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The Foreign Liabilities and Asset Return filing is mandatory to be made with the RBI and is mandated under the Foreign Exchange and Management Act, 19991. The FEMA governed the provisions for managing foreign remittances and provided for handling funds received in the form of FDI. The act was framed so that illegal activities of money laundering could be avoided and robust scrutiny be imposed on those remitting the funds outside the prescribed limit. Henceforth, the present act is enacted to avoid any illegal distribution of funds.
To achieve the objective of maintaining transparency at all levels, the Indian companies who deal in FDI, whether by inward or outward remittances, shall have to furnish a Foreign Liabilities and Asset Return for the previous year, including the year in which the company holds foreign assets or liabilities to RBI before the 15th of July of the respective filing year. The present article will state the important conjunctures of return filing and aim to simplify the procedure.
The entities who are required to file for Foreign Liabilities and Asset returns are:
The company that are not required to file Foreign Liabilities and Asset Return are:
The filing of a return is mandatory under Foreign Exchange and Management Act 1999. The companies who are engaged in making Overseas Direct Investment and receiving Foreign Direct investment shall file Foreign Liabilities and Asset returns based on audited returns by the 15th of July every year. Moreover, the company is also required to file FLA return if the company has not received any fresh FDI or ODI in the latest year but possesses outstanding FDI or ODI.
Further, if the accounts of the company engaged in ODI or FDI are not audited before the due date of filing the return, then the FLA return shall be filed based on the unaudited accounts. Once the accounts are audited, the company shall file a revised FLA return based on the updated audited accounts by the 30th of September of the reporting year.
The RBI has introduced an online filing process for FLA returns. The web-based platform enables the RBI to maintain records of all the companies and transparency in all processes. The current system replaces the traditional based method of filing returns through E-mail. The procedure for filing of return is as follows:
The company shall mandatorily file an FLA return by the 15th of July every year, failing which the company shall be held liable for violating the provisions of the FEMA Act. The company that has not filed or fled the return lately shall be liable for a penalty:
However, the contravention can be compounded by the Regional office of the RBI.
The Foreign Liabilities and Asset Return shall be filed with the RBI to avoid any penalty. The company shall disclose all the outward and inward remittances while filing an FLA return. Moreover, the company shall ensure that all its accounts remain updated and audited to file FLA returns without any hindrances. To avoid any penalty for late filing, the company shall ensure that the FLA return shall be filed by the 15th of July every year. Further, the filing of returns is a mandatory provision, and compliance with it will ensure transparency in the remittance of funds by the company.
Read our Article:Annual Return on Foreign Liabilities and Assets
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