FLA Return under FEMA : four important points

3 July 2017 • Anupama

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FLA Return under FEMA : four important points

3 July 2017 • Anupama

FLA (Foreign Liabilities and Asset) Return under FEMA (Foreign Exchange and Management Act, 1999) is Annual Return required to be submitted by all the India resident companies, Partnership firms, SEBI registered Alternative Investment Funds (AIFs), Public Private Partnerships (PPP), Branches or Trustees which have received FDI and/ or made overseas investment in any of the previous year(s), including current year.

Four important points that one should  know about FLA Returns:

  1. Due Date:- FLA is required to be submitted by July 15 every year. In case FLA filed on the basis of provisional accounts. In case there is variation in provisional and audited financials, a revised FLA is to be filed based on audited accounts before September end.

  2. Non Compliance:- Non-filing of the return before due date will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA. The penalty as prescribed under the FEMA is “THRICE” the sum involved in contravention or Rs. 2 lakh if the offence is non-quantifiable and if the contravention is continuing every day, then Rs. Five Thousand for every day after the first day during which the contravention continues.

  3. Compounding for delay in filing:- The powers to compound the contraventions have been delegated to all Regional Offices of RBI (except Kochi and Panaji) without any limit on the amount of contravention.

  4. Exemptions:-
    1. Where Indian company does not have any outstanding investment in respect of inward and outward FDI as on end-March of reporting year

    2. If a company has received only share application money and does not have any foreign direct investment or overseas direct investment outstanding as on end-March of the reporting year

    3. Companies which have issued the shares to non-resident only on Non-repatriable basis are not required to submit the FLA Return.

Procedure of Filing(as amended by RBI from reporting year 2018-19):-

With the objective to enhance the security-level in data submission and further improve the data quality, the previous email-based reporting system for submission of the FLA return is replaced with the online reporting portal (web-based system). Foreign Liabilities and Assets Information Reporting (FLAIR)system has been introduced by RBI via recent notification dated June 28, 2019

Main features of the revised Foreign Liabilities and Assets Information Reporting (FLAIR) system:

  1. Such change in reporting system would be applicable from reporting of information for the year 2018-19. Entities can submit FLA information for earlier year/s after receiving RBI confirmation on their request via email.

  2. Reporting entities are required to register itself on web-portal and generate RBI-provided login credentials for filing FLA.

  3. The form will seek investor-wise direct investment and other financial details on fiscal year basis as hitherto, where all reporting entities are required to provide information on FATS related variables (foreign affiliate trade statistics, which was mandatory only for subsidiary companies earlier).

  4. In addition, the revised form seeks information on first year of receipt of FDI/ODI and disinvestment.

  5. The reporting company need to take approval from RBI in case of revision of submitted FLA form after set due date.

  6. Reporting entities can amend/alter data entered in FLAIR and view/download the information submitted.

59 comments

  1. As per the new faq available online the time limit of audited accounts by September end has been removed. So our AGM date is 31 December 2021. So can we revise the fla return by end of December?

    1. Dear Reader,

      As per the new FAQ released by the Reserve Bank of India (RBI), we understand that one would be required to take RBI’s approval for filing of FLA return or revised FLA return (based on the audited financial statements) after the due date i.e. 15th July.

      Thus, in your case, the Company shall be required to obtain prior approval of RBI through FLAIR portal for filing of revised FLA return.

  2. Hi,
    I have a query related to FLA i.e if the numbers of previous year has been changed due to Ind As implementation then we should change the comparative number as per updated financials or should keep the audited numbers only

    1. The FLA return is required to be filed on the basis of audited/ unaudited accounts.

      In your case, Ind AS is adopted this year and to provide a comparative number last year figure has been adjusted. Since nothing is specifically provided under the RBI guidelines, we understand that the previous year figures would be based on the last year audited financial statements only.

      Further, it is advisable to reach out to RBI at surveyfla@rbi.org.in for your query.

  3. Dear Sir,
    Our Company is WOS of incorporated in 2019. Now we want to file FLA for 2019 and 2020 . can we do it. what are penal provisons?

    1. Dear Sir,
      The annual return on Foreign Liabilities and Assets (FLA) is required to be submitted directly by all the Indian companies which have received FDI (foreign direct investment) and/or made FDI abroad (i.e. overseas investment) in the previous year(s) including the current year i.e. who holds foreign Assets or Liabilities in their Balance Sheets.

