FLA Return: Reporting Foreign Liabilities and Assets to RBI by 15 July

The FLA return is mandatory for all Indian companies (and LLPs) that have received FDI or made overseas direct investment (ODI) and have outstanding balances of either on March 31 of the filing year. 'Outstanding' means any amount that is still equity, not yet repatriated as dividend or reduced through buyback.

If a company received FDI in 2023 and has since bought back all shares from the foreign investor (zero outstanding FDI), it does not need to file the FLA for years after the buyback is complete. But in practice, most GCCs maintain their FDI structure indefinitely, so FLA is a permanent annual obligation from the year of first FDI.

Branch Offices and Project Offices separately file an Annual Activity Certificate (AAC) with their AD bank and are not in scope for the FLA return. The FLA return is specifically for Indian companies (Pvt Ltd, public companies) and LLPs.

The FLAIR portal form covers: (a) company identification (CIN, PAN, GSTIN, registered address), (b) industry classification (NIC code), (c) financial year data from audited accounts (total assets, total liabilities, equity, retained earnings), (d) outstanding FDI stock as of March 31 - broken down by equity, reinvested earnings, and other capital, (e) outstanding ODI if the Indian entity has made investments abroad.

The FLA return requires audited financial statement data. If the audit is not complete by 15 July, companies may file a provisional FLA return based on unaudited numbers and revise it once the audit is complete. RBI's guidance allows provisional filing, but the provisional return must still be filed by 15 July.

Missing the FLA return deadline is a FEMA contravention. RBI has been progressively stricter in enforcement since 2020, issuing show-cause notices to companies identified through the FIRMS portal data (which shows FDI without corresponding FLA filings) and through AD bank reporting.

Regularization: file a compounding application with RBI's Compounding Authority via the CEFA portal. The standard compounding amount for FLA non-compliance is calculated on the outstanding FDI stock for the period of non-compliance. For a company with USD 1 million outstanding FDI that has missed FLA for 3 years, the compounding amount is approximately USD 30,000-60,000 depending on the RBI's assessment.

Some companies have multiple years of missed FLA returns. RBI requires all missed years to be filed before or simultaneously with the compounding application. File all historical data first, then submit the compounding application. The FLAIR portal accepts filings for multiple prior years.