What is FLA in income tax?
Foreign Liabilities and Assets are assets and liabilities that are located outside the country of residence. These liabilities can be in the form of cash, securities, other financial assets, real estate or any other assets. FLA is a tax return that is required to account for all the overseas income generated by those who have FLA. The FLA Return is a mandatory document for those who are filing their taxes in India. It is a form that needs to be submitted along with the income tax return if you have any foreign-asset or foreign-liability.
The purpose of this form is to ensure that all Indian citizens pay taxes on their worldwide income irrespective of where they reside. Foreign-controlled entity is a business owned and controlled by people from other countries or overseas. Foreign-controlled entities are not allowed to have any investments in India. Foreign-controlled entities include companies, trusts and estates. The Foreign Exchange Earnings Account is a mandatory document that needs to be submitted along with the income tax return if you have foreign-control entities income. The purpose of this form is to ensure that all Indian citizens will pay taxes on their foreign currency gains irrespective of where they are made.
Who has to file Fla?
The FLA Return is a form that is filed by taxpayers who have certain types of foreign assets and liabilities.
The FLA Return has to be filed if the taxpayer has any of the following:
- Foreign bank accounts for which the taxpayer does not provide a Form TD F 90-22.1, "Report of Foreign Bank and Financial Accounts."
- Foreign financial accounts for which the taxpayer does not provide a Form 8938, "Statement of Specified Foreign Financial Assets."
- A specified foreign asset that was transferred from one foreign financial account to another during a year for which the taxpayer did not file a Form 8938.
- Any other type of foreign asset or liability.
How do I file an RBI with FLA?
The Foreign Liabilities and Assets (FLA) Return is a report that must be filed by every U.S. person who has an interest in or signature or other authority over any financial account in a foreign country.
This report is due on June 30 of the year following the calendar year covered by the report. The IRS will not impose penalties for late filing if the return is submitted within six months of its due date, but interest will be charged from the original due date of April 15 until it is paid in full.
The FLA Return must be filed electronically through FinCEN's BSA E-Filing System and can only be filed after opening a new account, closing an existing account, or when there are changes to information already reported on a previously filed FLA Return.
Five different sections of FLA Return
The FLA return is divided into 5 different sections i.e.,
- Section-I: Identification Particulars: Section-I includes company’s identification details.
- Section-II: Financial Details: Section II includes the financial details of your company at the financial year end
- Section-III: Foreign Liabilities: Section III includes the investments details made in India. It normally includes FDI, portfolio investments etc.
- Section-IV: Foreign Assets: Section IV includes portfolio investments abroad, overseas direct investments, etc.
- Section-V: Variation Report: Section V is an auto-populated section that will caters the details from the above 4 sections.
Which entities are required to file the FLA return?
The Foreign Liabilities and Assets (FLA) Return is a form that must be filed by any entity that has foreign assets or liabilities, or both.
The FLA return is filed with the IRS, and it provides information about the foreign assets and liabilities of the entity filing it. The FLA return is required to be filed by any entity that has foreign assets or liabilities, or both. Examples of foreign assets include cash, capital investments, and foreign bank accounts. Examples of foreign liabilities are taxes owed to a country other than the U.S., tax on income that is generated outside the U.S., and any income with a source outside of the U.S.
In nutshell:
The company falling to file the FLA return will be liable to a certain penalty i.e. thrice the amount of contravention. Therefore, it is essential to comply with the FLA returns requirements. In case of any doubt in regards to FEMA compliances, please feel free to contact the ASC Group!
