RBI Compliances to be done by companies in India
Over the years, India has liberalized its FDI policy and now, no prior approval of RBI or government is required for making investment in most of the sectors in India with exception to few sectors. This has resulted in more and more foreign company registration in India and huge increase in FDI in India in all the sectors.
In order to monitor these cross border transactions, RBI has prescribed proper compliance mechanism to be in place. Accordingly, whether any foreign company is setting up business in India or making investment in India or Indian companies making investment overseas India or Indian companies making borrowing from abroad in the form of external commercial borrowings, certain compliance need to be done before RBI.
Further, aforesaid RBI compliance need to be done by every Indian company whether it is wholly owned subsidiary company or normal Indian company.
1) Filing of Annual Return on Foreign Liabilities and Assets [ FLA Return]
a) FLA return needs to be filed by every companies in India which has either received FDI and/or made FDI abroad in any of the previous years including current year.
b) This form needs to be filed even if no fresh FDI received in current year but the company has outstanding FDI/ODI
c) Due date for filing form FLA is 15th June of every year.
d) This return may be submitted on the basis of unaudited (provisional) financial statements and books of accounts in case books are not audited before the due date of its submission. Further, revised FLA can be filed before 30thSeptember on basis of audited books of account in case there is any revision.
e) Non-filing of the return before due date will attract penalty of thrice the sum involved in the contravention. In case if the amount is not quantifiable, then a penalty of Rs. 2,00,000/- has to be paid and if the contravention is continuing then Rs. 5,000/- per day till the default continues.
In case of private limited company registration in the form of subsidiary company, post incorporation, parent company subscribes to shares of Indian subsidiary and brings share capital money into Indian company’s bank account. Accordingly, Indian subsidiary need to file form FLA intimating about amount of share capital money received and shares subscribed by parent company.
2) Filing of Annual Performance Report [ APR Return]
a) Any Individual Resident in India (RI) or an Indian Party (IP) which has made an Overseas Direct Investment (ODI) in any Joint Venture or wholly owned subsidiary outside India, has to submit an APR return in Form ODI Part III to the Reserve Bank in respect of each such investment.
b) Form APR needs to be filed every year mandatorily.
c) Due date for filing form APR is 30th December of every year.
3) External Commercial Borrowings Return [ECB-2 Return]
a) Every Borrowers of ECB needs to report details of external commercial borrowings by filing monthly returns to RBI in form ECB-2 through AD Category 1 Banker.
b) Form ECB-2 returns are required to be filed within 7 days of end of the month.
c) Noncompliance or delay may lead to penalty and late fees as given below:
§ Rs 5000 for delay up 30 days.
§ Rs 50,000 for delay upto 3 years- Rs. 50,000/- per year.
§ Delay beyond 3 years- Rs. 1,00,000/- per year.
4) Filing of Single Master Form (SMF)
a) For smooth reporting of FDI transactions, now RBI has merged multiple reporting forms like FC-GRP, FC-TRS, LLP-I, LLP-II, CN, ESOP, DI, DRR forms into single master form (SMF)
b) Accordingly, now instead of reporting in separate forms, reporting will be done through SMF.
c) Various due dates of reporting of various forms are as under:
i. Reporting of FDI in form FCGPR through SMF- within 30 days of date of issue.
ii. Reporting of FDI in form FCTRS through SMF- within 60 days of date of transfer or date of remittance whichever is earlier.
iii. Reporting of FDI in form LLP-I through SMF- within 30 days of date of remittance
iv. Reporting of FDI in form LLP-II through SMF- within 60 days of date of remittance
v. Reporting of CN through SMF- within 30 days of date of issue/transfer
vi. Reporting of FDI in ESOP through SMF - within 30 days of date of issue of ESOPs
vii. Reporting of FDI in DI through SMF- within 30 days of date of allotment of equity instruments
viii. Reporting of FDI in DDR through SMF- within 30 days from the date close of issue.
5) Filing of Form FC-GPR
a) In case of subsidiary company registration in India, Indian subsidiary issues shares to parent company and receives foreign direct investment in the form of share subscription money. Such company needs to file form FC-GPR in Single Master Form.
b) Similarly, when Indian company issues bonus shares or right shares or any shares on conversion of External Commercial Borrowings to a foreign investor, such Indian company needs to file form FC-GPR in Single Master Form.
c) Due date of filing form FC-GPR is within 30 days of issue of shares.
6) Filing of Form FC-TRS
a) When shares of Non Resident are transferred to Resident, in such cases, Form FC-TRS needs to be filed in single master form.
b) This form needs to be filed by the transferor/transferee resident in India, through authorized dealer bank (AD Category-1 Bank)
c) This form needs to be submitted within 60 days from the date of transfer or date of remittance whichever is earlier.
7) Filing of Form ODI
a) This form needs to be filed by an Indian party and a Resident individual making an investment in Joint Venture or Wholly Owned subsidiary outside India.
b) This form needs to be filed within 6 months of making investment in overseas Joint Venture or Wholly Owned Subsidiary.
Therefore, every company in India must keep in mind all the aforesaid compliances and its due dates in order to avoid legal hassles.
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