India Corporate Compliance Q&A Part 2 (2026 Edition)

Comprehensive Overview of RBI FLA Return, GST, TDS, Corporate Tax, and Labor Law Obligations

-Comprehensive Overview of RBI FLA Return, GST, TDS, Corporate Tax, and Labor Law Obligations- Following the Companies Act (MCA/ROC) regulations covered in [India Entity Compliance Part 1] , Part 2 focuses on key annual compliances that Korean parent companies and working-level personnel must manage when operating a local Indian entity. This includes Indian corporate tax filings, foreign exchange regulations, labor laws, and RBI reporting requirements. ▶ [Guide to Terminology Used in Practice] In Indian compliance practice, government forms, online portals, statutes, and filing frameworks are managed exclusively in English. Accordingly, this article prioritizes official English terminology alongside explanations to facilitate understanding. Familiarizing yourself with these English terms will significantly improve communication with local Chartered Accountants (CAs), Company Secretaries (CSs), and government authorities. ▶ [Fiscal Year Guide] Unless specified otherwise, statutory deadlines mentioned in this guide are based on the Indian Fiscal Year (FY: April 1 to March 31 of the following year) . Once an Indian entity is incorporated and business operations commence, managing recurring monthly, quarterly, and annual tax and foreign exchange filings is just as crucial as filing corporate governance documents with the Registrar of Companies (ROC). Korean-invested entities subject to Foreign Direct Investment (FDI) compliance requirements face additional reporting obligations under the Foreign Exchange Management Act (FEMA) and Reserve Bank of India (RBI) regulations, unlike purely local companies. Even if ROC annual filings from Part 1 are complete, missing the July RBI filing or the November Transfer Pricing (TP) reporting obligations can expose the entity to unnecessary administrative and financial risks. Let us examine the essential compliance requirements in Part 2. ♣ [Annual Major Compliance Schedule at a Glance] Deadline Compliance Item Regulatory Body / Details April 30 Form MSME-1 (Outstanding Dues Return) Ministry of Corporate Affairs (MCA) / Report on outstanding dues to Micro and Small Enterprises (H2) June 30 Form DPT-3 (Return of Deposits/Borrowings) Ministry of Corporate Affairs (MCA) / Return of company borrowings and deposits July 15 FLA Return (Foreign Liabilities and Assets) Reserve Bank of India (RBI) / Mandatory for entities with Foreign Direct Investment (FDI) September 30 AGM (Annual General Meeting) Ministry of Corporate Affairs (MCA) / Approval of audited financial statements Sep – Oct Tax Audit Report Income Tax Department (ITD) / Mandatory for entities exceeding statutory turnover thresholds (Subject to deadline extensions) Oct – Nov ITR-6 (Corporate Income Tax Return) Income Tax Department (ITD) / Final corporate income tax return filing (Subject to deadline extensions) October 31 Form MSME-1 (Outstanding Dues Return) Ministry of Corporate Affairs (MCA) / Report on outstanding dues to Micro and Small Enterprises (H1) November 30 Form 3CEB (Transfer Pricing Report) Income Tax Department (ITD) / Mandatory for entities engaging in international transactions with overseas parent/associated enterprises December 31 GSTR-9 / GSTR-9C (GST Annual Return & Reconciliation) Central Board of Indirect Taxes and Customs (CBIC) / Annual indirect tax reconciliation and audit report ※ Note: Official filing deadlines are subject to extension or modification based on notifications issued by government authorities (CBDT, GSTN, MCA, etc.) and should be verified annually. 1. Foreign Exchange & RBI Compliance: The Easily Overlooked FLA Return An Indian entity established through foreign direct investment from a Korean parent company (FDI Company) must fulfill periodic foreign exchange reporting obligations to the Reserve Bank of India (RBI) , separate from its ROC filings. ▶ Core Requirement: FLA Return (Foreign Liabilities and Assets Return) Target Entities: All Indian companies that have received Foreign Direct Investment (FDI) or hold foreign assets/liabilities in any preceding financial year. Filing Deadline: On or before July 15 annually. Submission Method: Online submission via the designated RBI portal (FLAIR Portal). ▶ Practical Q&A & Guidelines Q1. We reported the parent company’s equity capital during ROC annual filings. Do we still need to file with the RBI? Yes, it must be filed separately. The Ministry of Corporate Affairs (MCA/ROC) and the Reserve Bank of India (RBI) operate under distinct regulatory authorities and governing laws. Even if equity details were submitted in ROC filings, the FLA Return due on July 15 must be filed independently . Non-compliance with FEMA regulations may necessitate a Compounding Procedure (a voluntary settlement procedure for regularizing violations) , which involves substantial monetary penalties. Q2. What if our financial audit is not completed between March 31 year-end and July 15? Submit the return based on unaudited financial statements first, then update it later. Statutory audits are frequently ongoing in mid-July. Practical guidelines stipulate submitting the FLA Return by July 15 using the company's unaudited financial accounts, followed by a revised FLA filing once the statutory audit is finalized. Q3. Does a company incorporated after July 15 need to submit an FLA Return? If foreign direct investment or foreign assets/liabilities exist during the relevant fiscal year (April 1 to March 31), the entity becomes subject to FLA Return filing in the subsequent reporting cycle. Initial filing timelines vary depending on incorporation dates and capital inflow timing; consulting a local Chartered Accountant (CA) during the first year is recommended. ▶ Practical Tip Many Korean companies mistakenly view RBI reporting as a "one-time setup procedure" required only during initial investment. However, the FLA Return is an annual recurring obligation for as long as foreign liabilities or assets exist. Any changes in parent company borrowings, capital increases, or shareholding structures modify the reporting data, making it advisable to review this alongside the annual financial audit. 