FLA Return Filing for NRI Investment via NRO Account: Is It Mandatory? 

The FLA return NRI NRO investment applicability query frequently  arises for NRIs holding investments in India through an NRO account. Many are unsure whether such indirect foreign investments require annual FLA return filing with the RBI. This blog explains the rules, process, and compliance requirements for NRIs making investments via NRO accounts.

 Abstract   

• FLA return is an annual RBI compliance for companies/LLPs with foreign investment.

• NRO account investments can trigger indirect foreign investment status.

• FLA filing is mandatory if the entity has foreign direct or indirect investment.

• RBI filing deadline is 15 July every year via the online FLAIR portal.

• Non-compliance can lead to penalties under FEMA regulations.

What is an FLA Return?  

The Foreign Liabilities and Assets (FLA) Return is an annual report submitted to the Reserve Bank of India (RBI) under FEMA, 1999.

• It records foreign assets, liabilities, and investment positions of Indian entities.

• Both companies and LLPs receiving foreign direct investment (FDI) or making overseas investments must file it.

• Filing is done through the FLAIR portal of RBI.

Understanding NRO Accounts and NRI Investments  

An NRO (Non-Resident Ordinary) account is used by NRIs to manage income earned in India,such as rent, dividends, or pension.

• Funds in an NRO account are usually from Indian sources but can be invested in Indian businesses or assets.

• If an NRI invests in an Indian entity via NRO funds, it can sometimes be treated as indirect foreign investment under RBI rules.

FLA Return NRI NRO Investment Applicability  

When It Is Mandatory ? 

FLA return filing becomes mandatory if:

• The Indian company/LLP has any outstanding foreign investment at the end of the financial year.

• The NRI’s NRO account investment qualifies as a foreign holding under FEMA definitions.

• Even if the NRO funds are from Indian income, the investor’s residential status under FEMA is “Non-Resident.”

Example:
If an NRI uses NRO funds to subscribe to equity shares in an Indian private limited company, the RBI may still treat this as foreign investment for FLA purposes.

When It May Not Be Required ?

FLA filing is not required if:

• The Company holds no outstanding foreign investment as of 31 March.

• The NRI investment was withdrawn/sold before the financial year-end.

• The NRO account is dedicated entirely for personal expenses and not for capital investment.

RBI’s Definition of Foreign Investment in This Context  

According to FEMA (Non-debt Instruments) Rules, 2019:

“Foreign investment” means any investment made by a person resident outside India, directly or indirectly, in capital instruments of an Indian company or to the capital of an LLP.

This definition includes NRIs, even if they invest through an NRO account. The RBI focuses on the investor’s residency status, not the source of funds.

Step-by-Step Guide to FLA Return Filing  

1.Check Applicability

• Confirm if the NRI/NRO investment is treated as foreign investment under FEMA rules.

• Review shareholding patterns as on 31 March.

2.Gather Information

• Details of foreign liabilities (FDI, ECBs, etc.).

• Foreign assets held abroad.

• Balance sheet and audited financials.

3.Register on the FLAIR Portal

• Access RBI’s FLAIR portal.

• Create a login ID using company/LLP details.

4.Fill out FLA Return Form

• Enter investment details, foreign liabilities, and assets.

• Provide sectoral classification and investor information.

5.Submit Before the Due Date

• The deadline is 15 July each year.

• If audited accounts are not ready, file with unaudited data and revise later.

6.Retain Acknowledgement

• Keep the FLAIR acknowledgment as proof of compliance.

Penalties for Non-Compliance  

Under Section 13 of FEMA, 1999:

• Monetary penalty up to ₹2,00,000 for the first default.

• Additional ₹5,000 per day for continuing contravention.

• RBI can also demand compounding of offences for regularisation.

Best Practices for NRIs and Indian Entities  

• Review investment structure annually to check FEMA classification.

• Maintain clear documentation of source of funds for NRO investments.

• Consult a FEMA expert to determine FLA applicability early.

• File on time to avoid late fees and compliance risks.

Final Thougths  

FLA return NRI NRO investment applicability depends on FEMA residential status, not just fund source. If applicable, file by 15 July to avoid penalties. EbizFiling can manage your FLA return end-to-end, ensuring timely and error-free compliance.

Suggested Read :

FLA Return Filing Online to RBI in India

Step-by-Step Guide to FLA Return Filing

Applicability of FLA Return – Who Needs to File?

FLA Return Filing Fees and Packages

FAQs on FLA Return Filing

FAQs