Companies and financial institutions operating in GIFT International Financial Services Centre (GIFT IFSC) have received a major relief.
A fresh clarification issued on Wednesday has confirmed that regulated entities in GIFT IFSC do not have to file their annual Foreign Liabilities and Assets (FLA) return with the Reserve Bank of India (RBI). Instead, the return will be submitted to the International Financial Services Centres Authority (IFSCA).
The move has eased concerns that had emerged after an earlier clarification suggested these entities would have to report directly to the RBI.
Contents
What Is the FLA Return?
The Foreign Liabilities and Assets (FLA) return is an annual report that tracks foreign investments made into Indian entities and investments made by Indian entities abroad.
It includes details such as:
Foreign equity investments in Indian companies.
Overseas investments made by Indian businesses.
External loans, debt, receivables, and other foreign assets and liabilities.
Normally, eligible Indian companies and other entities file this return every year.
The deadline for filing the previous financial year’s return is July 15.
Why Was There Confusion?
In March, an FAQ suggested that GIFT IFSC entities would also have to submit their FLA returns through the RBI.
This raised concerns because it appeared to reduce the authority of the IFSCA, which is the dedicated regulator for financial institutions operating in GIFT IFSC.
Industry experts warned that asking companies to deal with both the RBI and IFSCA could create unnecessary paperwork and reduce GIFT IFSC’s attractiveness as a global financial centre.
New Clarification Protects IFSCA’s Authority
The latest clarification has removed this uncertainty.
Regulated entities operating from GIFT IFSC, including subsidiaries of foreign companies, will now file their FLA returns only with the IFSCA.
Experts say this decision reinforces the legal position that the IFSCA is the single regulator for financial institutions operating in GIFT IFSC.
The IFSCA was established under the IFSCA Act, 2019, while the Foreign Exchange Management Act (FEMA) also limits the RBI’s regulatory powers within the International Financial Services Centre.
Why This Matters for Investors
GIFT IFSC has been developed as India’s international financial hub, offering a business environment that is designed to attract global investment.
Under FEMA rules, investments into GIFT IFSC are treated differently from investments within mainland India.
Because of these special rules, there had been uncertainty over how such transactions should be reported.
The latest clarification removes that confusion and is expected to make compliance easier for investment funds, banking units, finance companies, aircraft and ship leasing firms, and other businesses operating from GIFT IFSC.
The IFSCA has said that although these entities will not file FLA returns with the RBI, investment-related data is still required for compiling India’s Balance of Payments (BoP) statistics.
Detailed instructions on how regulated entities should submit this information to the IFSCA are expected to be issued soon.
The clarification is seen as an important step in preserving GIFT IFSC’s independent regulatory framework while making it easier for global financial institutions to operate from India’s international financial centre.