Key takeaways
- Your effective FX rate is what truly matters, it is the INR that lands in your bank divided by the foreign currency sent by your client, not the shiny quoted rate.
- The total landed amount method reveals every hidden cost, FX spread, platform fee, GST, SWIFT deduction, and timing effect in one simple number.
- A fee plus FX spread calculator helps you estimate costs before invoicing, so you can choose the platform that delivers the most INR per dollar.
- SWIFT routes often add unpredictable correspondent bank charges, local rails like ACH, SEPA, and FPS are faster, cheaper, and more transparent.
- GST at 18% applies only on the service fee, never on the principal remittance amount.
- Compare platforms at the same time, for the same invoice amount, with the same mid market benchmark, then decide using the effective FX rate.
- Platforms like Karbon Business convert at mid market rates, charge flat fees, and issue e FIRA quickly, which makes both compliance and comparison easier.
Why your USD shrinks by the time it becomes INR
You invoice a US client for $2,000, they pay on time, you expect ₹167,000 at a mid market rate of 83.50, and then you see only ₹161,000 in your account. That missing money is not magic, it is a mix of FX spreads, platform fees, SWIFT deductions, and GST. Once you learn to calculate your effective FX rate, you can see through marketing claims, compare platforms fairly, and keep more of your earnings.
Effective FX rate equals INR actually credited divided by foreign currency sent. Everything else is noise.
Understanding FX rates and payment components
The mid market rate
The mid market rate is the real exchange rate between two currencies, the one you see on Xe or Google. It has no markup and no margin. Think of it as the wholesale price of currency. If the mid market rate is 83.50 INR per USD, that is your baseline to judge all platforms.
Platform offered rate
Platforms usually quote a rate below the mid market rate and keep the difference as FX spread. If the mid market is 83.50 and a platform quotes 81.50, the 2.00 INR gap per dollar is their margin, so ₹4,000 disappears on a $2,000 invoice before fees.
FX spread or markup
FX spread per unit equals mid market rate minus platform rate. Using the example above, 83.50 minus 81.50 equals 2.00 INR per USD. Many services market zero fees, but hide profit in the spread, which makes comparisons tricky unless you track the effective rate and the spread. For a quick primer, see how to calculate FX impact on revenue.
Platform fees and charges
- Percentage fees: For example, 1% on ₹167,000 is ₹1,670.
- Fixed transfer fees: A flat charge like ₹500 per payout.
- SWIFT and intermediary bank charges: Unpredictable deductions, typically ₹500 to ₹1,500, explained here in this SWIFT fee breakdown in India.
- Card processing fees: If the client pays by card, expect 2% to 3% extra.
- Timing costs: If the platform delays conversion, you carry the market movement risk.
GST on payment services
GST at 18% applies only on service fees charged by the Indian entity, not on the principal conversion. If a fee is ₹1,640, GST is ₹295, added to your total cost, while the ₹167,000 remains untaxed.
Settlement routes and hidden costs
- SWIFT transfers: Multiple correspondent banks, opaque fees, slower settlement, often three to seven days.
- Local payment rails: ACH in the US, SEPA in Europe, FPS in the UK, faster and cheaper. Read this comparison of ACH vs SWIFT fees in India.
Always ask whether your platform offers local rails with virtual accounts, or relies on SWIFT for every transfer.
The total landed amount method to calculate effective FX rate India
Core concept
Effective FX rate equals INR credited divided by foreign currency received. This one number bakes in spreads, fees, taxes, and deductions. Compare it with the mid market rate to know your true cost.
Step by step walkthrough
Invoice: $2,000, mid market: 83.50 INR per USD.
- Step 1: Invoiced amount: $2,000.
- Step 2: Assume no SWIFT deduction before the platform.
- Step 3: Platform rate: 82.00. Converted amount: ₹164,000.
- Step 4: Platform fee 1%: ₹1,640.
- Step 5: GST 18% on fee: ₹295.
- Step 6: Correspondent bank deduction: ₹1,000.
- Step 7: Landed INR: ₹164,000 minus ₹1,640 minus ₹295 minus ₹1,000 equals ₹161,065.
- Step 8: Effective FX rate: ₹161,065 divided by $2,000 equals 80.53 INR per USD.
Against the mid market 83.50, you lost 2.97 INR per USD, roughly 3.6% of your invoice.
Real world example comparison
Assume mid market 83.50, invoice $2,000.
| Platform | FX rate quoted | Platform fee | GST 18% | SWIFT fee | INR landed | Effective rate | Cost vs mid market |
|---|---|---|---|---|---|---|---|
| Platform A | 82.00 | 1% (₹1,640) | ₹295 | ₹1,000 | ₹161,065 | 80.53 | 3.6% |
| Platform B | 83.00 | 1.5% (₹2,490) | ₹448 | ₹500 | ₹161,570 | 80.78 | 3.3% |
| Platform C | 83.50 | ₹1,640 flat | ₹295 | ₹0 | ₹165,029 | 82.51 | 1.2% |
That is a difference of about ₹4,000 on a single payment. For more context on measuring the full impact, review this explainer on calculating FX impact on revenue.
