Guide to Foreign Liabilities and Asset Return Filing

Nikhil Mogha

12 Jul, 2023

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 15^th of July of the respective filing year. The present article will state the important conjunctures of return filing and aim to simplify the procedure.

Who is required to file Foreign Liabilities and Asset Return?

The entities who are required to file for Foreign Liabilities and Asset returns are:

1. Company: A company that is engaged in making Overseas Direct Investment and receiving Foreign Direct Investment is required to file an FLA return. Moreover, the company shall also report its outstanding ODI or FDI of the previous year.
2. Limited Liability Partnership Firm: The Limited Partnership Firm that deals in ODI and FDI shall file an FLA return.
3. Others (including registered Alternative Investment Funds (AIFs), Partnership Firms, and Public-Private Partnership Firms): Apart from the company and LLP, the registered AIFs, partnership firm and PPP are required to submit FLA returns if they are dealing in ODI and FDI. Further, they are entitled to receive a dummy CIN numbed f there is an outstanding outward FDI as of the end of March.

Who is not entitled to file Foreign Liabilities and Asset Return?

The company that are not required to file Foreign Liabilities and Asset Return are:

1. The company that does not possess any outstanding FDI or ODI by the end of the financial year are exempted from filing an FLA return.
2. The company has received share application money but does not possess any outstanding ODI or FDI at the end of the financial year.
3. The company has issued their shares to the non-residents of India on a non-repatriable basis.

What is the Due Date for filing Foreign Liabilities and Asset Return?

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 30^th of September of the reporting year.

How to file Foreign Liabilities and Asset Return online?

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:

1. The company shall visit the RBI website and take a printout of the Authority letter and Verification letter. While registering as a new user, the company must upload the letters signed by the authorised person, namely, CS, CFO, and Directors.
2. After uploading the documents and registering on the portal, the user shall log in by submitting the user id and password.
3. Once login, the company shall click on “FLA Online Form.” After clicking, the company can initiate filing by clicking on “Start Filing FLA Form.”
4. The FLA return is divided into 5 categories, namely:
5. Identification Particulars: This section shall include all the details pertaining to the company, including the company’s name, PAN, CIN, E-mail, Contact Person etc.
6. Financial Details: This section shall include all the details pertaining to the financial details of the company calculated at the end of the financial year, including, Total paid-up capital, P&L, Reserve & Surplus, Sales and Purchase made during the year
7. Foreign Liabilities: This section shall include all the details regarding foreign investments made in India, including FDI, portfolio Investments etc.
8. Foreign Assets: This section shall include all the details of overseas direct investments, overseas portfolio investments, etc.
9. Variation Report: This Section shall include reconciling all the details filled in the above four sections. It does not require any submission of details.
10. After filling in all the details, the user shall click on “Submit Return” to submit the final return. After clicking on submit option, an acknowledgment slip will be sent to the registered E-Mail.

Penalty for Non-Filing and late filing of FLA Return

The company shall mandatorily file an FLA return by the 15^th 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:

1. If the amount is quantifiable, then the penalty shall be thrice the amount involved in the infringement.
2. If the amount is not quantifiable, then the penalty shall be RS 2 lakhs.
3. If the infringement continues, the penalty shall be Rs 5000 every day until the contravention continues.

However, the contravention can be compounded by the Regional office of the RBI.

Conclusion

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

1. https://incometaxindia.gov.in/pages/acts/foreign-exchange-management-act.aspx