      The FLA is required to be filed by the Company on or before 15 July every year. Non filing of the return before due date will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA i.e. Rs. 10000/- per year, the total amount being subject to ceiling of 300% of the amount invested.

      For submission of FLA returns for previous years, the reporting entity is required to take approval from RBI via FLAIR portal. For more details visit https://flair.rbi.org.in/fla.

  4. Hi,
    Our Company is liable to file FLA Return reason being Indian Company has Remitted Outside India in the WOS in the form of Equity as well as Preference Shares.
    While filing FLA Return under Section IV we are facing some issue as there is no option to fill Preference Share Capital . But we have entered the cumulative amount in the Total Paid up Capital Column but while validating the Section it shows error. And due to this we are unable to file our Return for the Year 2020.
    Kindly suggest .

    1. As per the requirement of Section IV, the company is required to provide the details of percentage of Equity and Participating Preference Share Capital held in foreign Company.

      Further, in order to completely understand your query, we would request you to share with us the error remark.

  5. Hello Sir,
    Our Company has 4 subsidiaries abroad and one of its subsidiaries is closed in August, 2019. The subsidiary was following FY as 1 Jan to 31 Dec. Now, for end march 2020 how to report disinvestment (whether percentage or amount) as the company has not received no amount post closure. Also FLA form does not accept NIL percentage of Equity holding

    1. Any disinvestment made by the reporting Indian company in its Direct Investment Enterprises (in which reporting company owns 10 percent or more of the ordinary shares or voting power) abroad during the year should be reported in section IV item 3.0.

  6. Sir i wanted to ask to file FLA their needs to be FDI, So if shares are been hold by foreign investors we need to file FLA but is their any quantum to fall in the definition of FDI or even single shares hold by foreign investors we need to file FLA

    1. As per the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, “FDI” or “Foreign Direct Investment” means investment through equity instruments by a person resident outside India in an unlisted Indian company; or in ten percent or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company. Based on this definition, in case of an unlisted company, even if one equity share is held in the company, it will qualify for FDI and therefore, FLA shall be mandatorily filed in such case.

    1. In the web-based system online reporting of foreign assets and liabilities, every company is required to provide the number of the employees on the payroll of the Company as on the end of previous year and current year.

  7. In one LLP when the partner invested his capital he was a Resident Indian . The money also came thru his Indian bank account at that time. . Some 5 years back he has shifted to abroad. His residency has changed from Indian to US. In Form 11 of LLP Annual Return his residential status is now appearing as “NON Resident”.

    Should we have to file Form FLA ?. Actually there is no FDI received as such. Only change in residential status from Resident to Non Resident. Is there any other method of reporting this to RBI. .

    1. The FLA return is required to be filed by all the Indian companies, partnership firms and trusts which have received FDI and/or made overseas direct investment in the previous year(s) including the current year i.e. who holds foreign Assets or Liabilities in their Balance Sheets.

      As in your case, the initial investment was made by resident person but now his status is changed to a non-resident, therefore, as per our understanding, the reporting of such initial investment should be made in section IV of FLA form.

      However, you can contact your AD bank for this query.

  8. As per FAQ II Point no. 20 we need to take all expenses it means we need to take indirect expense also???
    and under the same point it mention include capital from balance sheet it means we take all addition of fixed asset which also include land & building.request you to please clarify on that matter.
    Thanks a lot

    1. Per the referred point, all expenses (excluding depreciation) are to be taken into consideration which implies even indirect expenses shall be included. Further, you rightly understood that all addition of fixed assets including land & building shall also form the part of reporting.

  9. Sir, I have received FDI towards Share application money when company was formed in FY 2018-19 thereby allowing 2 foreign nationals with a majority shareholding in the private ltd company. The shareholding has not changed, no other FDI has been received in the company thereafter. We have filed the FLA returns in FY 2019-20 for the above received FDI. Do I have to still file the returns this financial year for the above FDI?

    1. Per the FAQs of RBI, we understand that as long as there exists any foreign investment in the company (say, company incorporated as a subsidiary of foreign company or at the end of F.Y., there are non-resident shareholders) the Company is required to submit FLA Return. Thus, the Company has not ‘received any fresh FDI and/or ODI (overseas direct investment)’ in the current year but it has outstanding FDI and/or ODI, hence it is required to submit the FLA Return every year.