Build a fee plus FX spread calculator India
Step by step calculator build
- Step 1: Capture the mid market rate, for example 83.50.
- Step 2: Note the quoted platform rate, for example 82.00.
- Step 3: FX spread per USD: 83.50 minus 82.00 equals 1.50.
- Step 4: Spread percentage: 1.50 divided by 83.50, about 1.8%.
- Step 5: List explicit fees: platform fee, GST on fee, SWIFT deductions, card fees if any.
- Step 6: Convert all fees to INR at the mid market rate if they are in foreign currency.
- Step 7: Spread loss on $2,000 equals ₹3,000, add total fees for your total cost.
- Step 8: Express total cost as a percentage of the mid market invoice value.
Formula recap: Total cost percentage equals spread loss in INR plus total fees in INR, divided by invoice amount at mid market, multiplied by 100.
Quick checklist for your calculator
- Invoice amount and currency pair
- Mid market snapshot at a specific time
- Platform quoted rate taken at the same time
- Platform fee, percentage or flat
- GST at 18% on the fee only
- SWIFT or intermediary bank charges
- Card processing fee if applicable
- Expected holding period or conversion delay
With these inputs in a simple sheet, you can estimate your effective FX rate in under two minutes.
Compare payment platforms accurately
Fair comparison checklist
- Use the same invoice amount, for example $2,000 USD to INR.
- Capture all rates within the same five minute window.
- Include every fee, spread, GST, SWIFT deduction, and card cost.
- Account for settlement time and rate movement risk.
- Consider compliance support, e FIRA generation, and customer service.
Common gotchas to watch for
- Hidden spreads behind zero fee claims: Always benchmark against the mid market rate.
- Unpredictable SWIFT deductions: Today ₹500, tomorrow ₹1,500, with no warning.
- GST mistakes: Apply 18% only on service fees.
- Card traps: Card processing fees plus chargeback risk often outweigh convenience.
- Delayed conversion risk: A few days of rate movement can wipe out any fee advantage.
Practical tools and templates for freelancers
Google Sheets template structure
Inputs: Invoice amount, currency pair, mid market rate, quoted rate, platform fee, GST rate, SWIFT estimate, card fee.
Calculations: Conversion at platform rate, fee and GST in INR, total deductions, net INR credited, effective FX rate, mid market benchmark, total cost in INR, cost percentage.
Outputs: Effective FX rate, total cost percentage, INR lost to spreads and fees, comparison with mid market.
Daily workflow for rate tracking
Before invoicing:
- Check the mid market rate on Xe.
- Note quotes from two or three platforms.
- Update your sheet, calculate the effective FX rate for each option.
- Pick the platform with the lowest total cost.
- Send the invoice with the chosen payment route.
After receiving payment:
- Record the exact INR credited and the foreign currency amount.
- Verify the predicted effective rate against the landed rate.
- Adjust your sheet if unexpected fees appear.
- Refine your platform choices for future invoices.
Quick reference checklist
- I have the current mid market rate.
- I captured platform quotes at the same time.
- I know the platform fee and added 18% GST on it.
- I confirmed SWIFT or intermediary charges.
- I checked if the platform uses local rails.
- I know the settlement timeline.
- I computed my effective FX rate via the landed amount method.
- I compared it against the mid market benchmark.
Best payment platforms for receiving international payments in India
- Karbon Business: Built for Indian freelancers and small service firms, offers virtual USD, GBP, EUR, CAD accounts with local rails, converts at mid market rates with a flat 1% platform fee, auto generates e FIRA, typical INR settlement in 24 to 48 hours, no setup or maintenance charges, option to hold currency for up to 60 days.
- Wise Business: Multi currency accounts with local bank details and transparent fees, good for frequent smaller collections.
- Payoneer: Receiving accounts for multiple currencies, fees and spreads vary, always compute the effective rate.
- PayPal: Extremely convenient, generally higher FX markup and fees, use only if clients insist.
- Razorpay X International: Emerging solution for Indian collections, verify current pricing and features.
How Karbon Business works for Indian freelancers
Example transaction
Invoice $2,000, mid market 83.50.
- Conversion at mid market: ₹167,000.
- 1% platform fee: ₹1,670.
- GST at 18% on fee: ₹301.
- INR credited: ₹167,000 minus ₹1,670 minus ₹301 equals ₹165,029.
- Effective rate: ₹165,029 divided by $2,000 equals 82.51 INR per USD, about 1.2% all in cost versus mid market.
Settlement and compliance
Funds typically settle to your Indian bank within 24 to 48 hours after you claim the payout. The platform auto generates e FIRA within 24 hours to keep you compliant with RBI and FEMA. Clients pay you via local rails like ACH, SEPA, or FPS, which avoids SWIFT deductions and stabilizes your effective FX rate.
