FLA Return Filing

Declare your global assets. File your FLA Return on time. If your Indian company has received foreign direct investment (FDI) or made overseas investments, filing the FLA (Foreign Liabilities and Assets) Return with the RBI is a yearly obligation. We simplify the complex reporting by preparing accurate data sheets, validating information, and filing the FLA Return on time to help you avoid penalties and maintain seamless regulatory compliance.

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Foreign Liabilities and Assets (FLA) Return

The Foreign Liabilities and Assets (FLA) Return is a mandatory annual compliance filing required under the Foreign Exchange Management Act (FEMA), 1999. It plays a critical role in helping the Reserve Bank of India (RBI) gather detailed information on Indian entities that have received foreign direct investment (FDI), made overseas direct investments (ODI), or have outstanding external borrowings as of the end of the financial year. This return adds the data relating to equity participation from foreign investors, investment made by Indian companies in foreign entities, borrowings from foreign lenders, and other foreign assets and liabilities recorded in the balance sheet. The return is filed through the FLAIR (Foreign Liabilities and Assets Information Reporting) system, which enables the RBI to analyse external sector vulnerabilities and foreign exchange exposures. Non-compliance or incorrect filing of the Return can attract penalties under FEMA provisions.

What is the FLA Return?

The FLA Return is a mandatory report that businesses in India must file with the Reserve Bank of India (RBI) to report their foreign liabilities and assets. The filing serves as a tool for monitoring external economic exposure and tracking foreign investments in India. It includes information:

Foreign Liabilities: All foreign investments, loans, and borrowings in Indian companies.
Foreign Assets: Investments made by Indian companies in foreign entities or countries, including subsidiaries, joint ventures, and properties.

Why is the FLA Return Important?

The FLA Return plays an important role in ensuring the overall health and sustainability of India's economic landscape. FLA returns have several benefits, such as:

Track Foreign Capital Flows

India is one of the largest destinations for foreign direct investment (FDI). The FLA Return helps track the influx of foreign capital, including foreign equity investments and loans. It enables the government and the RBI to assess India's financial stability and ability to manage external liabilities.

Assess Balance of Payments (BoP) and International Investment Position (IIP)

The information collected through the FLA Return helps analyse India's Balance of Payments (BoP) and International Investment Position (IIP) and evaluate the country’s external financial assets and liabilities.

Formulate Policies for the Government

Accurate FLA data assists policymakers in understanding the dynamics of cross-border investments. It provides insights into sectors attracting foreign investments and helps in crafting policies.

Internal Financial Assessment

The process of compiling data for the FLA Return encourages businesses to regularly assess their foreign assets and liabilities, leading to better financial management and strategic planning.

Avoid Operational Disruptions

Timely and accurate filing of the FLA Return ensures that businesses avoid any disruptions or restrictions that may arise from regulatory non-compliance with the regulations.

Who Needs to File the FLA Return?

Several categories of entities are required to file the FLA Return annually. The filing requirement is primarily based on the company’s foreign investments, liabilities, and assets. These include:

Indian Companies with Foreign Investments: Any company that has received foreign direct investment (FDI) must file the FLA Return. This includes companies with foreign equity participation, whether partial or majority ownership.
Joint Ventures (JVs) and Wholly Owned Subsidiaries (WOS): Indian companies that are in a joint venture or have a wholly owned subsidiary abroad must also file the return to report their foreign assets and liabilities.
Financial Institutions and NBFCs: Non-banking financial Companies (NBFCs) with foreign equity participation or external borrowings are required to submit the FLA Return.
Companies with External Borrowings (ECBs): Firms that have raised External Commercial Borrowings (ECBs) must report their foreign loans and borrowings through the FLA Return.
Public and Private Sector Companies: Public and private sector enterprises with foreign investments, borrowings, or assets must file the FLA Return. This ensures that all entities engaged in cross-border transactions comply with the reporting requirement.
MSMEs and Startups with Foreign Investments: Small and Medium Enterprises (SMEs) and startups that attract foreign investments or loans are also required to file the FLA Return to disclose their foreign liabilities and assets.
Alternative Investment Funds (AIFs), Limited Liability Partnerships (LLPs), and Partnership Firms

Who is Not Required to File the FLA Return?

The FLA Return is not applicable to entities that meet the following conditions:

Companies with No Foreign Assets or Liabilities
Companies that Received FDI but Later Transferred It: If a company:

- Received FDI, but the foreign investor sold off their shares before March 31st
- Has no outstanding foreign investment as of March 31st

Companies That Are Not in Operation and Have No Assets/Liabilities
Branches or Liaison Offices of Foreign Companies in India

Components of the FLA Return

The FLA Return consists of several sections that require detailed financial data. Companies need to report the following key components accurately:

1. Foreign Liabilities

The FLA Return requires the reporting of foreign liabilities, which include the following:

Foreign Equity Investment (FDI): The amount of foreign capital invested in the company through equity.
External Commercial Borrowings (ECBs): Loans from foreign financial institutions, banks, or investors.
Foreign Currency Liabilities: Any liabilities in foreign currency that the company has with external lenders or institutions.

2. Foreign Assets

This section asks for information regarding the company’s investments abroad, including:

Overseas Investments: Equity stakes in foreign subsidiaries, joint ventures, or other international ventures.
Foreign Real Estate: Details of any property owned by the company outside India.
Other Foreign Assets: Includes foreign bonds, stocks, and other securities.

3. Equity Participation by Foreign Entities

Companies are required to disclose the percentage of foreign equity participation in their business. This includes foreign investments by institutional investors, venture capitalists, or foreign individuals.

