The RBI is now conducting detailed reviews of Overseas Direct Investments (ODI) made by Indian companies, after outbound corporate investment jumped from $14.5 billion in FY24 to $27 billion in FY26. The central bank’s foreign exchange department has begun sending extensive questionnaires to companies, seeking clarity on fund utilisation, the governance of foreign subsidiaries, and whether the commercial purpose of the investment is genuine. Jurisdictions like Singapore and Dubai are drawing extra attention due to their use in tax-efficient structuring. For Indian entities with an outstanding ODI, this scrutiny arrives at a pointed moment: FLA Return filing for FY 2025–26 is due on the RBI’s FLAIR portal by July 15, 2026 which has now extended to July 31, 2026.
Why This Matters Right Now
Indian companies have been expanding abroad aggressively – helped by FEMA’s flexible framework, which allows a company to commit up to 400% of its net worth to a foreign entity via the Automatic Route, factoring in equity, loans, and guarantees combined. That flexibility has fuelled the surge in outbound capital, but it has also caught the RBI’s attention.
According to recent reports, the regulator is focusing on:
- Mergers and acquisitions structured through overseas subsidiaries
- Foreign subsidiaries holding financial assets or real estate rather than operating businesses
- Equity-heavy structures, since equity lacks the formal repayment obligations and accountability that loans carry
- Round-tripping and layering risks, especially through low-tax hubs
Some authorised dealer banks have already begun asking companies for additional clarification before processing outward remittances – meaning the scrutiny isn’t limited to RBI’s own questionnaires; it’s filtering into everyday banking compliance too.
The FLA Connection
This is precisely why the timing of your FLA (Foreign Liabilities and Assets) Return matters more than usual this year. The FLA Return is the RBI’s annual position statement of every Indian entity’s outstanding foreign assets and liabilities as on March 31 – and it is one of the core data sources the RBI’s Department of Statistics and Information Management uses to build the very picture regulators are now scrutinising more closely.
A few things to keep in mind before the deadline:
- Due date: Originally July 15, 2026, now extended to July 31, 2026, on the FLAIR portal (flair.rbi.org.in) – no offline or email filing is accepted.
- Mandatory even with no fresh activity: if your entity has any outstanding FDI or ODI on its books as of March 31, 2026, you must file – even with zero new transactions during the year.
- Provisional filing is fine: if your audit isn’t complete, file with provisional figures now and submit the revised return by September 30, 2026.
- Penalties for missing it: A Late Submission Fee of ₹7,500 per return, plus FEMA Section 13 penalties of up to three times the amount involved (or ₹2,00,000 where the amount can’t be quantified.
- Missed the deadline? You can still file: the FLAIR portal doesn’t lock you out after July 31. Filing late simply attracts the Late Submission Fee (and FEMA penalty exposure if it drags on) – so if you’re already past due, the right move is to file immediately rather than wait, since every additional day adds to the penalty.
Given that the RBI is actively cross-checking ODI governance and fund usage, discrepancies between your FLA data and your FC-GPR/SMF transaction reporting are more likely to draw a query now than in a routine year. Accurate, on-time filing isn’t just a compliance box to tick – it’s your first line of defence if your ODI structure ever comes under review.
Don’t Forget the APR
The FLA Return isn’t the only annual filing that matters here – if your company holds an Overseas Direct Investment, you’re also required to file the Annual Performance Report (APR) for each foreign entity, under FEMA’s Overseas Investment Rules.
A few essentials on the APR:
- What it covers: the financial position of the foreign entity – including its audited (or unaudited, where permitted) financial statements, and confirmation that the investment remains in force.
- Due date: by December 31 each year, based on the foreign entity’s financial year-end (with some flexibility where the foreign jurisdiction’s accounting year differs from India’s).
- Filed via: the RBI’s FIRMS portal, alongside your other ODI-related filings.
- Why it matters together with the FLA: the FLA Return captures your entity’s overall foreign asset/liability position, while the APR confirms the specific overseas investment is still active and performing as declared. Regulators frequently cross-check the two – so inconsistencies between your FLA figures and your APR disclosures for the same overseas entity are a common trigger for RBI queries, especially in a year where ODI scrutiny is already elevated.
In short: if you have an outstanding ODI, treat FLA and APR as a single compliance calendar, not two separate to-dos.
Ready to expand overseas or already have an outstanding ODI? Talk to our FEMA Experts
Frequently Asked Questions
Q1: What is the deadline for filing the FLA Return in 2026?
The FLA Return for the financial year ending March 31, 2026, was originally due July 15, 2026, but the RBI has now extended the deadline to July 31, 2026, via the FLAIR portal. If audited accounts aren’t ready, you can file with provisional figures and submit a revised return by September 30.
Q2: Why is the RBI scrutinising Overseas Direct Investments now?
Outbound corporate investment rose sharply — from $14.5 billion in FY24 to $27 billion in FY26 — prompting the RBI to verify that investments reflect genuine business activity, assess leverage and foreign exchange exposure, and ensure profits are eventually repatriated to India.
Q3: Does the FLA Return apply if I made no new ODI transactions this year?
Yes. The FLA Return is position-based, not transaction-based. If your entity has any outstanding FDI or ODI on its balance sheet as of March 31, you must file, even without fresh activity during the year.
Q4: What happens if I miss the FLA filing deadline?
Missing the July 31 deadline doesn’t mean you can’t file – the FLAIR portal remains open. You’ll face a Late Submission Fee of ₹7,500 per return, plus a FEMA penalty of up to 300% of the amount involved (or ₹2,00,000 if it can’t be quantified).
Q5: Which jurisdictions is the RBI watching most closely?
Reports indicate Singapore and Dubai are under heightened watch, given their frequent use for tax-efficient overseas structuring by Indian companies.
Q6: Is the APR different from the FLA Return, or the same filing?
They’re different filings with different purposes. The FLA Return is an entity-level snapshot of all foreign assets and liabilities, filed once a year by every entity with outstanding FDI or ODI. The APR is specific to each overseas entity you’ve invested in – it confirms that entity is still active and reports its financial performance. If you have an ODI, both filings apply, and they’re typically cross-checked against each other by the RBI.
How SKP Can Help
S K Patodia & Associates LLP advises Indian companies and LLPs on end-to-end FEMA compliance for outbound investments and ODI structuring. Our support includes:
- FEMA due diligence for outbound investments.
- Assessing ODI eligibility, the 400% net worth limit, and financial commitment structuring across equity, loans, and guarantees.
- Preparing and filing the FLA Return on the FLAIR portal, including provisional filings and the subsequent revised return.
- Reviewing Form FC and UIN filings for accuracy and timely submission.
- Advising on governance structures for overseas subsidiaries and JVs, including the two-layer subsidiary rule.
- Guidance on APR filing obligations and reconciling FLA data with FC-GPR/SMF transaction reporting to pre-empt RBI queries.
- Responding to RBI questionnaires and AD bank clarification requests on existing ODI structures.
- Advisory on repatriation of profits and arm’s-length pricing compliance for overseas transactions.
- Support through FEMA compounding, where past filings need to be regularised.
We hope that the Article has provided you with the required insights into navigating RBI’s tightened scrutiny of overseas investments. If you have any queries or wish to review your specific situation, feel free to get in touch with our team.
