Overview of Foreign Liabilities and Assets Annual Return (FLA Return)

Basics of FLA Returns

The FLA Return (Annual Return on Foreign Liabilities and Assets) is a mandatory annual filing required by Indian entities that have received Foreign Direct Investment (FDI) or have made overseas investments (Overseas Direct Investment – ODI). This return reports the foreign assets and liabilities reflected in the entity’s balance sheet to the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA), 1999.

Applicability

• Companies registered under the Companies Act, 2013.
• Limited Liability Partnerships (LLPs) registered under the LLP Act, 2008.
• Other entities including SEBI-registered Alternative Investment Funds (AIFs), Partnership Firms, Public-Private Partnerships (PPPs), etc., involved in FDI or ODI.

Due Date and Filing

• The FLA Return must be submitted annually by July 15 based on audited or unaudited accounts of the previous financial year.
• If audited accounts are not available by July 15, a provisional return can be filed, followed by a revised return by September 30.
• Filing is done online through the RBI’s FLA portal after registration.

Penalties

• Non-filing or false filing can attract penalties up to 300% of the amount involved or Rs. 2 lakh, with daily penalties for continued violations.

In summary, any Indian company or LLP that has foreign investments or liabilities must file the FLA Return annually by July 15 with the RBI, reporting all foreign assets and liabilities on their balance sheets

FLA Non-Compliance consequences

Non-compliance with FLA Return filing obligations can lead to significant penalties under the Foreign Exchange Management Act (FEMA), 1999. Here are the key consequences:

Monetary Penalties

1. Up to 300% of the Contravention Amount
   The maximum penalty is three times the sum involved in the foreign investment violation46. For example, if non-compliance involves ₹1 crore in unreported FDI, penalties could theoretically reach ₹3 crore. However, the Reserve Bank of India (RBI) typically imposes lower amounts through its compounding mechanism.
2. Fixed Penalty of ₹2 Lakh
   If the contravention amount cannot be quantified, a flat penalty of ₹2,00,000 is levied.
3. Daily Penalties for Ongoing Violations
   If non-compliance persists, an additional ₹5,000 per day is charged after the initial violation period.

Late Submission Fee (LSF)

• A flat fee of ₹7,500 is imposed for delayed filing beyond July 15, as per RBI’s September 2022 circular. This is separate from compounding penalties.

Key deadlines for submitting the FLA return

The key deadlines for submitting the FLA Return each year are:

• July 15: The primary due date for filing the FLA Return based on audited accounts. If the accounts are not audited by this date, the return should be filed using unaudited or provisional figures.
• September 30: The deadline to submit a revised FLA Return based on audited accounts if the initial filing was done with unaudited/provisional data.

These deadlines apply to Indian companies, LLPs, and other entities that have received FDI or made overseas investments and must report their foreign liabilities and assets to the RBI annually.

Specific foreign assets and liabilities included in FLA return

In your FLA Return, you must include the following specific foreign assets and liabilities:

Foreign Liabilities (Inward Investments/Obligations):

• Equity capital held by non-resident investors in your company.
• Other capital instruments held by non-residents.
• Reinvested earnings attributable to foreign investors.
• Loans and trade credits received from foreign entities.
• Other accounts payable to foreign unrelated parties.

Foreign Assets (Outbound Investments/Claims):

• Equity capital invested by your company in foreign entities (subsidiaries, joint ventures) where your equity holding is 10% or more.
• Other capital instruments held by your company in foreign entities.
• Trade credits extended to foreign parties.
• Loans given to foreign entities.
• Currency, deposits, and other accounts receivable from foreign unrelated parties.

Important Notes:

• Only foreign assets and liabilities reflected in your company’s balance sheet as on March 31 must be reported.
• Domestic assets or liabilities, even if denominated in foreign currency, should NOT be included.
• If your overseas subsidiary’s accounting period differs, report the latest available financial information.
• You must report both current year and outstanding foreign assets/liabilities from previous years.

This comprehensive disclosure helps RBI monitor foreign investment inflows and outflows accurately.

Types of foreign assets exempt from reporting in the FLA

Certain foreign assets are exempt from reporting in the FLA Return

• Share Application Money: If the company has only received share application money from non-residents and no actual shares have been issued by the end of March, this amount is not considered foreign investment and need not be reported.
• Shares issued on a Non-Repatriable Basis: Shares issued to non-residents on a non-repatriable basis are not treated as foreign investment; hence, entities with only such shares are exempt from filing the FLA Return.
• No Outstanding FDI or ODI: If an entity has no outstanding foreign direct investment or overseas direct investment as on March 31, it is not required to file the FLA Return even if it had foreign transactions during the year.
• Export-Import Transactions: Export or import of goods and services, even if involving foreign currency payments or receivables, are not considered foreign assets or liabilities for FLA reporting.

In summary, only actual foreign investments reflected as liabilities or assets in the balance sheet as of March 31 must be reported. Provisional amounts like share application money or non-repatriable share issues are exempt from FLA reporting.

Register for our Webinar on “FLA (Annual Return on Foreign Liabilities and Assets) – Grey Areas and Practical Issues” on 19th June 2025, 12 pm – 1:30 pm

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