Introduction to FLA Return
With increasing involvement in foreign investments, adherence to the Foreign Exchange Management Act (FEMA) has become crucial for company operations. The Foreign Liabilities and Assets (FLA) Return is an annual requirement for companies with foreign investments or those investing abroad, either through partnerships or as sole owners via Overseas Direct Investment (ODI). This report, mandated by the Reserve Bank of India (RBI), gathers information on foreign liabilities and assets as reflected in the entities' balance sheets. It is governed by the guidelines established under the Foreign Exchange Management Act, 1999 (FEMA).
Overview of FLA Return
The FLA Return is an annual report mandated for Indian entities that have either received Foreign Direct Investment (FDI) or made FDI abroad. It must be submitted to the Reserve Bank of India (RBI) and serves to document the foreign liabilities and assets held by these entities as part of their balance sheets. This reporting requirement is governed by the Foreign Exchange Management Act, 1999 (FEMA).
Applicability of FLA Return
The FLA Return applies to a variety of entities, including:
- Companies registered under the Companies Act, 2013.
- Limited Liability Partnerships (LLPs) registered under the Limited Liability Partnership Act, 2008.
- Other entities such as SEBI-registered Alternative Investment Funds (AIFs), Partnership Firms, Public Private Partnerships (PPPs), among others.
Non-Applicability of FLA Return
An entity is exempt from submitting the FLA Return if:
- It has not received Foreign Direct Investment (FDI) or made any overseas investment in the current reporting year or in any previous years.
- As of the end of March of the reporting year, it only holds share application money and does not have any outstanding FDI or overseas direct investment.
- Non-resident shareholders have transferred their shares to residents during the reporting period, and any shares issued to non-residents are on a non-repatriable basis.
Registration and Filing Process
- Registration on the RBI Portal: To begin, entities must register on the RBI Portal at https://flair.rbi.org.in. First-time users are required to complete the "FLA User Registration Form" and submit it along with scanned and signed Authority and Verification Letters in PDF format.
- Filing the FLA Return: Once registered successfully, entities can log in to the portal using their username, password, and a One-Time Password (OTP) sent to their registered email address. They can proceed to file the FLA Return by accessing "FLA Online Form" and selecting "Start Filing FLA Form."
Sections of the FLA Return
The FLA Return comprises five sections:
- Section I: Identification Particulars
- Includes entity details like name, PAN, CIN, contact person, email ID, mobile number, nature of business, and listing status.
- Section II: Financial Details
- Covers financial data such as total paid-up capital, profit and loss, reserves and surplus, and sales and purchases during the financial year.
- Section III: Foreign Liabilities
- Requires information on investments in India (FDI) and other foreign liabilities, including details of non-resident equity and participating preference share capital percentages.
- Section IV: Foreign Assets
- Includes details of overseas direct investments (ODI) and other foreign assets, such as equity securities and debt securities held under portfolio investment.
- Section V: Variation Report
- Auto-populated based on data entered in previous sections, this part requires verification of accuracy before final submission.
Due Date for Filing FLA Return
The FLA Return must be filed by July 15th each year. If the entity's accounts are not audited by this date, the FLA Return should be submitted based on unaudited or provisional accounts. Subsequently, once the accounts are audited, a revised FLA Return must be submitted by September 30th of the same year.
Conclusion
The FLA Return stands as a crucial compliance requirement for Indian entities involved in Foreign Direct Investment (FDI) activities abroad. It mandates accurate reporting of foreign liabilities and assets, governed under FEMA guidelines. Understanding its applicability, provisions, and filing process is paramount for ensuring timely submission and compliance.
By adhering to the guidelines outlined in this comprehensive guide, entities can navigate the FLA filing process effectively. This includes gathering necessary documentation, maintaining secure login credentials, following step-by-step instructions, and meticulously reviewing all entered information before submission. By doing so, entities can fulfill their regulatory obligations and contribute to a streamlined and compliant reporting framework under RBI oversight.
