By- Mala Mahto (CS, LLB)
What is an FLA Return:
As per Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017, an Annual Return on Foreign Liabilities and Assets (FLA) is required to be filed by Indian company which has received FDI or made ODI abroad or an LLP which has received investment by way of capital contribution in the previous year(s) including the current year, should submit form FLA Return to the Reserve Bank on or before the 15th day of July of each year.
Who is required to file FLA return
Every Company who holds foreign assets or liabilities in their financial statements as on 31 March or an LLP which has received investment by way of capital contribution and is outstanding as on 31st March is required to file FLA Return.
If the Indian company does not have any outstanding investment in respect of FDI and/or ODI as on 31st March of the reporting year, the Company is not required to filet the FLA Return. Similarly, if the Indian company has not ‘received any fresh FDI and/or ODI in the latest year but the company has outstanding FDI and/or ODI, then that company is still required to file the FLA Return 15 July of every year.
Online – Web-based reporting through FLAIR
RBI through a Circular dated 28th June 2019 has announced that FLA Return is now to be submitted through a web-based online reporting system.
Through this Circular RBI has replaced earlier email-based reporting system with an online form. This move was taken by RBI to enhance the security-level in data submission and further improve the data quality. It would facilitate data submission by eligible entities {including the alternative investment funds (AIF) registered with the Securities and Exchange Board of India (SEBI) as also the reporting of foreign investment in the form of capital/profit share contribution received/transferred in case of LLPs and investment by persons resident outside India in an investment vehicle
Special Features
Some Features of revised Foreign Liabilities and Assets Information Reporting (FLAIR) System:-
RBI would provide a web-portal interface to the reporting entities (https://flair.rbi.org.in). Entities will have to submit the User registration form. After successful registration Login Name and Password shall be generated using that FLA Return can be filed.
The revised form will seek information on the first year of receipt of ODI/FDI and disinvestment also.
Reporting entities will get system-generated acknowledgment receipt upon successful submission of the form.
The data can be revised, if required, and view/download the information submitted.
Entities can submit FLA information for earlier year/s after receiving RBI confirmation on their request email.
The existing mechanism of email-based submission of FLA Return forms will be discontinued.
The requirement shall come into force with immediate effect and would be applicable for reporting of information for the year 2018-19.
Due date of filing FLA Return
The FLA Return is required to be filed on an annual basis on or before 15th July of every year. RBI has clarified that the new form would be applicable for current year filing also, the last date of which is 15th July 2019. The irony is that the RBI has announced the new form 18 days before the last date of filing of the form. We hope that RBI also comes with a FAQ dealing with the filing of web-based FLA Return and there are no technical glitches while filing the form and if there is such the last date be extended.
Consequences for non-compliance
Non-filing of the return before the due date will lead to violation of FEMA and penalty clause may be invoked for violation of FEMA. RBI has also clarified that entities not complying with the latest circular that is not filing the form on a new web-based system will be treated a non-compliant with FEMA regulations.
Click here to know more about FDI Reporting under FIRMS
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