Are only Companies obliged to file Foreign Liabilities and Assets (FLA) returns?

Foreign Liabilities and Assets (FLA) returns

With the ongoing involvement of companies with foreign investments, the FEMA regulations have become significant for the operation of the companies. FLA becomes important for companies that engage themselves in wholly owned subsidiaries or ventures or businesses committed to Foreign Direct Investments or FDIs.

Requirement for the filing of FLA returns

The Companies that have received Foreign Direct Investments or made overseas FDIs in any financial year should file the Foreign Liabilities and Assets returns with the Reserve Bank of India. The financial statement of the companies for the same fiscal year can clearly show the status of inward or outward FDI.

Do companies need to file FLA, or do other entities need to file it too?

Are companies the sole entities who are required to file the FLA, or can other entities file it, too? No, there are other entities too who are obligated to file FLA as mentioned below-

  1. Companies– All the companies which are registered under the Companies Act are mandated with the filing of FLA returns. It also includes the corporate entities which operate with a limited liability status.
  2. LLPs or Limited Liability Partnerships- The LLPs registered under the LLP Act are also required to file FLA returns.
  3. Others- The entities that fall under this category are AIFs or the Alternative Investment Funds registered with the SEBI. It also involves investment funds which operate far from the traditional investment vehicles. Partnership Firms (PF) that have partnerships with foreign entities, also fall in this category. Public Private Partnerships (PPP): The collaborations between private and public entities involving foreign investments are also covered under Foreign Liabilities and Assets returns filing.
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Exceptions to FLA filing

The exception to the rule is that the shares which are issued by the reporting entity on a non-repatriable basis to the NRs will not be covered under foreign investments. So, the entities issuing such shares are exempted from filing FLA returns.

Difference between Companies, Partnership firms and LLPs

BasisCompaniesPartnership firmsLLPs
CreationIt is created by law.Contract creates it.It is created by law.
GovernanceCompanies Act of 2013Partnership firm of 1932Limited Liability Partnership Act of 2008
RegistrationRegistration with ROCRegistration is optional for these firmsThey need to be registered with the Registrar of LLP
Time of the RegistrationGenerally, a week to ten daysFive to seven daysA week to ten days
Common SealEvery company shall have their own signatureNot required for themThey may or may not have a common seal or signature
Distinct entityA separate entity under the Companies Act of 2013These are not separate entitiesUnder the LLP Act of 2008, these are also separate entities
Legal proceedingsCompanies can be sued or sue in their own nameA partnership firm can sue only if it is registeredIt can sue and be sued
No. of MembersIf the company is Pvt. Ltd., it shall have 2-200 members2-502- No limit
TransferabilityBy transferring the shares, ownership can be transferredNon- transferableIt can also be transferred
Foreign ownershipThe foreigners can also be members of the CompanyForeigners are not allowedForeigners are allowed to be partners
Assets ownershipThe company has ownership of the assetsPartners have joint ownershipThey have independent ownership
Perpetual SuccessionMembers can come and go, but it has a perpetual successionIt is dependent on partners, so no perpetual succession is thereIt has independent ownership
Liability of MembersIt is limited to the extent of the amount which is to be paid upon each share.Their liability is not limitedLimited liability
Relationship of the Principal or AgentDirectors act as the agent of the CompanyPartners are the firm’s agentsPartners act as Agents
Annual FilingThe returns are to be filed every yearNo need for return filingAnnual returns to be filed
DissolutionBy the order of the NCLT or voluntaryThrough insolvency, mutual consent or insolvencyBy NCLT order or voluntary

Filing procedure of FLAs

The previous system for FLA returns was email-based. So, to enhance the security in data submission and improve the data quality, the web-based reporting portal replaced the email system. The Reserve Bank of India, by the notification dated 28 June 2019, introduced the FLAIR system, which is the Foreign Liabilities and Assets Information Reporting.

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Features of the FLAIR

The change was applicable from the year 2018-19. The Reporting entities must register through the web portal and provide the login credentials generated by the RBI to file FLA returns. The form seeks direct investment and financial details on the basis of the fiscal year, where the reporting entities have to provide information on variables relating to the foreign affiliate trade statistics, also known as FATS, which was earlier mandatory for subsidiary companies only. The new form also seeks information about the first-year ODI FDI or disinvestment receipt. The reporting entities can also amend the data they have entered in the FLAIR and view or download the information they have submitted. 

