The Foreign Liabilities and Assets (FLA) Return is an essential compliance requirement under the Foreign Exchange Management Act (FEMA), 1999, for all entities in India that have received Foreign Direct Investment (FDI) or made Overseas Direct Investment (ODI).
It helps the Reserve Bank of India (RBI) maintain records of foreign investments and liabilities, ensuring that the country’s external financial position is accurately documented. Despite being an annual compliance requirement, many businesses either miss filing it or are unaware of the obligations associated with it.
In this article, we will cover everything you need to know about the FLA return, including who needs to file, who is exempt, the filing process, late filing implications, and whether it’s possible to file it for the past five years.
1. What is the FLA Return?
The Foreign Liabilities and Assets (FLA) Return is an annual reporting requirement mandated by the RBI for all Indian entities that have either:
✅ Received Foreign Direct Investment (FDI) or
✅ Made Overseas Direct Investment (ODI)
This return captures details about the following:
- Foreign investment received (equity, debt, etc.).
- Investment made outside India by Indian entities.
- Liabilities arising from foreign investments or borrowings.
- Assets held abroad, such as subsidiaries, joint ventures, or bank accounts.
Why is the FLA Return Important?
- Helps RBI maintain India’s foreign exchange and investment data.
- Ensures compliance with FEMA, 1999, to prevent unauthorized capital flows.
- Assists in economic planning and decision-making regarding foreign investments.
2. Who Needs to File the FLA Return?
The FLA Return is mandatory for the following entities:
1️⃣ Companies Incorporated in India
- If they have received FDI in any form (equity, convertible debt, etc.).
- If they have invested in foreign companies, subsidiaries, or joint ventures outside India (ODI).
2️⃣ Limited Liability Partnerships (LLPs)
- If they have received foreign direct investment (FDI) from a non-resident.
- If they have invested outside India (ODI) in a foreign company, LLP, or any entity.
3️⃣ Startups and Private Limited Companies
- Startups that received foreign investments in any form (SAFE Notes, Compulsorily Convertible Debentures, etc.).
4️⃣ Partnership Firms, Trusts, and Others
- If they hold foreign assets or liabilities under FEMA rules.
Example Scenarios:
✔ A Private Limited Company receiving equity investment from a U.S. investor must file the FLA Return.
✔ A manufacturing company that acquired shares in a U.K.-based company must file the FLA Return.
✔ An LLP that raised investment from a Singapore-based venture capital firm must file the FLA Return.
3. Who is NOT Required to File the FLA Return?
Entities that do NOT meet the following conditions are exempt from filing the return:
❌ Companies that have not received any FDI or made ODI in the previous financial year.
❌ Entities engaged only in trade transactions (import-export) with no foreign investment or borrowings.
❌ Companies that do not hold foreign assets or liabilities at the end of the financial year.
❌ Entities that have been dissolved or closed before the due date for filing the return.
Example Scenarios:
🚫 A company that only imports raw materials from China but has not received any foreign investment does not need to file.
🚫 A business that only provides services to foreign clients but has not received FDI or made ODI is exempt.
4. How to File the FLA Return?
The FLA Return is filed online via the FLAIR (Foreign Liabilities and Assets Information Reporting System) portal of RBI.
Step-by-Step Guide to Filing FLA Return:
Step 1: Registration on the FLAIR Portal
- Visit https://flair.rbi.org.in.
- Click on “New Entity Registration” and enter basic details.
- RBI sends login credentials to the registered email ID.
Step 2: Filling Out the Return
- Log in to the FLAIR portal using the received credentials.
- Enter financial details related to FDI received, ODI made, foreign liabilities, and assets.
- Verify that all amounts match with financial statements and FEMA records.
Step 3: Submitting the Return
- After reviewing, submit the return before the deadline.
- An acknowledgment email is generated upon successful submission.
5. What is NOT Filed in the FLA Return?
The FLA Return does NOT include: 🚫 Export-import transactions of goods/services.
🚫 Routine foreign remittances for business expenses.
🚫 Domestic assets and borrowings (only foreign-related transactions are reported).
6. Can We File the FLA Return Late?
✅ Yes, late filing is possible, but it is considered a FEMA non-compliance.
The FLA Return is due on July 15th of each financial year (based on foreign transactions of the previous fiscal year).
💡 Implications of Late Filing:
- Non-compliance may lead to FEMA penalties under Section 13 of FEMA, 1999.
- RBI may issue notices requiring justification for non-filing.
- Possible financial penalties under FEMA guidelines, though no fixed penalty is mentioned.
How to File FLA Late?
- Login to the FLAIR portal and submit the return.
- RBI does not automatically impose penalties but may seek explanations.
- If non-filing continues for multiple years, RBI may take stricter action.
7. Can We File the FLA Return for the Last 5 Years?
✅ Yes, it is possible to file FLA Returns for previous years.
If an entity has failed to file FLA Returns in past years, it can voluntarily file them now through the FLAIR portal.
Steps to File for Previous Years:
- Ensure accurate financial records for past years (foreign investments, liabilities, etc.).
- Contact RBI (if required) for permission to submit older FLA Returns.
- File each pending return separately on the FLAIR portal.
- Keep documentation ready to explain the delay if RBI asks.
Possible Challenges:
⚠ Data availability issues (if old financial records are incomplete).
⚠ Reconciliation with previous FEMA/RBI filings to ensure consistency.
⚠ Potential scrutiny from RBI for multiple years of non-filing.
It is advisable to consult a Chartered Accountant for assistance in filing old FLA Returns.
Conclusion
The FLA Return is an essential compliance requirement for Indian entities with foreign investments or liabilities. Filing it on time ensures regulatory compliance and prevents potential issues with FEMA and RBI.
Key Takeaways:
✔ Due Date: July 15th each year.
✔ Who Must File: Entities with FDI or ODI transactions.
✔ Late Filing: Possible but can attract FEMA scrutiny.
✔ Old Returns: Can be filed but require proper documentation.
If you need help with FLA Return filing, FEMA compliance, or RBI reporting, consult LBC to ensure smooth compliance and avoid any legal risks. 🚀