding FDI or ODI from previous years.

---

Penalty if missed the deadline for submitting FLA return

Failing to submit your FLA Return after the due date (July 15th) is considered a violation of the Foreign Exchange Management Act (FEMA). This can lead to penalties from the Reserve Bank of India (RBI). Here is how the penalty is charged if any entity misses the deadline:

• Fines: The penalty amount can be:
  • Three times the value involved in the violation (if the violation can be quantified).
  • A fixed amount of Rs. 2 lakhs (if the violation cannot be easily quantified).
• Daily Fines: If you continue not to file the FLA Return after the due date, you may be charged a daily penalty of Rs. 5,000.
• Compounding: The RBI's regional officer has the authority to settle the penalty for a lesser amount.

---

How to file FLA return online?

You can file FLA returns online on the RBI’s FLAIR portal; here is how you can file FLA returns:

Registering on the FLAIR Portal:

• Visit the FLAIR portal: https://flair.rbi.org.in/fla/faces/pages/login.xhtml
• Click on "Registration for New Entity Users."
• Fill out the FLA user registration form with your company details.
• Upload the required documents, such as a verification letter and authorization letter.
• Submit the registration form.
• You'll receive an email with your user ID and a default password.
• Use these credentials to log in to the FLAIR portal.

Filing Your FLA Return:

• Once logged in, you can download a draft FLA return form.
• Review the draft form carefully and make any necessary corrections.
• Once satisfied, submit the final FLA return to the RBI.
• Upon submission, you'll receive an acknowledgment within the system confirming your company's FLA data has been received. The RBI will not send a separate email notification.

---