Audited or Unaudited financials

If the company’s financials are not finalized or audited until the deadline arrives, the return must be filed using the unaudited financials. After the financials have been audited, the company must file the revised FLA returns on the Reserve Bank of India portal. It will be considered a violation of the FEMA regulations if the returns are not filed before maturity; hence, a penalty clause can also be invoked.

Securities transfer by a non-resident investor to a resident- -investor

If the non-resident shareholders have transferred the shares to the resident members during the reporting period and hence the company doesn’t have an outstanding investment with respect to the outward or inward FDI as of March end, in that case, the corporation need not file the FLA return. The details should contain the financials. If the corporation did not audit their accounts before 15 July, they have to file the FLA returns, which are consistent with the unaudited accounts, and they can audit their accounts later.

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If there is no filing of the FLA returns, it shall be considered a breach of the FEMA provisions, and so the penalty clause shall be enforced. If the false information is filed under the FEMA Act, it will be 300% of the amount which is involved in the violation, and if the offence is non-quantifiable, then a rupees 2 lacs fine will be imposed. If the offence is continuing, then rupees 5000 shall be fined for every day after the first day of that violation. The compounding power for these violations is delegated to all the regional offices of the Reserve Bank of India.

For the filing of FLA returns, the maturity is on 15 July of that year. If, on the unaudited accounts, the filed return is predicated, then a revised form needs to be filed before the month of September. The regional offices of the Reserve Bank of India have the facility for compounding contraventions with no limit.


As we have seen above, the FLA filing obligations are extremely important for entities which are engaged in financial transactions (overseas) or foreign investments within the country. The FLA obligations are in line for tracking the financial transactions of the companies, and it also helps in building the nation’s economy. However, the exceptions to the same also clarify whether the FLA filing is important for certain sectors.


  1. Which companies are required to file an FLA return?

    The Companies that receive FDI or Foreign Direct Investments or made FDI in any financial year must file returns with the RBI.

  2. Which company needs to file FLA?

    All the companies that have either made ODI or received FDI.

  3. Which companies are exempt from filing FLA returns?

    All the corporates are not left with any outstanding balance, FDI, or ODI by the end of the year.

  4. Who is eligible for FLA return?

    Entities who have received FDI or ODI in the previous year, including the current year.

  5. What is the FLA annual return?

    It should cover the foreign investments that are made by the company or to the company, and it should be submitted directly to the RBI.

  6. Is Fla's return applicable to individuals?

    The applicability of FLA returns extends to the following-
    1.       Companies
    2.      Limited Liability Partnerships (LLPs)
    3.      Any other body like partnerships

  7. What is the penalty for non-filing of FLA returns?

    A penalty of rupees 2,00,000 will be applicable if the sum is non-quantifiable. And if the contravention is of a continuing nature, then a fine of rupees 5000 shall be imposed.

  8. What is the fee for filing an FLA return?

    Usually, it starts from rupees 9999.

  9. Who is required to file FLA?

    The below-mentioned entities are required to file FLA-
    1.       Companies
    2.      Limited Liability Partnerships (LLPs)
    3.      Any other body like partnerships

  10. Do individuals need to file FLA?

    The applicability of FLA returns extends to the following-
    1.       Companies
    2.      Limited Liability Partnerships (LLPs)
    3.      Any other body like partnerships

  11. What are the consequences for non-filing of FLA returns?

    The consequences are the imposition of a penalty which is rupees 2,00,000, if the sum is non-quantifiable. And if the contravention is of a continuing nature, then a fine of rupees 5000 shall be imposed.

  12. What happens if the Fla return is not filed?

    The company will be required to pay a penalty of thrice the amount involved.

  13. What is the penalty for late filing an FLA return?

    The penalty for late filing of the FLA return is thrice the amount which is involved.

  14. Is FLA mandatory?

    It is mandatory for the categories who are required to file the FLA returns.

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