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Reserve Bank of India Introduces Changes To Annual Reporting Of Indian Companies

24 Mar 2011

Every Indian Company which has either received or made foreign investment is currently required to submit Part B to Form FC - GPR ("Part B") detailing the outstanding position of foreign direct investments, portfolio investments, overseas direct investments ("ODI"), etc on June 30 every year. The RBI has replaced the existing Part B with an Annual Return on Foreign Liabilities and Assets ("ARF"). This form is to be filed by July 15th every year. Taxand India looks at the new reporting requirement and the key features of the ARF and the differences with Part B.

The ARF proposes to capture more data as compared to the Part B and has been introduced with an aim to align with international best practices.

The ARF is divided into three sections:

  • Section I pertains to the identification particulars which includes the credentials of the company, the sector and industry to which it belongs, paid-up capital and free reserves and surplus.
  • Section II focuses on Foreign Liabilities deals with investments by non-residents into Indian companies under the FDI route as well as the portfolio investment scheme route, and other liabilities in the form of Financial Derivatives, Trade credits, etc.
  • Section III concerns Foreign Assets to direct Investments made overseas under the ODI scheme as well as the outstanding investments other than those made under ODI scheme. The changes in this section are similar to the ones introduced in the section on Foreign Liabilities, including the bifurcation of Equity and Other Capital, Split of investments between enterprises where the Indian Company holds 10% or more and less than 10%, etc.

Taxand's Take

The new reporting requirement is significantly different as compared to the existing Part B and seeks detailed information on the investments received and made by Indian enterprises. Interestingly, it specifically states that the information provided will be kept confidential. Furthermore, the Form has introduced a new methodology of valuation and the concept of residence. The concept of residence in particular could be onerous to satisfy; although, it does not seem to apply for foreign direct investment just as yet.

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Mukesh Butani
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