2. Tax Compliance: Corporate Tax, Transfer Pricing (TP), GST, and TDS India’s tax regime is broadly divided into Direct Taxes (Corporate Tax, TDS) overseen by the Income Tax Department (ITD) and Indirect Taxes (GST) administered by the Central Board of Indirect Taxes and Customs (CBIC). ① Tax Audit & Corporate Income Tax Return (ITR-6) Tax Audit Report (Form 3CA/3CB & Form 3CD): Entities exceeding statutory turnover thresholds must obtain a Tax Audit Report from a Chartered Accountant and file it with the ITD. Corporate Tax Return (ITR-6): Filed with the Income Tax Department following the completion of the Tax Audit. Practical Notes: Tax Audit Reports are typically due in September–October, followed by ITR-6 filings in October–November. However, the Central Board of Direct Taxes (CBDT) frequently issues notifications extending these deadlines, making real-time verification of official announcements essential. ② Transfer Pricing Report (Form 3CEB) Filing Deadline: On or before November 30 annually. Target Entities: Entities engaging in international transactions (purchase/sale of goods, management fees, royalties, intercompany loans, etc.) with a Korean parent company or overseas Associated Enterprises (AEs). Key Focus: Entities must demonstrate that intercompany transactions comply with the Arm's Length Principle (ALP) . Indian subsidiaries frequently conduct Year-End Adjustments at fiscal year-end based on TP benchmarking results. Q. How should we handle intercompany transaction price changes during the year? Transactions between the Korean parent and the Indian subsidiary must adhere to the Arm's Length Principle. If price adjustments occur mid-year due to market fluctuations, the underlying rationale (cost analyses, benchmarking data, contract amendments) must be documented in advance. Final appropriateness is re-examined during the year-end Transfer Pricing analysis. ③ Goods and Services Tax (GST) & Annual Reconciliation Filing Deadline: Annual GST Returns ( GSTR-9 ) and Reconciliation Statements ( GSTR-9C ) must be submitted on or before December 31 following the end of the relevant financial year. Practical Focus: This process reconciles monthly GSTR-1 (Outward Supplies) and GSTR-3B (Summary Return) filings against audited financial statements. Because Input Tax Credit (ITC) claims are managed strictly based on GSTR-2B (auto-populated inward supply details), regular monitoring is necessary to identify non-reporting or delayed reporting by suppliers. ④ Tax Deducted at Source (TDS) Annual Management Operational Overview: When making payments to vendors (rent, professional fees, interest, etc.), tax must be withheld at prescribed rates, deposited to the credit of the Central Government generally by the 7th of the following month, and reported via quarterly TDS Returns (Form 26Q, Form 27Q, etc.). Practical Focus: Failing to generate and issue TDS Certificates (Form 16A) via the Income Tax Department’s TRACES portal to vendors on time can result in commercial disputes or withheld payments. 3. Labor Law & Human Resources (HR) Compliance Labor legislation in India varies across different States, meaning employer obligations depend on the local jurisdiction of the workplace. ① POSH (Prevention of Sexual Harassment) Annual Report Filing Deadline: On or before January 31 annually (submitted to the designated District Officer). Key Obligation: Under the POSH Act, establishments meeting statutory employee thresholds must formally constitute an Internal Committee (IC) , conduct regular sensitization training, and file an annual report detailing complaints received and resolved. ② EPF (Employees' Provident Fund) & ESIC (Employees' State Insurance) Compliance Framework: In addition to monthly contributions, annual reconciliations of employee registers and accumulated contribution records must be maintained. Expat Benefits: Expatriates assigned from Korea who meet the criteria under the Korea-India Social Security Agreement (SSA) may obtain an exemption from Indian EPF contributions upon obtaining a Certificate of Coverage (CoC). ③ PTax (Professional Tax) & LWF (Labour Welfare Fund) State-Specific Regulations: Filing frequencies, rates, and thresholds vary by State (e.g., Maharashtra, Karnataka, Tamil Nadu). Compliance schedules must be verified against the local state regulations where the business operates. ▶ Key Action Items Across Tax, Foreign Exchange, and Labor Laws Documentation for Parent Company Transactions: When remitting management fees or technical service fees to the parent company, robust supporting documentation (agreements, service evidence, email correspondence, deliverables, work logs) must be archived to mitigate risks of tax deduction disallowances or withholding tax disputes. Monitoring State-Level Regulatory Amendments: In addition to Central Government statutes, local State-level Labour Welfare Fund (LWF) contributions and Professional Tax (PTax) rules require continuous tracking. Conclusion: Building an Internal Compliance Management Framework As illustrated in Part 1 (Company Law/ROC) and Part 2 (Taxation, Foreign Exchange, and Labor Laws), India's annual compliance framework operates as an interconnected timeline. Furthermore, managing timelines between the head office and local entity requires structural care due to the difference between Korea's financial year (Jan 1 – Dec 31) and India's fiscal year (Apr 1 – Mar 31). While outsourcing execution to professional firms such as Chartered Accountants (CAs) and Company Secretaries (CSs) is practical, ultimate legal liability and risk rest with the company and its directorship . Regulatory frameworks, filing forms, and compliance relief notifications from Central and State authorities are continuously updated. Rather than relying entirely on third-party advisors without oversight, companies must internally master the annual compliance cycle and monitor regulatory developments. Establishing a systematic internal archive to store filed e-Forms, Acknowledgments (ACKs), and Statutory Audit Reports by fiscal year forms the cornerstone of sustainable business operations in India.