Annual Return on Foreign Assets and Liabilities (FLA)

Annual Return on Foreign Assets and Liabilities (FLA): Reporting India’s Foreign Financial Exposure

Introduction

In an increasingly interconnected global economy, the need for accurate and comprehensive data on cross-border investments has never been more vital. To this end, the Reserve Bank of India (RBI), under the aegis of the International Monetary Fund (IMF), conducts two key surveys: the Co-ordinated Direct Investment Survey (CDIS) and the Co-ordinated Portfolio Investment Survey (CPIS)

These surveys are implemented through the Annual Return on Foreign Liabilities and Assets (FLA), which captures the foreign financial assets and liabilities position of Indian resident entities as of end-March each year. The data gathered not only contributes to global databases maintained by the IMF but also forms a crucial input for the compilation of India’s Balance of Payments (BoP) and International Investment Position (IIP). Importantly, the RBI assures that all entity-specific information submitted remains confidential, with only aggregate-level data being disseminated.

Applicability

The obligation to file the FLA Return applies to all Indian entities—including companies, Limited Liability Partnerships (LLPs), SEBI-registered Alternative Investment Funds (AIFs), partnership firms, and Public-Private Partnerships (PPPs)—that have either received Foreign Direct Investment (FDI) or made Overseas Direct Investments (ODI) during the financial year. Indian reportable entities are required to file the FLA return even if there has been no fresh inflow or outflow of foreign investment, as long as there is an outstanding balance of direct investment.  However, Resident Individuals who have made overseas investments are currently excluded from the purview of this reporting mandate. 

Financial Information for Filing the FLA Return

Entities may submit the FLA Return based on audited or unaudited/provisional financial statements available as on due date (July 15). If audited financials are finalized after submission, the return can be revised with prior approval from the Reserve Bank of India (RBI). It is important to note that all financial data must reflect the entity’s position as on March 31, irrespective of the financial year followed by the Indian entity or its foreign counterpart. Furthermore, entities are not required to attach any supporting documents, such as the balance sheet or profit and loss account, while submitting the FLA Return. 

Structure of the FLA Return

The FLA Return comprises five key sections, designed to capture detailed data on a reporting entity’s cross-border investment profile:

Section I – Identification Particulars
This section collects the basic information of the entity, including its name, CIN/LLPIN, PAN, business classification, industry code, listing status, and contact details of the authorized representative.

Section II – Financial Details
Here, entities report core financial data such as equity capital, reserves and surplus, revenues, imports and exports, net worth, total assets, liabilities, and profitability for the year ending March 31.

Section III – Foreign Liabilities
This section covers FDI, portfolio investments, and other forms of foreign capital such as External Commercial Borrowings (ECBs). It reflects the scale and structure of foreign investment in Indian entities.

Section IV – Foreign Assets
Entities must report details of ODI including equity and debt investments abroad, loans, guarantees, and any income earned from these foreign assets. This section also requires disclosure of the country of investment and purpose.

Section V – Variation Report
Any variation between the current year’s reporting and figures previously submitted are required to be explained in this section.

Understanding Key Reporting Concepts

To ensure accurate and compliant submission of the FLA Return, it is essential to understand the classification of various types of cross-border financial instruments. The following concepts are critical for determining the reporting structure:

• Equity Capital and Other Capital
   Foreign direct investment (FDI) in a reportable entity is broadly classified into Equity Capital and Other Capital.

• Equity Capital includes ordinary shares and other participating instruments held by non-resident investors.
• Other Capital encompasses all outstanding liabilities or claims between the reporting entity and its direct foreign investor. This includes borrowings, trade credits, investment in non-participating instruments, share application money, convertible instruments (CCD, CCP) and other debt-like arrangements.

Scenarios where Entities are Exempt from Filing the FLA Return

While the Annual Return on Foreign Liabilities and Assets (FLA) is mandatory for Indian entities with foreign investment exposure, there are specific scenarios where filing is not required which are outlined below:

• Share Application Money Only
  An entity that has outstanding share application money as of March 31 but has no foreign liabilities or assets related to direct investment is not required to file the FLA Return. The absence of an actual foreign investment position negates the need for reporting.
• Non-Repatriable Investments
  Shares issued to non-residents on a non-repatriation basis are not considered foreign direct investment (FDI) under FEMA regulations. Consequently, entities with only such investments are outside the scope of FLA reporting.
• Transfer or Buyback of Shares
  If a reporting entity has had foreign direct investment or made overseas investment in the past, but all such investments were either transferred or fully bought back during the reporting year—resulting in no outstanding foreign investment as of March 31—the entity is exempt from filing the FLA Return for that financial year.

Valuation Guidelines

Accurate valuation of equity capital is a critical component of the FLA Return. The methodology differs based on whether the reporting entity is listed or unlisted. For unlisted companies, the market value of equity capital is determined using the book value method. The net worth of the company is calculated as follows:
Net Worth = Paid-up Equity Capital + Participating Preference Shares + Reserves & Surplus – Accumulated Losses

In case of entities listed on a recognized stock exchange, the market value of equity capital is based on the closing share price as on March 31 of the relevant financial year. This reflects the fair market value of the company’s equity at the reporting date.

Filing Deadline 

The FLA Return must be submitted annually by July 15. While late submissions are permitted with prior approval from the RBI, failure to file within the stipulated timeline constitutes a contravention of the Foreign Exchange Management Act (FEMA) which can be cure by paying Late Submission Fee (LSF) for delay in reporting of FLA returns amounting to INR 7,500 per return. In today’s dynamic international market, maintaining a disciplined approach to FEMA compliance is essential to avoid financial penalties and reputational damage of Indian businesses.

Submission Process

Entities required to file the return must do so through the RBI’s web-based portal at https://flair.rbi.org.in  On successful submission, a system-generated acknowledgment and a link to download the FLA Form on the screen is provided immediately. 

Conclusion

The Annual FLA Return is not merely a regulatory formality but a critical instrument in assessing India’s international investment dynamics. With its role in shaping national economic indicators and informing global economic governance, compliance with this requirement is not just obligatory—it is a responsibility. Timely and accurate submission of the FLA Return by eligible entities ensures transparency and enhances India’s stature in the global financial ecosystem.

S N S S & Co | Chartered Accountant

Niranjan Shah 

niranjan@snssindia.in

+91 982 586 0488

Disclaimer: This blog is intended for educational purposes only and should not be interpreted as advice. It is recommended to seek guidance from a qualified professional for advice relevant to your circumstances. For any feedback, inquiries, or suggestions, please feel free to reach out to the author at niranjan@snssindia.in / Contact No +91 982 586 0488.