Conclusion and next steps
Stop guessing and start measuring. Use the total landed amount method after each payout, build a simple fee plus FX spread calculator to estimate costs upfront, compare platforms on the same day with the same invoice amount, and always benchmark against the mid market rate. Before your next invoice, ask every platform for the exact rate, all explicit fees, SWIFT or intermediary costs, GST treatment, settlement timelines, and compliance features like e FIRA. Run the numbers, pick the route that delivers the most INR per dollar. If you want mid market rates, flat fees, fast settlement, and automatic documentation, consider Karbon Business, then verify with your own effective rate calculations.
FAQ
What is the effective FX rate for freelancers in India, and how do I compute it exactly?
The effective FX rate is the INR that actually lands in your bank divided by the foreign currency your client sends. For example, if $2,000 becomes ₹161,065 after all fees and deductions, your effective rate is 80.53 INR per USD. This single metric bakes in FX spreads, platform fees, GST, and SWIFT charges, so it is the only fair way to compare platforms.
Which is the best way to receive international payments in India without losing a lot in fees?
Use platforms that offer local rails like ACH, SEPA, or FPS, convert at mid market rates, and charge transparent flat fees. For example, many freelancers use Karbon Business to get virtual USD, GBP, and EUR details, avoid SWIFT deductions, and pay a flat 1% service fee with GST applied only on the fee.
How do I figure out hidden FX markup versus explicit platform fee?
Compare the quoted rate against the mid market rate at the same time. The difference per USD is the FX spread. Multiply that spread by your invoice amount to see the hidden FX cost in INR. Then add explicit fees and GST to get the total cost. This is exactly what a fee plus FX spread calculator does.
If my client pays via SWIFT, how much will banks deduct on the way to India?
Correspondent banks usually deduct ₹500 to ₹1,500 per transfer, sometimes more, and it is unpredictable. This variability makes your effective FX rate worse and harder to forecast. When possible, ask the client to pay to your local USD, GBP, or EUR account provided by a platform like Karbon Business, then convert to INR without SWIFT deductions.
Do I need to add GST on the full remittance or only on the service fee?
GST at 18% applies only on the platform’s service fee charged by the Indian entity, never on the principal foreign currency amount. If the fee is ₹1,640, GST is ₹295, and the total deduction becomes ₹1,935. Always verify GST is applied correctly, or your cost estimates will be off.
How can I estimate my take home INR before I send the invoice?
Use a simple spreadsheet. Capture the mid market rate and the platform’s quoted rate at the same time, list all fees including GST and any expected SWIFT deductions, then compute the converted amount at the quoted rate and subtract all costs. The remaining INR divided by the invoice amount gives your predicted effective FX rate. Platforms like Karbon Business simplify this by converting at mid market and using flat fees.
Is it better to get paid by card or by bank transfer for overseas clients?
For you, bank transfer is usually better. Card payments add 2% to 3% processing fees, and they carry chargeback risk that can freeze or reverse funds. Bank transfers via ACH, SEPA, or FPS to your virtual account are cheaper, safer, and typically faster to settle in INR.
How fast will I get INR in my Indian bank after the client pays?
Local rails usually settle in 24 to 48 hours after you claim funds, while SWIFT can take three to seven days. Faster settlement reduces rate risk and makes your effective FX rate more predictable. Many freelancers report 24 to 48 hour settlement with platforms such as Karbon Business.
What documents are required to start receiving international payments as a freelancer in India?
Typically PAN, masked Aadhaar, three months of bank statements, and a basic online profile or portfolio. Approval often takes two to four working days. After each payment, ensure you receive an e FIRA or FIRC for compliance. Platforms like Karbon Business auto generate e FIRA within about 24 hours.
How do I compare PayPal, Payoneer, Wise, and Karbon Business fairly for my $2,000 invoices?
On the same day, record the mid market rate and each platform’s quoted rate within a five minute window, list all fees, include GST and any SWIFT deductions, and compute the effective FX rate using the landed amount method. The platform that delivers the highest INR per dollar wins, regardless of marketing claims.
Can I hold USD or EUR and convert later if the INR rate looks bad today?
Yes, some platforms let you hold currency for a period, which can help if you expect a favorable move. There is always market risk. If the rupee weakens further, you lose more when you finally convert. If you hold, track the mid market daily and compute the effective FX rate at conversion time, not at the time of client payment.
What is the simplest way to ensure I stop overpaying on FX and fees as a freelancer in India?
Adopt a routine. For every invoice, log the mid market rate, capture platform quotes, calculate the predicted effective FX rate, and pick the best option. After payout, compute the actual effective rate and update your sheet. Consider platforms that convert at mid market with flat fees and local rails, for example Karbon Business, then verify with your own math.
