The Foreign Liabilities and Assets (FLA) Return is a crucial annual filing required by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA), 1999. It applies to all Indian companies, LLPs, and other entities that have received Foreign Direct Investment (FDI) or made Overseas Direct Investments (ODI) in the previous financial year.
Despite involving no filing fee, the FLA Return is far from a mere formality. It plays a vital role in India’s macroeconomic planning, contributing directly to the compilation of the country’s Balance of Payments (BoP) and shaping foreign investment policy decisions.
This comprehensive guide by CertificationsBay will help you understand:
- The legal and compliance framework of FLA Return
- Who must file and what disclosures are needed
- The filing process on RBI’s portal
- Key challenges and penalties for non-compliance
Whether you’re a startup with foreign investors or a growing business with overseas assets, understanding your FLA Return obligation is essential for regulatory compliance.
Penalties and Late Submission Fees for Delayed FLA Return
Delaying your FLA Return filing without formalizing a Late Submission Fee exposes your entity to more serious enforcement mechanisms under FEMA. Below is how RBI addresses a late FLA Return:
1. Late Submission Fee (LSF)
- Under A.P. (DIR Series) Circular No. 16 dated September 30, 2022 (RBI), all late filings for non-flow reporting—including the FLA Return—incur a fixed fee of ₹7,500 per outstanding return.
- Opting to pay the LSF regularizes the delay up to three years from the original due date.
2. Compounding Proceedings under Section 13 of FEMA
- If an entity neither files on time nor pays the LSF, the RBI may initiate compounding of the contravention under Section 13 of FEMA, 1999.
- Compounding allows the RBI to impose a case-specific penalty, taking into account factors such as the amount involved, the nature of the default, and any prior compliance history.
- Once compounded, no further proceedings are initiated for that particular contravention.
Key Takeaway: To avoid the uncertainty and potential costs of compounding, it is highly advisable to either file your FLA Return by July 15 or, if delayed, promptly pay the ₹7,500 LSF through the FLAIR portal.
Common Challenges in Filing FLA Return
Despite being an annual compliance requirement, filing the FLA Return correctly can be a complex task for businesses. Below are some common pitfalls faced by entities during the process:
1. Misclassification of Instruments
Incorrect classification between equity, debt, preference shares, or reinvested earnings can lead to erroneous filings, non-compliance, or future scrutiny during RBI assessments.
2. Currency Conversion Errors
All foreign investments and liabilities must be converted into INR using the RBI reference rate as on March 31 of the reporting year. Using average rates, spot rates, or year-end market rates may cause inconsistencies in reporting.
3. Coordination with Auditors
When filing with unaudited or provisional data, entities must ensure coordination with their audit teams to timely revise and update the FLA Return using final audited figures. Delays in this handoff can trigger compliance risks.
4. Group Company Confusion
Each eligible entity within a corporate group—whether a subsidiary, joint venture, or associate—must file its own FLA Return separately. Consolidated filings are not permitted, even if financials are reported on a group basis.
No Filing Fee, But High Regulatory Impact
There is no government fee for filing the FLA Return. However, its regulatory weight is substantial. The data submitted is used by the Reserve Bank of India to:
- Frame investment and external sector policy
- Track foreign participation trends in the economy
- Evaluate India’s international investment position (IIP)
Inaccuracies or omissions may not only attract late submission fees, but also lead to regulatory scrutiny, follow-up queries, or audits by RBI or Authorized Dealers.
Conclusion: Ensure Timely, Accurate, and Compliant FLA Reporting
The FLA Return is more than a compliance checkbox—it reflects your organization’s cross-border financial standing and participation in India’s international economic landscape. Given its technical nature, detailed disclosures, and regulatory importance, entities are strongly advised to:
- Implement a proactive internal compliance process
- Engage qualified professionals who understand FEMA, FDI/ODI regulations, and RBI reporting nuances
- Review all foreign investment transactions periodically for accurate and up-to-date reporting
At CertificationsBay, our FEMA and RBI compliance experts help ensure your FLA Return is submitted accurately, on time, and without penalty.
✅ Need help filing your FLA Return or regularizing a delay? Get Expert Assistance from CertificationsBay
FLA Return FAQs
1. Which entities must submit the FLA Return?
The FLA Return is mandatory for Indian companies (private limited companies/public limited companies) (as defined under Section 1(4) of the Companies Act, 2013), LLPs registered under the Limited Liability Partnership Act, 2008, and other entities such as SEBI-registered Alternative Investment Funds (AIFs), partnership firms, and public-private partnerships (PPPs) that have received FDI or made overseas investments in the current or previous financial years.
2. What is the deadline for submitting the FLA Return?
Entities falling under the above criteria must file the FLA Return annually by July 15, based on either audited or unaudited financial data for the reporting year ending March 31.
3. What if the entity’s accounts are unaudited by the due date? What information should be reported?
If audited financial statements are not ready by the deadline, entities must submit the FLA Return using provisional or unaudited figures. Once audited accounts are finalized, the entity must request RBI approval to revise and resubmit the return with the audited data.
4. Can entities report data based on their own accounting year-end if it differs from March 31?
No. Entities are required to report FLA data strictly as of March 31 for the relevant years, irrespective of their own financial year-end.
5. Can the FLA Return be submitted after the due date if missed?
Yes, entities can file the FLA Return post-deadline but must obtain RBI’s approval beforehand. Late filing may attract penalties.
6. Is it possible to file the FLA Return for previous years after the deadline?
Yes, filing of returns for prior years is allowed with RBI’s prior approval; however, penalties for late submission may apply.
7. Can previously submitted FLA Returns be amended?
Entities may revise already submitted FLA Returns after securing RBI’s permission to do so.
8. Is submission of the FLA Return necessary if no FDI or ODI has occurred in the previous or current years?
If there are no outstanding foreign investments or liabilities as of March 31 of the reporting year, the entity is not required to file the FLA Return.
9. Is the FLA Return required if the entity has only share application money and no actual foreign investment?
No, if only share application money has been received and there are no outstanding foreign investments, filing is not mandatory.
10. Must entities file the FLA Return if no fresh inward FDI or outward ODI occurred during the year but outstanding investments exist?
Yes, entities must report any existing outstanding foreign investments as of March 31, even if no new FDI or ODI was made in the latest financial year.
11. Are registered partnership firms, branches, or trustees required to submit the FLA Return if they have overseas investments?
Yes, such entities with outstanding overseas investments as of March 31 must file the FLA Return.
12. If the Annual Performance Report (APR) for ODI is submitted, is the FLA Return still required?
Yes, the APR and FLA Return are separate filings monitored by different RBI departments; both need to be filed if applicable.
13. If non-resident shareholders transfer their shares to residents during the reporting period, is the FLA Return still needed?
If all foreign shareholders transfer their shares to residents and there are no outstanding foreign investments as of March 31, the FLA Return is not required.
14. Are shares issued on a non-repatriable basis to non-residents considered foreign investment for FLA purposes?
No. Shares issued on a non-repatriable basis do not qualify as foreign investment and therefore do not require FLA Return submission.
15. Are audited or unaudited financial statements required to be submitted along with the FLA Return?
No, submitting balance sheets or profit & loss accounts is not mandatory with the FLA Return.