  10. Hello Sir, Our company made ODI in WOS in singapore in last year. As we are required to file FLA return for the first time. In case of new login for filling the form. In that case it required some letters (Verification letter and Authority Letter). So can you please share such documents with us.

    1. FLA Return is required to be filed by all the Indian companies which have received Foreign Direct Investment and/ or made the overseas investment. However, the requirement to file FLA return in case of Downstream investment is not prescribed anywhere under the law. As per our understanding, downstream investment is an investment that is made by one Indian company into another Indian company, and therefore, there is no direct foreign investment involved. Hence, there is no need to file the FLA Return.

  11. Hello sir,

    Our company have a wholly owned foreign subsidiary, but have not file fla return, if you could please suggest that if we file it now what consequences our company have to face for late filing

    1. Dear Sir,

      FLA return was required to be filed by all the Indian companies which have received FDI (foreign direct investment) and/or made FDI abroad (i.e. overseas investment) in the previous year(s) including the current year.

      If any Company fails to file the FLA return on or before 15 July every year then the penalty clause of FEMA may be invoked and penalty would be imposed on the Company which is as follows:

      If the offence is non-quantifiable: upto thrice the sum involved in such contravention or;
      If the offence is non-quantifiable: INR 2,00,000 (Rupees Two Lakh Only);

      and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues.

    1. For filing of revised FLA return,you would firstly be required to take RBI’s approval either by writing to RBI (surveyfla@rbi.org.in) or through portal itself. Kindly follow the below procedure for seeking approval from RBI through portal:

      1. Visit https://flair.rbi.org.in/fla
      2. Login to FLAIR → Click “Please click here to get the approval to fill FLA form for current year after due date (31/07/2019) / revision of FLA-2019” → select 2019
      3. Click “Request”.

      After sending request to RBI through FLA portal, you need to wait for at least one working day (generally RBI is approving the request within 5-10 minutes) for approval. You can also check the status of yout request in “Multiple Year Enable Screen” under menu on the left corner.

      Once approved by RBI, you can file revised FLA return.

  12. Sir, till last year we were submitting FLA Return in July with provisional data and by 30th September with Audited data.
    In this year also we have submitted the provisional figures in FLA filed in July, 2019.
    So in new system is there any due date to file FLA with Audited data???

    1. Dear Sir, please note that the RBI has only revamped the reporting system for submission of FLA return from offline to online mode. The due dates for filing of FLA return are still same i.e. 15th July and 30th September.

      If the Companies have filed FLA returns on the basis of provisional accounts then they are required to submit the revised FLA return based on audited accounts by the end of September if there is any variation in provisional and audited financials.

      Hence, in your case you would be required to file revised FLA return in case if there is any change in audited financials as compared to provisional financials.

  13. Whether the financial information to be reported in the FLA is to be based on Standalone Financials or Consolidated Financials ?

    1. Financial information to be reported in FLA Return is based on standalone financials of the reporting company, However, in case of Overseas Direct Investment (ODI) financial information of the overseas entity is also required to be reported separately.

          1. Sir, means whether we need to report Standalone financials of overseas subsidiary or consolidated financials of subsidiary (if overseas subsidiary has its subsidiaries)

          2. Financial information to be reported in FLA return is based on the standalone financials of the reporting company (i.e., Indian Company), However, in case if the company has received any Overseas Direct Investment (ODI) the same shall be reported separately under Section IV on foreign assets, which captures the information on the financial details of an overseas company in which the Indian Company is holding equity of 10 percent or more.

  14. In Section III & Section IV there is option for reporting of O/s Liabilities & Claims on Foreign Unrelated Parties. Do we also have to report Claims & Liabilities of related party transactions. Our company has FDI, and our related parties are not our direct investors

    1. In FLA Return, Section III provides a field with the head “Other Investment”, which is followed by a description that transactions with Foreign Unrelated Parties are to be reported thereunder. However, this field further clarifies that it is a residual category that includes all financial liabilities which are not considered as direct investment or portfolio investment.

      As per our understanding, further clarification makes its evident that even transactions with related party can be reported under this head provided they are not direct or portfolio investors.

  15. I work in a closely held public limited company. The company does not have any FDI. The company has not made any overseas investments. The company is exporting automobile components to various countries. If required at times the company imports components or parts. Some say that since we have exports and import oustandings we should file Form FLA. My view is since we do not have any FDI and since we do not have any overseas investments we are not required to file FLA return. Can you kindly clarify my query.

