FEMA

Annual Return on Foreign Liabilities and Assets

FLA stands for Foreign Liabilities and Assets. Annual Return on FLA has been notified under FEMA 1999 and it is required to be submitted by all the India resident Companies which have received Foreign Direct Investment (FDI) or made any overseas investment (ODI) in any of the previous years, including current year to the RBI.

It may be noted that 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.

Who should file Annual Return on FLA?

• Annual Return on FLA is required to be submitted by all the India resident companies which have received Foreign Direct Investment (FDI) and/ or made overseas investment in any of the previous years, including current year by July 15 every year and if the Company’s accounts are not audited before the due date of submission, then the FLA Return should be submitted based on unaudited (provisional) account.
• Post-filing of FLA returns, if there is any variance in provisional financial statement vs. Audited financials, the companies are required to file the revised return by the end of September as per the audited financials.
• If the Company has outstanding FDI or Overseas Direct Investment (ODI), then the Company is required to submit the FLA Return every year by July 15, even if the Company has not received any new FDI or ODI in the latest year.

When is Annual Return on FLA not required?

FLA Return filling is not required in the Following case –

• The Company need not submit the Annual Return on FLA if the Company does not have any outstanding investment in respect of inward and outward FDI as on end-March of the reporting year.
• If all non-resident shareholders of a company have transferred their shares to the residents during the reporting period and the company does not have any outstanding investment in respect of inward and outward FDI as on end-March of the reporting year, then the company need not submit the FLA Return.
• If a resident company has received share application money and does not have FDI by 31/03 of the financial year, in such circumstances Company is not required to fill up FLA Return.
• Shares issued a resident company to non-resident on Non-Repatriable basis shall not be considered as FDI; therefore, companies which have issued the shares to non-resident only on Non-Repatriable basis is not required to submit the FLA Return.

What is the Due Date for Filing the FLA Return?

•  FLA is required to be submitted by July 15 every year.
• In case FLA is filed on the basis of provisional accounts, revised FLA is to be filed based on audited accounts before September end.

What is the Procedure for Filing of FLA Return?

• The Annual Return on FLA has to be submitted to the Reserve Bank of India (RBI)using excel based format, which has inbuilt checks and validations, any other attachment should not be forwarded along with the FLA Return.
• Company’s financial details along with other relevant details need to be filled in the return based on the audited financial accounts.
• After filling in the required details, the Company can file the FLA Return by emailing the same to the RBI at fla@rbi.org.in by July 15 every year from an official E-mail address of any authorized person like CFO, Director, Company Secretary etc.
• On submission of the FLA Return, an Acknowledgement will be forwarded to the E-mail address of the authorized person
• The latest format of FLA Return is available on RBI’s website at the following link: https://www.rbi.org.in/Scripts/BS_ViewFemaForms.aspx
• Any query regarding filling of FLA return should be mailed at fla@rbi.org.in

What is the Penalty for Non-Compliance of the provision?

• Filing of the return after the due date will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA.
• The penalty under FEMA Act for contravention of law or submission of misleading fact, the amount of penalty may be 300% of the sum involved in contravention or Rs. 2 lakh if the offense is non-quantifiable and if the contravention is continuing every day, then Rs. 5,000 for every day after the first day during which the contravention continues and the powers to compound the contraventions have been delegated to all Regional Offices of RBI without any limit on the amount of contravention.

Annual Return on FLA: Points to be noted

Be mindful of the following points:

• When filing basic credentials, give e-mail id and the mobile number of the accountant rather than of the director or partner so that at the time of receiving OTP, there is no issue.
• Ensure strong connection of the internet while filing FLA as even a little disturbance can lead to issues.
• Keep financial and other data available in excel format.
• Submitted form may be saved in PDF.

Conclusion

Annual return on FLA is one of the compliances that should be met by companies that have received FDI or made ODI. If you are a foreigner who wish to start business in India, contact Enterslice.

Read our article: Reporting of Foreign Liabilities and Assets to Reserve Bank of India