by Disha Jaggi
The Foreign Exchange Management Act, 1999 (FEMA) is an Act of the Parliament of India “to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Foreign Direct Investment (FDI) in India is undertaken in accordance with the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017
Reporting Requirement for Annual Return of Foreign Liabilities and Assets(FLA)
From June 1, 2019 the format and email -based reporting system has been replaced by FLA information reporting system (FLAIR) which is an online web – based reporting for submission of Annual FLA return.
In this web-based reporting system of FLA, entities first need to create business-user through “FLA User Registration form” on
https://flair.rbi.org.in and thereafter the annual return on FLA can be filed.
Reporting Requirement for forms through a Single Master Form
The Reserve Bank has introduced an online application, FIRMS (Foreign Investment Reporting in and Management System), which is a platform which provides for the reporting of foreign investment in India. FIRMS provides a one stop shop, 24*7 online reporting facility for the applicant.
With the objective of integrating the extant reporting structures of various types of foreign investment in India, RBI has introduced a Single Master Form (SMF) subsuming all the existing reports.
With the implementation of SMF, the nine forms namely FC-GPR,FC-TRS, LLP-1, LLP-2 ,CN, ESOP, DRR ,DI and InVI has been integrated into a Single Master Form for easing the process of reporting. The Single Master Form is available on https://firms.rbi.org.in.
Given below are the reporting requirements for Foreign Investment In India
| Form | Applicability | Due Date | Information/ Document to be filled /attached |
| Annual Return on Foreign liabilities and assets (FLA Return) | The FLA return is required to be submitted by the following companies who have received Foreign direct investment (FDI) and/or made Foreign direct investment abroad in the previous year(s) including the current year :- (a)Companies incorporated under the Companies Act or under any previous company law; (b) Insurance companies, (c) Banking companies, ; (d) Companies engaged in the generation or supply of electricity (e) any other company governed by any special Act for the time being in Force (f)such body corporate, incorporated by any Act for the time being in force, as the Central Government may, by notification, specify (g)A Limited Liability Partnership (h)SEBI registered Alternative Investment Funds (AIF’s), Partnership firms, Public Private Partnership,branches, trustees (PPP) etc | The return is to be submitted based on audited/ unaudited account by July 15 every year. Once the accounts get audited. The revised FLA return has to be submitted based on audited accounts by end –September | Annual Return on FLA through an online web based reporing portal needs to be submitted before due date. In the web based reporting system , there is no requirement of submitting the balance sheet and profit and loss statement of the Company. |
| Foreign Currency-Gross Provisional Return (FC-GPR) | FC-GPR is a form filed when the Indian company receives the Foreign Direct Investment and the company allots shares to a person resident outside India. The following would be the cases for issuing capital instruments outside India (a)Bonus issue or Right issue ( directly or through merger and amalgamation of the existing company) (b) Sweat equity shares (c) Cross border merger (d) Employee stock option (e) On conversion of capital instruments | FC-GPR has to be reported not later than 30 days from the date of issue of the capital instruments in the single master form | Document to be attached in he web based form are (a) Declaration by the authorised representative (b) CS certificate (c) Valuation certificate (d) Board Resolution (e) Memorandum of Association , if applicable (f) FIRC and KYC |
| Foreign Currency-Transfer of shares(FC-TRS) | Form FC-TRS is required to be filed for transfer of capital instruments by way of sale between (a)a person resident outside India holding capital instruments in an Indian company on a repatriable basis to a person resident outside India holding capital instruments on a non-repatriable basis; (b) a person resident outside India holding capital instruments in an Indian company on non-repatriable basis to a person resident outside India holding capital instruments on repatriable basis; (c)a person resident outside India holding capital instruments in an Indian company on repatriable basis to a person resident in India. (d) a person resident in India holding capital instruments in an Indian company to a person resident outside India holding capital instruments on repatriable basis. | The form FC-TRS has to be filed with the AD bank within 60 days of receipt/ remittance of funds or transfer of capital instruments whichever is earlier. It has to