4. External Commercial Borrowings (ECBs)

This section involves reporting of loans and borrowings from foreign financial entities. Companies must provide details such as loan amount, interest rates, repayment schedules, and lender details.

How to File the FLA Return Online?

The FLA Return is filed electronically through the RBI’s FLA Filing Portal. Follow the step-by-step procedure to file the FLA return:

Step 1: Register on the RBI Portal

To submit the FLA Return, companies need to create an account on the RBI’s online portal. You need to add the basic company details, including CIN (Corporate Identification Number), PAN (Permanent Account Number), and contact details.

Step 2: Complete the FLA Form

After logging in, the next step is to complete the relevant FLA form. The form will ask for detailed information regarding the company’s foreign liabilities, assets, and foreign borrowings.

Step 3: Attach Supporting Documents

Companies must attach necessary financial documents, including balance sheets, profit and loss accounts, and loan agreements for external borrowings.

Step 4: Submit the Return

After filling out the form and attaching the required documents, you can submit the return electronically through the RBI portal. Upon successful submission, companies will receive an acknowledgment.

Deadline for Filing the FLA Return

The FLA Return must be filed on July 15th every year for the previous financial year. Timely filing is essential to avoid penalties and ensure compliance with RBI regulations.

Penalties for Non-Compliance

Failing to file the FLA Return on time or providing inaccurate information can lead to serious penalties, such as:

Penalty Type	Penalty	Amount
Quantifiable Contravention	Applies when the exact value of the foreign assets or liabilities is known, the RBI can impose a fine of up to three times that amount.	Up to 300% of the unreported amount
Non-quantifiable Contravention	When the breach can’t be tied to a specific figure (e.g., missing or miscoded entries), a flat penalty of up to ₹2 lakh ensures a minimum deterrent.	Up to ₹2,00,000
Continuing Contravention	For defaults that persist beyond the first day, an additional charge of ₹5,000 is levied for each extra day until the return is correctly filed or amended.	₹5,000 per day (after Day 1)
Late Submission Fee (LSF)	Introduced via RBI’s A.P. (DIR Series) Circular No. 16 (Sept 30, 2022), this fixed fee applies immediately upon delay, even before formal penalty proceedings begin.	₹7,500 per late return
Compounding Option	Firms may apply to “compound” the contravention settlement by paying an agreed amount, often below the statutory maximum under the RBI’s compounding framework.	Negotiated fee (case-by-case)
Cap on Compounding	Under its recent policy amendment, the RBI has capped the maximum compounding fee at ₹2 lakh, regardless of the breach’s value, to ease the compliance burden.	Up to ₹2,00,000 per contravention

NOTE: In extreme cases, the RBI may revoke permission for FDI or other foreign investments for companies that repeatedly fail to comply with filing requirements.

Common Mistakes to Avoid

Incorrect Business Identification Number
Inaccurate Shareholding Details
Ignoring Dormant Foreign Investments
Using the Wrong Email or Login Credentials
Not Revising After Audited Financials
Missing the July 15 Deadline
Incomplete Financial Details
Not Keeping Acknowledgment Receipts

Why Choose Kanakkupillai for FLA Filing with RBI?

The Foreign Liabilities and Assets (FLA) with the Reserve Bank of India is not just about submitting a form; it is about ensuring that your business complies with the laws of the nation that impact business and global investors directly. At Kanakkupillai, we provide:

Strong Knowledge of RBI Rules for FLA Return: We have proven expertise in handling FLA Return filings in full compliance with FEMA and RBI guidelines. Whether your company has raised foreign funds through equity, debentures, or preference shares, we ensure accurate reporting.
Complete Filing Assistance: We handle everything from FLAIR portal registration, data preparation, form filing, and submission for timely filing.
Tailored Support for Your Investment Structure: Every foreign investment is unique. We provide customised filing solutions based on the specific nature of your foreign assets or liabilities.
Post-Filing Compliance Assistance: Even after filing, we assist in handling RBI queries, rectifications, and maintaining records for audits and future reference.

Frequently Asked Questions

Who is required to submit the FLA Return? +

All Indian entities that have received Foreign Direct Investment (FDI) and/or made overseas investments in the previous year(s), including the current year, are required to submit the FLA Return. This includes companies, Limited Liability Partnerships (LLPs), SEBI-registered Alternative Investment Funds (AIFs), Partnership Firms, and Public Private Partnerships (PPPs).

What is the FLAIR portal? +

The Foreign Liabilities and Assets Information Reporting (FLAIR) system is an online portal introduced by the RBI for the electronic submission of the FLA Return.

What is the due date for submission of the FLA Return? +

The FLA Return must be submitted by July 15 every year, based on the entity's audited or unaudited accounts.

What happens if the FLA Return is not filed by July 15? +

Non-filing of the return on or before the due date is treated as a violation of FEMA, and penalty clauses may be invoked for such violations.

Can the FLA Return be filed with unaudited financials? +

Yes, if the entity's accounts are not audited before the due date, the FLA Return can be filed based on unaudited accounts. However, if there are significant changes upon finalization of audited accounts, a revised return should be filed by September 30.

How should the FLA Return be submitted? +

The FLA Return must be filed electronically through the RBI’s online web portal, FLAIR at https://flair.rbi.org.in.

Is there a confidentiality clause regarding the information submitted in the FLA Return? +

Yes, the entity-wise information collected under the FLA Return is kept confidential, and the Reserve Bank releases only consolidated aggregates.

What is the reference period for the FLA Return? +

The reference period for the FLA Return is the financial year (April-March) immediately preceding the due date of submission.