Financial Liabilities and Assets (FLA) Annual Return: A Complete Guide for Indian Companies Dealing with FDI and ODI
Md Saddam Hussain
Md Saddam Hussain is a highly skilled and experienced Company Secretary specializing in corporate laws, regulatory compliance, and legal advisory. With expertise in the Companies Act, FEMA, LLP regulations, SEBI compliance, NCLT proceedings, and liaisoning with government authorities, he provides strategic guidance to businesses, ensuring seamless adherence to statutory obligations. Known for his meticulous approach and in-depth knowledge of corporate governance, he assists companies in mitigating risks, handling regulatory filings, and navigating complex legal frameworks. With a commitment to excellence and integrity, Md Saddam Hussain plays a crucial role in supporting businesses with compliance, litigation, and corporate structuring.
India’s position as a dynamic hub for foreign investments has evolved rapidly over the past decade. Indian companies—including startups and established firms—are increasingly seeking foreign capital to fuel their growth ambitions. In parallel, more Indian businesses are exploring international markets through Overseas Direct Investments (ODI) to establish a global footprint.
As the volume and complexity of these cross-border transactions increase, so does the need for regulatory oversight and compliance. The Reserve Bank of India (RBI), under the Foreign Exchange Management Act (FEMA), has mandated several reporting requirements to monitor foreign investments. One such critical annual compliance requirement is the Financial Liabilities and Assets (FLA) Return.
This guide delves into what the FLA return entails, to whom it applies, how it must be filed, and the consequences of non-compliance.
- What is the FLA Return?
The FLA return is an annual declaration required to be submitted to the Reserve Bank of India by Indian entities that either:
- Receive Foreign Direct Investment (FDI)—i.e., when foreign entities invest in Indian companies in the form of equity, convertible debentures, or other instruments; or
- Make Overseas Direct Investment (ODI), i.e., Indian entities invest in foreign subsidiaries, joint ventures, or acquire foreign businesses.
But there’s a condition:
The FLA return must be filed only if the FDI or ODI remains outstanding (not fully repaid or liquidated) as of 31st March of the reporting year. This means that the investment must still reflect in the entity’s balance sheet at the end of the financial year.
It applies regardless of whether the investment occurred in the current or a previous financial year.
- Why is the FLA Return Important?
The FLA return plays a vital role in helping the RBI compile important financial statistics, including:
- India’s Foreign Liabilities and Assets position;
- Balance of Payments (BoP) data;
- Monitoring and control of foreign capital flows; and
- Ensuring transparent international transactions in line with economic policy goals.
Failure to report these figures can impact not just regulatory compliance but also reflect poorly on the company’s corporate governance practices, potentially leading to investor distrust.
- Who is Required to File the FLA Return?
The following Indian entities must file the FLA return:
- Companies that have received FDI and the foreign investment is still reflected in their books.
- Companies/LLPs that have made ODI, and such investment is still outstanding.
- Entities that have both FDI and ODI transactions outstanding as of 31st March.
This includes companies across all sectors—IT, manufacturing, fintech, real estate, pharmaceuticals, etc.—as long as they have foreign investment transactions that meet the criteria.
- Due Dates and Filing Timeline
The standard deadline for filing the FLA return is 15th July every year.
Important Note:
If the company’s accounts are unaudited by that date, the return must be submitted using provisional figures. However, once the audited financials are available, a revised FLA return must be submitted by the end of September.
This two-stage filing ensures that regulatory timelines are met, while also allowing time for accurate, audited data to be submitted later.
- Filing Procedure: Step-by-Step
The process of filing the FLA return is slightly different from typical online submissions:
Mode of Submission:
- The return must be sent via email to the RBI at the prescribed email address.
- The email should be sent from the official registered email ID of the entity.
- It should be submitted only by authorized personnel—typically a Director, Chief Financial Officer (CFO), or Company Secretary (CS).
Documents Required:
- Audited or provisional Balance Sheet and Profit & Loss Account.
- Details of foreign liabilities (like shares held by foreign entities) and assets (like overseas subsidiaries or investments).
- Supporting schedules for any loans, trade credit, or equity instruments involved.
Confidentiality:
The data submitted is treated confidentially and used for statistical and policy-making purposes only.
- Penalties for Non-Compliance
Non-filing or delayed filing of the FLA return can lead to severe penalties under FEMA:
- A penalty of up to three times the amount of the investment (FDI/ODI); or
- 2,00,000 if the transaction amount is not quantifiable:
- An additional penalty of Rs. 5,000 for each day the default continues.
These penalties are not just monetary but can also restrict the entity’s ability to receive further foreign investments, repatriate funds, or even participate in future regulatory approvals.
- Common Mistakes to Avoid
- Assuming that the FLA applies only in the year the FDI/ODI occurs is incorrect—it applies as long as the investment remains in the books.
- Delaying submission due to unaudited accounts – use provisional data and revise later.
- Forgetting to send the email from the registered and authorized email ID.
- Overlooking ODI compliance – even small investments abroad make your company liable.
Conclusion: Stay Compliant, Stay Ahead
As Indian businesses continue to globalize and attract foreign investments, regulatory compliance becomes non-negotiable. The FLA return is not just a legal formality—it’s an essential mechanism for ensuring India’s financial transparency and alignment with global standards.
Whether you are a CFO of a mid-sized manufacturing company, a startup founder with angel funding, or the finance head of a multinational subsidiary, keeping track of FLA compliance is critical.
Need Expert Support?
If you are unsure about your FLA filing obligations or need professional assistance in preparing and submitting your return, it’s best to consult a qualified Chartered Accountant or FEMA expert.
Avoid unnecessary penalties and focus on what matters most—growing your business across borders.
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