Monday, July 27, 2020

FLA Return (Foreign Liabilities & Assets)

What is an FLA Return and Who needs to file it?

An annual return on Foreign Liabilities & Assets more commonly called the FLA Return is a compliance under the FEMA laws, which is required to be submitted by companies/LLPs resident in India, which have received FDI and/or have made overseas investment in any of the previous years, including current year.

To summarize, it has to be filed by companies/LLPs in India that have foreign assets or liabilities in their balance sheet. This means that even when a company has not received any fresh FDI or ODI in the previous year, even then it is required to file the FLA Return.

It is also to be filed by entities holding foreign assets/liabilities such as by SEBI registered Alternative Investment Funds (AIFs), Partnership Firms, Public Private Partnerships (PPP), etc.

The FEMA regulations also require partnership firms to file FLA annual return if they have received FDI or made ODI. In the case of partnership firms, the RBI will issue a dummy CIN upon its request which will be used only for the filing of FLA annual return.

A company is not required to file the FLA Return if it has received only share application money and it does not have any FDI or ODI outstanding as on 31-March of the reporting year.

What is the Due Date for filing FLA Return?

The return is due to be filed by 15th July of each year. The company can file the FLA return after due date by taking approval from RBI.

A company can file the previous year FLA form (through online FLA portal only) by taking approval from RBI by sending a mail to

For FY 2019-20, the due date is extended to 31-Jul-2020. Further extended to 14-Aug-2020.

How is the FLA Return filed?

The return used to be in the Form of an Excel Utility which had to be emailed from the company's email ID of the Company Secretary, CFO or an authorized Director to the RBI at

The return form can be viewed in PDF here

However, since June 2019, the return is now filed on the RBI's FLAIR Portal at

How to Register on the FLAIR Portal?

A user guide for registering on the portal is available here

Formats required to be signed at the time of registering are also available on the home page of the portal, and should be kept ready for uploading at the time of registration.

Follow the steps below:
1. Go to the FLAIR portal
2. Download the forms given at the bottom for authorization and verification
3. Fill user registration form
4. Submit online user registration form by uploading the following documents
    - Authority Letter
    - Verification Letter
5. Receive email with User ID and Password, which has to be reset at the time of login
6. Login with OTP received on registered email ID
7. Start filling in the 'FLA Online Form' from the Menu

What if the Accounts are not audited till 15th July?

If the accounts are not audited before the due date, the return should be submitted based on unaudited provisional accounts. A revised FLA return will have to be filed when the accounts are audited i.e. by September end.

There is no need to attach any scanned balance sheet or profit & loss statement with the return.

What if the FLA Return is delayed or not filed?

The non filing company may be liable to pay a penalty of three times the sum involved in the contravention, which if cannot be calculated, then a penalty of Rs. 2 lakh may have to be paid. For continuing contraventions, a penalty of Rs 5,000 per day may have to be paid.

Notes to Refer while Filling up the Form

1. In Section 5. for Sales and Purchase (in Section II), you are required to provide the information relating to all purchases [including capital (from balance sheet) and revenue of goods and services] / sales made domestically as well as foreign during the reference period (April – March).

The detailed information to be furnished in 5. Sales and Purchase are as follows:
a. All expenses (excluding depreciation) /sales shown in profit and loss account to be taken as total purchases/total sale.
b. Both goods and services are to be included.
c. All foreign purchases/ sales i.e. imports and exports, should be captured fro P& L Account.

2. Premium on issue of Equity Share Capital is a part of Reserve, which should be reported under the item 4.1 of 1C- Reserves and Surplus, (in Section II).

3. In the Section II Block 2, take fully diluted preference share for convertible preference share.

4. In Section III Block 1, take settlement date/allotment date as the date of first receipt of FDI received.

5. Any disinvestments made by non-resident direct investor of the reporting Indian company during the year should be reported in section III item 3.0 (all blocks). Likewise, any disinvestment made by the reporting Indian company in its DIE abroad during the year should be reported in section IV item 3.0 (all blocks).

6. Participating preference shares are those shares which have one or more of the following rights:
(a) To receive dividend, out of surplus profit after paying the dividend to equity shareholders.
(b) To have share in surplus assets remaining after the entire capital is paid in case of winding up of the company.
On the other hand Non-participating Preference Shares are those shares which do not have one or more of the above said rights.

7. If the share application money is received from the existing non-resident shareholder, then the outstanding share application money should be reported at item 2.1 of 1.b FDI and 2.b DI in Section III, depending upon per cent of equity plus participating preference share holding by non-resident investor.

8. Compulsorily convertible debentures (CCD) issued by the company should not be included in the paid up capital while furnishing the information in Block 1A (in Section II) of the FLA Return. However, if the CCDs / Debentures are held by the non-resident direct investor who is holding the equity shares of Indian reporting company, then CCD / Debentures holding should be reported in ‘other capital’ component of either Block 2A or 2B (in Section III), depending upon the per cent equity held by the non-resident direct investor.

9. Since Non-Participating share capital is a type of debt investment and is part of Item 1.0, Non-Resident Equity and participating Preference Shares Capital holding (%) is calculated with respect to item 1.1 of Block 1A (in Scion II).

10. Premium on issue of Equity Share Capital is a part of Reserve, which should be reported under the item 4.1 of Block 1C- Reserves and Surplus, (in Section II).

11. To calculate the market value of equity capital for unlisted companies use the OFBV method as follows:

Market value of equity capital held by Non- resident at OFBV
= (Net worth of the company) * (% non-resident equity holding)

Where, Net worth of the company
= (Paid up Equity & Participating Preference share capital of company + Reserves & Surplus - Accumulated losses)

12. A related party is a person or entity that is related to the entity that is preparing its financial statements (referred to as the ‘reporting entity’).
A person or a close member of that person’s family is related to a reporting entity if that person:
(i) has control or joint control over the reporting entity;
(ii) has significant influence over the reporting entity; or
(iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.
In the definition of a related party, an associate includes subsidiaries of the associate and a joint venture includes subsidiaries of the joint venture. Therefore, for example, an associate’s subsidiary and the investor that has significant influence over the associate are related to each other.

13. Any domestic liabilities or assets (even if they are in foreign currency) should not be reported in the FLA return.