    1. Yes, your understanding is correct. As per FEMA, FLA Return is required to be filed by all Indian companies which have received Foreign Direct Investment (FDI) and/or made Overseas investment (ODI) in any of the previous/current year i.e. who holds foreign Assets or Liabilities in their Balance Sheets as on march end.

      Export-import of goods or services is not a FDI/ODI, therefore filing of FLA return is not required.

  16. Hi sir,
    If the company(Private Limited) has no inward and outward investment at the year end.
    Only payment against invoices has been received in foreign currency. Will there is still any requirement to file FLA.

    1. If the company has received entire amount against billing in foreign currency (received from outside India) and there is no receivables as on 31st March of relevant year then there is no requirement to file FLA return for that year.

      However, it is suggested to confirm that there is no other foreign assets and liabilities standing in financials of the company and also ensure that company (including private company) has not issued any shares to Non Resident on repatriation basis, to ensure the non-applicability of FLA.

  17. Hello Sir!
    How to apply for Dummy CIN for a LLP? Do we need to send an email from the authorised Signatory or anyone can do it? And LLPs capital doesnt constitute Shares rather it is shown as contribution. Is there any other Format for LLPs?How to fill the FLA Return for LLP?

    1. 1. The submission of FLA return is regulated pursuant to RBI Circular (https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10083&Mode=0) wherein all LLPs having FDI or ODI are to report their Assets and Liabilities by 15th July every year in Form FLA. The FLA Return is to be filed in an Excel utility format provided by RBI and for submission of said return, an LLP is required to have Dummy CIN allotted by RBI. (To obtain the dummy CIN mail to: surveyfla@rbi.org.in ). Kindly note that if the LLP does not have any outstanding investment in respect of inward and outward FDI as on end-March of reporting year, it need not submit the FLA Return. For further information kindly follow the link (https://m.rbi.org.in/Scripts/FAQView.aspx?Id=95).

  18. An IP has ODI JV and files APR and FLA every year. Is application for compounding for late filing of FLA (ODI) applicable? if yes, what are the supporting documents are to submitted along with compounding appln. In the exemptions “Where Indian company does not have any outstanding investment in respect of inward and outward FDI as on end-March of reporting year” is mentioned. Since this company has only ODI (and not FDI), is the exeption applicable? Pl clarify.

    1. We could not understand why you intend to go for compounding? Has it been directed by the Regulator? We wouldn’t advise to go for compounding suo moto just for late filing of APR.
      The exemption quoted in your query is applicable on such companies which do not have any current as well as previous inward or outward FDI. Outward FDI corresponds to ODI. So the exemption is not applicable in the given case.

  19. Thanks for this informative article. The amount of penalty is not clearly mentioned. you say if it s quantifiable then ___ is the amount and if not then ____. How do we know if this is quantifiable or not?

    1. Quantifiable and non- quantifiable can be interpreted as in case of simple English. Imposing a penalty and a way to impose it, is all at the discretionary power of the appropriate authority .

    1. FLA return is required to be submitted by all the India resident companies which have received FDI and/ or made overseas investment in any of the previous year(s).
      Individual investing outside India are not require to file FLA returns.

    1. In accordance to Regulation 238 of Insolvency and Bankruptcy code 2016, any Company under the procedure of winding up has to comply with IBC.
      Though nothing has been mentioned in the FEMA guidelines and regulations, taking a conservative view you can file the FLA return.

  20. One of our client has not filed the FLA, we are ready to file the FLA. Our only concern as we are filing now, will they raise any demand for the late filing of FLA. If yes, is there any case law which is of same nature of our company and waived penalty.

    Thanking you in advance

    1. As per the FAQS issued by the RBI on Annual Return on Foreign Liabilities and Assets (FLA return) under FEMA 1999 “Non-filing of the return before due date will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA”. Nonetheless, we advise you to file it, better to put a stop to continuity of offence.

    1. An Indian Party (IP) / Resident Individual (RI) which has made an Overseas Direct Investment (ODI) has to submit an Annual Performance Report (APR) in Form ODI Part III to the Reserve Bank by 30th of June every year in respect of each Joint Venture (JV) / Wholly Owned Subsidiary (WOS) outside India set up or acquired by the IP / RI

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