RBI/FEMA: Export Rules Indian Freelancers Can't Ignore

Key takeaways

What actually counts as export of services under FEMA

FEMA treats your work as a service export when three facts align, you are resident in India, your buyer is outside India, and money arrives through legitimate banking rails in a freely convertible currency. Think USD, EUR, GBP, CAD, AUD, SGD. The Reserve Bank of India classifies these as hard currencies.

Examples bring this to life, a Bengaluru developer invoices a New York startup for backend coding and gets USD via ACH, a Mumbai designer bills a Berlin agency and receives EUR via SEPA, a Pune strategist consults for a Toronto firm and gets CAD via FPS, each case is a FEMA compliant service export.

Remember, GST export of services deals with zero rating and the Letter of Undertaking, FEMA is about forex realization and documentation, did money come through a bank, is the purpose code correct, do you have the e-FIRA, keep both systems synced yet separate in your mind.

Regulatory context continues to evolve, for deeper background read RBI releases FEMA 2026 export, import trade regulations and this detailed FEMA 2026 overview.

Export of services under FEMA, the core rules you cannot ignore

Use authorized banking channels only. ACH, SEPA, FPS, wire, or SWIFT are fine, cash, Western Union, crypto, hawala, or friends and family transfers are not.

Receive in freely convertible currency. USD, EUR, GBP, CAD, and similar hard currencies qualify, INR works only in special cases like Nepal or Bhutan arrangements.

Assign the correct purpose code. Your Authorized Dealer bank tags each inward remittance with a FETERS purpose code, services codes start with P, like P0101 for software development, P0802 for design, P0302 for management consulting, P0506 for education and training, mention the intended code in your invoice to guide processing.

Keep the right documents. You need the contract or SOW, the invoice, and the e-FIRA that proves legal inward remittance with date, amount, sender, purpose code, and currency.

Handle third party payments with authorization. If a parent company or payroll vendor pays, collect a signed authorization letter from your client naming the payer and reason.

Document set offs and refunds. Seek bank approval for set offs, and for refunds inform your bank so they adjust e-FIRA and records, otherwise compliance and tax reconciliation break.

Holding foreign currency is permitted. You can hold forex within the realization window, many freelancers time conversion or use hedging tools offered by banks or platforms.

Banks run KYC, AML, and sanctions checks. Keep PAN, Aadhaar, and business documents current, respond quickly to queries to avoid holds.

RBI has notified new FEMA regulations for exports and imports, effective October 1, 2026, see RBI notifies new FEMA regulations for export and import for the latest direction.

Understanding the realization period for export proceeds

The realization period is your countdown clock, for most service exports it is 15 months from the date of export, if you invoice in INR under permitted exceptions the window typically extends to 18 months.

For services, the date of export is the invoice date or the delivery milestone date, if your SOW says final files delivered March 15, that date starts the clock.

If payment misses the 15 month window, banks flag a realization shortfall, you must explain and provide documentation, banks can grant extensions, usually six months at a time, request before the deadline with proof like email threads or contract amendments.

• Track each invoice in a simple sheet, with invoice number, date, client, currency, amount, expected payment date, realization deadline, and status.
• Set reminders at 12 months and 14 months to chase or apply for extension.
• On receipt, record the actual date and e-FIRA number.

For broad regulatory context, review RBI’s FEMA 2026 notification.

How to create a FEMA compliant invoice for service exports

Your invoice is a compliance artifact, not just a payment request, include these essentials:

• Client legal name, full address, and country, prove non resident status.
• Specific service description that maps to a purpose code.
• Amount in foreign currency, USD, EUR, GBP, CAD, or similar.
• Clear payment terms, net 30, due on receipt, or milestone splits.
• Your receiving account details, ACH routing and account for USD, IBAN for EUR SEPA, sort code for GBP FPS, or SWIFT details.
• Invoice date and unique invoice number.
• Contract or SOW reference.
• Purpose code note, for speed, such as P0101 software, P0802 design, P0302 consulting, P0506 training.
• Permitted payment channels, ACH, SEPA, FPS, or SWIFT only.

Once funds land, your bank or platform issues an e-FIRA, save and link it to the invoice, your CA needs it for GST zero rating and income tax filings.

Sample invoice snippet

Invoice #INV-2026-001 | Date, January 15, 2026
To, ABC Corporation, 123 Main Street, Suite 500, New York, NY 10001, USA
Services Rendered, Website design and development, responsive homepage, about page, contact page, as per SOW dated December 1, 2025
Amount Due, USD 5,000.00
Payment Terms, Net 30 days, Due by February 14, 2026
Payment Instructions, Pay via ACH to the USD account, Account Name, [Your Name], Account Number, USXX XXXX XXXX XXXX, Routing Number, XXXXXXXXX, Bank, [Platform or Bank Name]
Contract Reference, SOW-2025-XYZ
Purpose Code, P0802, Design Services
For questions, contact [Your Email] or [Your WhatsApp]

Your FEMA compliance checklist for freelance service exports

Before client onboarding

• Collect client KYC basics, legal name, registered address, country, contact, tax ID.
• Sign a contract or SOW with deliverables, timeline, payment terms.
• Agree on currency and channel, for example USD via ACH, EUR via SEPA.

