Cross-border investments and raising finance is not an unusual thing. As the economies are opening and business-friendly policies are being developed, more and more businesses are trying to raise finances from international sources. Startups are a great example of raising finances from offshore investors. But, as these transactions involve huge amounts and are susceptible to manipulations, the government has placed in measures to ensure transparency. Foreign Exchange Management Act, 1999 is the principle law governing foreign transactions. One of the significant compliances for businesses engaged in such transactions is the filing of FLA returns.
What is FLA return and what does it encompass? Let’s find out!
What is FLA Return?
Foreign Liabilities and Assets Return, also known as FLA return, is required to be filed by every Indian entity that has either made Overseas Direct Investment (ODI) or has received Foreign Direct Investments (FDI) in any of the previous or current years. But merely engaging in foreign transactions does not mandate a company to file online FLA return. If the Indian entity has foreign assets or liabilities outstanding as of the date of the balance sheet, then it shall be required to file the FLA return online.
Applicability of FLA Return
The FLA return shall be applicable to the following types of entities:
- Companies,
- Limited Liability Partnerships (LLPs)
- Other entities like partnership firms, Public Private Partnerships (PPPs), SEBI registered AIFs etc.
In case a partnership firm, trust etc. has outstanding FDI as on the end of the financial year, then such entity is required to apply for a dummy Corporate Identification Number (CIN). This will allow them to file the FLA return. In case an entity has already been allotted the CIN, then such entity can use the same CIN to file FLA return online.
Process to File FLA Return
You need to file FLA return online. It can be filed through the Foreign Liabilities and Assets Information Reporting (FLAIR) System. The due date for FLA return is 15th July each year. The FLA return can be submitted on a provisional basis in case the accounts are unaudited as on the date of filing FLA return. Revised FLA return can be filed till 30th September.
Penalty for Not Filing FLA Return
You are compulsorily required to file FLA return online in case you satisfy the above criteria. The penalty for not filing FLA return attracts violation under FEMA. The penalty for violation of FEMA provisions and regulations or furnishing false information is 300% of the amount involved in case it is quantifiable. In case the amount is not quantifiable, then the penalty shall be Rs. 2 lakhs. A penalty of Rs. 5000 per day shall be levied from the first day of violation in case of continuing offence.
In case you need any assistance in filing FLA return, feel free to contact the ASC Group.
