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An Indian entity that has received FDI or made Overseas Direct Investment (ODI) (i.e., invested in foreign companies or subsidiaries) must understand the most important filing with the RBI, the FLA filing.
Filing the Foreign Liabilities and Assets (FLA) Return is one of those tasks that seems simple—until it’s not. While the form itself isn’t long, and the instructions from the Reserve Bank of India (RBI) seem straightforward, companies of all sizes often get tripped up by small oversights or misunderstandings.
In the previous blogs, we have covered the frequently asked questions about FLA filing. In this blog, we’ll highlight some of the most common mistakes businesses make when filing the FLA return, especially those with foreign investments, cross-border transactions, or outward direct investments (ODIs). More importantly, we’ll guide you on how to avoid these errors, ensuring smooth compliance with FEMA regulations and avoiding unnecessary penalties.
Let’s start with the most basic mistake: not realizing you’re supposed to file at all.
Many companies assume that the FLA return only applies to large corporations or multinationals. In reality, even start-ups, LLPs, and private limited companies that have received Foreign Direct Investment (FDI), issued shares to foreign entities, or invested in foreign subsidiaries are required to file.
Some businesses even believe that if there are no recent transactions, there’s nothing to report. However, the FLA requirement is based on ownership and investment, not just transactions in the current year. This misunderstanding often leads to missed filings.
How to avoid it: Keep track of all inward and outward foreign investment activities. If any capital flows in or out of India, even through equity infusion or ODI, check whether the FLA return applies. Review previous years’ returns too—if you filed last year, you likely have to file this year. When in doubt, consult a FEMA advisor—don’t assume you’re exempt.
Let’s be honest—most of us have delayed something “because there’s still time,” right?
But when it comes to the FLA return, waiting till July 14th or 15th is like asking for trouble. The official deadline is July 15. The portal might slow down, your Authorized Dealer (AD) bank contact might be unreachable, or you might suddenly realize a key document’s missing.
And here’s the kicker: errors made in a last-minute rush are the ones most likely to go unnoticed—until RBI sends a query or worse, a non-compliance reminder.
It’s not about how fast you can fill out the form. It’s about whether the return truly reflects your foreign asset position accurately and cleanly.
How to avoid it: Don’t treat the July 15 deadline as your starting point. Give yourself a 10 to 14-day timeline, and build in time for review and internal approvals. Start collecting data in June, schedule one review call, and aim to file early. The peace of mind is worth it—trust us.
Here’s a small mistake that creates big headaches: wrong login credentials or an outdated email ID on the FLAIR portal.
Sounds minor. However, it can completely block your ability to submit the return or receive updates from the RBI. Sometimes, companies forget who the registered user is. Other times, the person who handled filings last year has moved on, and no one updated the contact. Suddenly, you’re stuck waiting for OTPs on an old email or calling RBI to reset access. Not ideal when you’re just trying to get a form filed.
How to avoid it: Well before the due date, check who’s listed as the authorized person on the portal. Update the email ID and mobile number if needed. If the login is linked to a generic ID, make sure someone’s checking it regularly. It sounds basic, but it’s the kind of thing that saves you from last-minute panic—and possibly missing the deadline altogether.
You’d be surprised how often companies mess up the basics—like entering the wrong CIN, PAN, or email ID.
Sometimes it’s just a typo; other times, they use old details from when the company was first incorporated. Either way, it causes problems. Worse yet, many companies use outdated business activity codes or forget that their sector classification (NIC code) changed after a business pivot or restructure. These mismatches can confuse RBI systems that trigger follow-ups or flag the return as invalid.
It may feel like a small thing, but when your return gets stuck over something like a typo in your CIN, it’s frustrating.
How to avoid it: Before you can even open the FLAIR portal, pull your most recent ROC master data, confirm your PAN and official email ID, and recheck your NIC code classification. Don’t just copy-paste from last year’s file. It takes five extra minutes to verify, but it can save hours of rework later.
This one’s pretty common, especially in companies where the financial year ends in March, but audits take a few months.
To meet the July 15 FLA deadline, many teams throw in guesstimates or half-baked figures to get it done. Sound familiar? Some even leave that field blank, thinking, “We’ll just revise later.” But often, that revision never happens. And incomplete or vague entries can make your return non-compliant, or worse, misleading.
There’s also the issue of not accounting for indirect foreign holdings, like when a foreign investor holds shares through another Indian entity. That’s still foreign investment, and it should be reported.
How to avoid it: Plan even if audited numbers aren’t ready, prepare internal financials based on the best available data, and label them clearly as provisional. Don’t skip fields unless they truly don’t apply. If you use provisional numbers, mark your calendar to revise the return later. This isn’t just good practice—it’s expected.
This one trips up more companies than you’d think. If you’ve invested in a foreign subsidiary, opened an office abroad, or acquired even a small overseas stake, you’re expected to disclose the whole picture in the FLA return.