At the time of invoicing

• Invoice in foreign currency.
• Include all core elements and note the intended purpose code.
• Specify permitted channels, ACH, SEPA, FPS, SWIFT.
• Email the invoice and store a timestamped copy.

On payment receipt

• Confirm authorized channel routing.
• Obtain the e-FIRA within 24 hours and verify details against your invoice.

Record keeping, retain for seven years

• Contracts or SOWs, invoices, email threads, e-FIRAs, bank advices.
• Third party authorization letters, set off approvals, refund documents and adjusted FIRA notes.

Ongoing monitoring

• Track realization windows, set 12 and 14 month reminders.
• Chase overdue payments weekly, request extensions before deadlines.

Tax and compliance sync

• File LUT for GST zero rating through your CA.
• Reconcile e-FIRAs with invoices quarterly, correct purpose code mismatches promptly.
• Provide your CA complete packs for annual filings.

Annual sweep

• Reconcile all inward remittances with e-FIRAs.
• Document reasons for any expired realization without payment.
• Fix mismatches and fill documentation gaps ahead of tax season.

Step by step, from invoice to INR settlement

Step 1, Set up receiving infrastructure. Open accounts with an Authorized Dealer bank or a compliant fintech, learn the purpose codes relevant to your services, for example P0101 for software, P0302 for consulting, P0506 for training.

Step 2, Issue a FEMA compliant invoice. Include service specifics, foreign currency amount, ACH or SEPA or FPS details, and mention the intended purpose code and SOW reference, email it to the client.

Step 3, Client sends payment. Funds travel via local rails, for example ACH, SEPA, FPS, then land in your foreign currency account.

Step 4, Claim payment and get e-FIRA. Your platform or bank issues the e-FIRA within roughly 24 hours, save it to your export docs folder.

Step 5, Hold or convert FX within the realization window. Convert partially or hold to time rates, many platforms provide mid market rates with transparent fees.

Step 6, File and reconcile. Log invoice, receipt date, and e-FIRA number, share packs with your CA for GST and ITR, keep your records audit ready.

Common FEMA mistakes freelancers make and how to fix them

Payment arrives from a different sender. Fix with a client signed third party authorization letter naming the payer and reason, share with your bank or platform to release funds.

Realization period expires. Gather emails, revised timelines, or amendments, request an extension from your bank before the deadline, document outcomes if the client never pays.

Missing or delayed e-FIRA. Follow up the day funds land, resolve KYC or name mismatches, prefer platforms that auto issue e-FIRA within 24 hours.

Wrong purpose code. Ask your bank to correct FETERS records with your invoice and contract proof, write precise descriptions to avoid ambiguity.

Refunds not documented. Confirm refund details via email, process outward remittance through your bank or platform, get adjusted FIRA notes and reconcile net income.

Pro tip, proactive communication and tidy documentation prevent most compliance pain, a simple tracker and habit of saving e-FIRAs will save you hours at tax time.

How Karbon Business simplifies FEMA compliance for freelancers

Karbon Business gives Indian freelancers virtual USD, EUR, GBP, and CAD accounts with local rails, ACH for USD, SEPA for EUR, FPS for GBP, each inward payment generates an automatic e-FIRA within 24 hours, your dashboard links certificates to invoices for effortless reconciliation.

Fees are transparent, a flat 1 percent platform fee, zero FX markup on mid market rates, you can hold foreign currency up to 60 days to time conversion, INR settlement usually arrives within 24 to 48 hours after claiming funds.

Mobile friendly tracking shows invoice status, realization deadlines, and e-FIRA history, support teams understand RBI rules and help with third party authorizations, extensions, and purpose code fixes, response times average under 20 minutes.

Tools and platforms for receiving international payments compliantly

• Karbon Business, local accounts in major currencies, auto e-FIRA, mid market FX, 24 to 48 hour INR settlement, designed for Indian freelancers.
• Wise Business, multi currency accounts with low fees, confirm FIRA process with their Indian partner bank.
• Payoneer, popular with marketplace freelancers, request FIRA from their bank partner when needed.
• PayPal, easy but expensive, higher fees and FX markups, use sparingly for small occasional payments.
• RazorpayX International, compliant inward remittances, suited to larger B2B flows.
• Tazapay and WorldFirst, B2B focused alternatives, verify RBI compliance and FIRA issuance before onboarding.
• OFX and Revolut Business, competitive FX, availability varies, confirm compliance and documentation support.

