Of late, India has witnessed a steady increase in Foreign Direct Investments. Indian companies have started taking the business globally, and this has seen lots of money in the form of dollars, pounds, euros, and even Japanese Yen coming in. However, these investments have to comply with FEMA or the Foreign Exchange Management Act and their regulations.
The annual return is calculated via the FLA or Foreign Liabilities and Annual Return. It is one of the primary compliances which companies that have FDI need to follow strictly. Companies that invest in other companies via subsidiaries or JVs are also known as Overseas Direct Investment (ODI).
The annual filing of the FLA needs to cover all foreign investments that a company makes and must be submitted directly to the RBI by the company.
Who Has to File the FLA Annual Return?
The FEMA regulation of 1999 says any company that has received an FDI or made an ODI will have to file the annual return. These companies also have to report the FLA of the current financial year and the previous year’s liabilities and assets.
If a company doesn’t hold any FLA for the present year but has outstanding ODI or FDI of earlier years, they need to file the annual return that indicates outstanding FLAs.
FEMA regulations also mean partnership ventures, and firms have to file the FLA annual return if they’ve made ODIs or received FDIs. The RBI will issue a CIN (dummy) on request, which can be used to file the FLA’s annual return. If the dummy CIN has been issued, the partnership firm can use it for the FLA return.
Filing FLA Returns –
Filing FLA returns can be done quickly with an excel sheet. All companies that fall under the criteria must follow the measures and complete it. The filing process must be done before July 15 of the respective year and should include data of the ODI received or FDI made for the previous year and the current year.
The form must be mailed from the email ID to the official email ID of the RBI. The members who are authorized to file these returns include the Chief Financial Officer, Company Secretary, and Directors.
The details need to contain all the financial and other necessary information per the company’s audited accounts.
If the company doesn’t have any accounts audited before July 15, they must file the FLA returns according to the unaudited accounts and then proceed to get them audited. Post the audit; if changes are found, the company needs to file an additional form that contains the changed details before September 30.
Post the FLA return filing; the RBI will send an acknowledgment mail to the authorized person’s email ID.
Important Pointers That You Must Know Before Filing Your FLAs-
- If a company does not file the FLA return on time, they have to pay a penalty that is thrice the contravention sum. If it isn’t quantifiable, then a 2,00,000 penalty has to be paid too. If it is continuing, then an Rs. 5,000 a day penalty will be imposed
- The due date is July 15. If the FLA return is based on the unaudited accounts, then the revised form needs to be filed based on the audited accounts before September.
- The RBI’s regional offices are granted the power to compound any contraventions with zero limits. The law doesn’t extend to the offices of Panaji and Kochi.
- Companies that have issued shares only on a non-repatriable basis to non-residents or NRIs of India are exempt from filing the FLA.
- Companies that don’t have any outstanding ODI or FDI balance at the end of the financial year are also exempted.
- Companies having received the share application money without receiving or making FDI or ODI respectively are exempted.
We hope this post helped you understand all about the FLA returns and the steps needed to implement them. Once you go through it, you can take the necessary steps and make sure your FLAs are in sync with the RBIs guidelines.