But here’s what happens: many companies either forget to mention these investments or report them under the wrong section. Some even think, “We haven’t sent funds this year, so maybe we can skip it.” Unfortunately, that’s not how it works.
RBI wants visibility into all foreign assets, not just new investments. If you hold equity abroad—even indirectly—it needs to be disclosed.
How to avoid it: Maintain a simple spreadsheet with all your outward investments: names of entities, countries, ownership percentage, and book values. Even if there was no activity this year, include existing ODIs and subsidiaries. When in doubt, include a note or seek clarification. It’s always better to over-disclose than under-report, especially with foreign assets.
One of the most overlooked parts of FLA filing? The Nil return.
Companies often assume, “We didn’t receive any fresh FDI this year, so no need to file.” That sounds logical, but it’s not how the RBI sees it. If your company has even one rupee of existing foreign investment or an ODI, and you filed the return last year, then you’re likely required to file again—even if nothing changed. Skipping a Nil return gives the impression that you’ve either shut the shop or are ignoring compliance.
How to avoid it: Check your past filings. If you submitted an FLA return before, regardless of whether there was a new activity, you’re probably expected to file this year too. Think of it as a “status update” to the RBI. If there’s nothing to report, submit a nil return. It’s fast, easy, and keeps your record clean. A 5-minute task that prevents a 5-figure penalty? Worth it.
This one’s sneaky. RBI allows companies to file the FLA return with provisional numbers if the audit isn’t done by July 15. So, many companies take that route (which is perfectly fine). However, the problem is that most people never bother to revise the return until the audited financials are finally available.
It’s easy to forget. You file once, tick it off your list, and move on. But that provisional return is supposed to be temporary, not your final word.
How to avoid it: If you’re filing with unaudited or management-certified numbers, set a reminder for when your audit closes. That could be in August, September, or later—but when it’s done, go back to the FLAIR portal and submit the revised return. It’s quick and shows that you take compliance seriously. Plus, if the RBI ever reviews your filings, they’ll see that you followed through. It’s a small step that helps build a big reputation for doing things right.
Now, this happens in a lot of companies, especially those where a dedicated FEMA team doesn’t handle compliance. The accounts or finance team fills out the FLA return, sometimes under pressure, and no one else looks at it before it’s filed.
Sure, they may know the numbers, but do they fully understand how RBI wants them reported? Not always. And that’s where minor missteps—like reporting equity under debt or missing foreign ownership details—can slip in unnoticed.
How to avoid it: Even if you’ve got a capable internal team, make sure there’s a second set of eyes on the return—ideally someone with FEMA knowledge. It doesn’t have to be an audit-level review, just a practical one. Ask simple questions like: “Is this amount in rupees or foreign currency?” or “Should this asset be reported under ODI?” This kind of light review can prevent bigger issues down the line. When it comes to regulatory filings, a little extra attention never hurts.
Filing the FLA return isn’t always the end of the story. Sometimes, the RBI or your AD Bank might reach out with a question or ask for clarification on something you submitted. And what do many companies do? They miss the email or ignore it.
Maybe it went to a generic inbox. Perhaps the person responsible has left. Whatever the case, if you don’t respond, RBI may treat the return as incomplete or even invalid. That’s not the kind of attention you want from a regulator.
How to avoid it: After filing, make sure someone actively monitors the registered email ID on the FLAIR portal. If RBI or the AD Bank reaches out, reply within a couple of working days—even if it’s just to say you’re working on it. These follow-ups are usually simple, but ignoring them creates the impression that compliance isn’t a priority. And trust me, that’s not an impression you want to give when dealing with foreign exchange regulators.
Filing the FLA return might feel like another tick-box compliance item. However, ignoring the details can lead to RBI scrutiny, penalty notices, and even questions during future funding or external audits. And the tricky part? Most of the mistakes businesses make are completely avoidable.
From missing deadlines and filing outdated data to not reporting foreign subsidiaries or neglecting a nil return, the risks aren’t just about penalties. It’s also about credibility.
Companies with even a single round of FDI or an ODI transaction should treat the FLA return seriously. Maintaining accurate records, preparing early, and cross-verifying before filing can turn what feels like a boring compliance exercise into a clean and efficient process.
The smart move? Build a calendar, assign the responsibility to someone experienced, and if things still feel unclear, don’t hesitate to take professional help. A little caution today can prevent a compliance mess tomorrow.
At Mercurius, our team of seasoned professionals brings deep industry knowledge to help you navigate all compliance and regulatory requirements. With over 15 years of experience, we’ve supported clients across business registration, statutory filings, and end-to-end compliance in India. We also offer a wide range of post-incorporation services, including accounting, tax filing, audit and assurance, and more.
You can always contact us to learn more about the FLA return or consult about it.
