The Foreign Liabilities and Assets return is an important annual FEMA filing for eligible Indian entities. It provides information about foreign investment received in India and overseas investment made by Indian entities. The filing is relevant to companies, limited liability partnerships and certain other entities that hold foreign assets or liabilities in their balance sheets. RBI information states that entities covered by the applicable criteria are required to submit the return through the FLAIR system, generally by July 15 each year.
The first requirement is to determine whether the entity is covered. An organisation should review whether it has received foreign direct investment, issued shares or other permitted instruments to a non-resident, made overseas investment or continued to hold foreign assets or liabilities from an earlier period. The obligation may apply even when there has been no fresh transaction during the reporting year, if foreign assets or liabilities remain outstanding.
The entity must use the online FLAIR portal for submission. A new reporting entity generally needs to register on the portal before filing. The registration process requires the entity to provide relevant identification information and upload prescribed documents, which may include a verification letter and authority letter. Once registration is completed, login details are sent to the authorised person’s registered email address according to the RBI’s instructions.
The organisation should not wait until the final week to create portal access. Registration difficulties, incorrect email details, unavailable authorised signatories and technical problems can delay filing. The compliance team should confirm that the registered email address is active, the authorised person is available and login credentials are maintained securely. Passwords should not be circulated through informal messaging channels or stored in unprotected files.
The data required for the return should be prepared in advance. Important information may include the entity’s legal name, registered office, business activity, financial year, paid-up capital, foreign investment, non-resident investor details, overseas assets, overseas liabilities and relevant financial figures. The figures must be reconciled with the books of account, audited or unaudited financial statements, share capital records, bank statements and earlier FEMA filings.
Currency conversion should be handled consistently. Foreign currency amounts may need to be reported in the prescribed manner and converted into Indian rupees using an appropriate exchange rate. The basis used for conversion should be documented. Inconsistencies between the FLA return and the entity’s financial records may lead to queries and require clarification.
The preparation process should include a transaction review. The entity should examine foreign equity investment, loans, trade credit, guarantees, overseas subsidiaries, branches, joint ventures and other relevant cross-border positions. It should verify whether any investment was transferred, written off, sold, redeemed or restructured during the year. Corporate actions such as mergers, share transfers, capital reductions and changes in investor ownership should also be considered.
Before final submission, a reviewer should compare the current return with the previous year’s filing. Significant changes should be explainable. A sudden increase or decrease in foreign liabilities, paid-up capital or overseas assets should be supported by transaction documents. The organisation should retain copies of the submitted return, acknowledgement, working papers and supporting records.
Late filing is not a matter that should be treated casually. RBI states that failure to file the FLA return by the applicable deadline may be treated as a FEMA violation and may attract the relevant penalty provisions. [7] If a filing is missed, the entity should promptly assess the position, complete the return and obtain appropriate guidance on the available corrective process.
Technology controls are also important. The entity should restrict access to the FLAIR account, maintain an authorised user register and preserve evidence of every submission. If a consultant is appointed, the organisation should issue written authority, review the information before submission and obtain the final acknowledgement. The consultant should not become the sole owner of the entity’s regulatory records.
The OZGIAN community recommends beginning the FLA return process several weeks before July 15. A practical workflow includes eligibility confirmation, portal access verification, data collection, accounting reconciliation, preparation, review, authorised submission and document archiving. Questions relating to FEMA filing requirements may be sent to ask@fema.in.