be filed with the AD bank on receipt of every tranche of payment. The onus of reporting shall be on the resident transferor/ transferee. | Document to be attached in he web based form are as follows – For Transfer by way of Gift: (a)Relevant regulatory approvals, wherever applicable. (b)Consent letter: Consent letter between donar and donee for the transfer to be attached as other attachment. (c)Non-resident declaration. Documents to be attached For transfer by way of sale (a)Transfer agreement along with the consent letter between buyer and seller (b)Valuation Certificate:. (c)Non-resident declaration In case of sale by a non-resident, acknowledgement of FC-GPR/ FC-TRS as applicable for the capital instruments being sold (d)FIRC /Outward remittance certificate and KYC |
| Form FDI LLP-I & FDI LLP-II | Form FDI LLP-I – A Limited Liability Partnership receiving amount of consideration and acquisition of profit shares is required to submit a report in the Form FDI LLP-1 Form FDI LLP-II -A Limited liability Partnership shall report disinvestment/ transfer of capital contribution or profit share between a resident and a non resident (or vice versa) in the Form FDI LLP-II | Form Foreign Direct Investment-LLP-1 is to be reported within 30 days from the date of receipt of the amount of consideration. Form Foreign Direct Investment-LLP-II is to be reported within 60 days from the date of receipt of funds in | Document to be submitted for Form FDI LLP-1:- (a) copy/ies of the FIRC/s evidencing the receipt of the remittance (b) a KYC report in respect of the foreign investor in the format specified in. Document to be submitted in Form FDI LLP-II (a) FIRC / Debit statement/ outward remittance and KYC (b) Relevant acknowledgement letter for the capital contribution being transferrred Valuation certificate (c) Buyer and seller consent letter and transfer agreement (d) Declaration from the Non resident transferor/ transferee |
| Reporting of issue or transfer of convertible note–Form CN | A startup company issuing Convertible Notes ( CNs) to a person resident outside India and Transfer of convertible notes of a start up company by way of sale between a person resident in India and a person resident outside India shall be reported in Form CN | The Form CN has to be filed within 60 days of such issue or transfer. | Documents to be attached for Form CN– (a) A Foreign Inward Remittance Certificate or debit statement as applicable (b) KYC |
| Reporting of ADR/GDR Issues–Form DRR | The domestic custodian shall report the issue/ transfer/ of sponsored/unsponsored depository receipts in Form DRR | The Form DRR has to be filed within 30 days of close of issue | Documents to be attached to Form DRR– (a) A Foreign Inward remittance Certificate( FIRC ) |
| Downstream statement -Form DI | An Indian entity or an investment vehicle making downstream investment in another Indian entity which is considered as indirect foreign investment for the investee company shall file the Form-DI | The Form DI has to be file Form DI within 30 days from the date of allotment of capital instuments | Documents to be attached to Form DI :- (a) Board of director’s resolution (b) Shareholder’s resolution , if any (c) Valuation certificate |
| Reporting of investment by a person resident outside India in an Investment vehicle Form-InVi | An Investment vehicle which has issued its units to a person resident outside India shall file Form InVi with the Reserve Bank | To be reported by the Investment Vehicle receiving investment by a person resident outside India within 30 days of the date of issue of units | Documents to be attached to Form -InVi:- (a)A certificate from Company Secretary (ii) A certificate from SEBI registered Merchant Banker / Chartered Accountant (if applicable) Or A certificate from the Chartered Accountant/Cost Accountant/ approved valuer from the panel maintained by the Central Government, |
Late Submission Fee for delay in reporting
| Amount involved in reporting | Late Submission Fee as % of amount involved | Maximum amount of Late Submission Fees applicable |
| Up to 10 million | 0.05 percent | Rs.1 million or 300% of the amount involved, whichever is lower |
| More than 10 million | 0.15 percent | Rs.10 million or 300% of the amount involved, whichever is lower |
Effect of Covid-19 on reporting requirements
The Reserve Bank of India is yet to announce any relaxation with reporting requirement under Foreign Exchange Management Act,1999.
Although a request has been sent by the Institute of Company Secretaries of India (ICSI) to the RBI for relaxing the timelines of filing various forms including the event based forms without the levy of additional fees/penalty or penal action due to the difficulty faced by the industry in complying RBI reporting requirement.
Stay tuned to the blog for further updates!
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