Resources, glossary, and next steps

Glossary

• Authorized Dealer bank, RBI approved banks that handle forex, for example HDFC, ICICI, Axis, SBI, Kotak.
• FIRA or e-FIRA, certificate of inward foreign remittance, essential for tax and compliance.
• FETERS purpose code, RBI classification for forex transactions, services codes start with P.
• Realization period, time allowed for export proceeds to be received, typically 15 months for services.
• Freely convertible currency, globally tradable currency like USD, EUR, GBP, CAD, AUD, JPY, CHF, SGD.
• Third party payment, someone pays on your client’s behalf, needs authorization.
• Set off, adjusting one invoice against another, requires bank approval and documentation.

Official context and commentary, see RBI releases FEMA 2026 export, import trade regulations, FEMA 2026 details and implications, and A reset of India’s export, import rules.

Support channels, Karbon Business support on WhatsApp, email, support@karboncard.com, phone, 1800-309-8470.

Next steps

• Set up a compliant receiving account, prefer platforms that auto issue e-FIRA.
• Standardize your invoice template and include purpose code hints.
• Audit your last year’s inward remittances, ensure e-FIRA exists for each.
• Coordinate with your CA, confirm LUT, keep GST and FEMA streams in sync.
• Build a cloud folder structure for contracts, invoices, e-FIRAs, emails, bank statements, refunds, and keep it updated.

Wrapping up, FEMA compliance is your safety net

FEMA rules safeguard you and the system, follow authorized channels, invoice clearly, collect e-FIRAs fast, track realization windows, and document exceptions, with a clean process and the right platform support, compliance becomes routine and payments stay smooth.

FAQ

How do I receive USD payments in India as a freelancer under FEMA without issues?

Invoice in USD with clear terms, ask your client to pay via ACH or SWIFT to a compliant account, for example a USD account from Karbon Business, and ensure you get the e-FIRA within 24 hours, this covers purpose coding and legal inward remittance proof.

Is PayPal business payment FEMA compliant for service exports, will I get FIRA?

PayPal can route funds compliantly, but fees and FX markups are high, and FIRA issuance may require coordination with their Indian partner bank, if you need predictable e-FIRA and lower costs, platforms like Karbon Business auto issue e-FIRA and use mid market FX.

Which RBI purpose code should I use for web design, development, and UI or UX projects?

Use P0101 for software development and P0802 for design services, if your scope mixes both, split invoices or describe services precisely so your bank tags the right code, Karbon Business support can help you clarify codes during payment processing.

My US client’s parent company paid my invoice, the name does not match, what should I do?

Send your bank a third party authorization letter from the client, naming the payer and referencing the invoice, once verified the bank releases funds, platforms like Karbon Business can accept and store the letter for future payouts.

What is the realization period for services, and how do I request an extension?

The standard window is 15 months from the invoice or delivery date, if payment is delayed, compile email trails or contract amendments and request a six month extension from your Authorized Dealer bank before the deadline, Karbon Business can flag upcoming deadlines on your dashboard.

Do I need e-FIRA for every inward remittance, how do I get it quickly?

Yes, e-FIRA is mandatory proof of export income, most banks issue it on request, platforms like Karbon Business auto generate it within 24 hours and link to the transaction, save each certificate for seven years for tax and audit readiness.

Are Wise or Payoneer good options for Indian freelancers who want FEMA compliant receipts?

Both can work, confirm FIRA issuance and routing through RBI compliant channels, compare fees and FX spreads, if you prioritize local rails, auto e-FIRA, and transparent pricing, Karbon Business is optimized for Indian freelancers.

Can I hold USD or EUR before converting to INR, is that allowed under FEMA?

Yes, you can hold foreign currency within the realization window, many freelancers hold for weeks to time conversion, Karbon Business allows holding up to 60 days and converts at mid market rates with zero markup.

How do I handle refunds or partial chargebacks under FEMA and keep my records clean?

Document the reason and amount in writing, process the outward remittance through your bank or platform, then obtain an adjusted FIRA or bank note, reconcile net income against the updated certificate, Karbon Business support can guide you through this flow.

What are typical FEMA red flags that cause banks to freeze my payment?

Mismatched sender names, unclear service descriptions, wrong purpose codes, missing KYC, or suspected sanctions hits, prevent issues by keeping KYC current, invoicing clearly with purpose code hints, and sending third party authorization letters when needed.

Do I need a GST LUT for service exports if I am already FEMA compliant?

Yes, GST LUT is separate, it enables zero rated billing for exports, FEMA governs forex receipt and documentation, your CA can file LUT while you handle e-FIRAs and realization tracking, platforms like Karbon Business make the FEMA side easier.

Is PayPal friends and family or crypto acceptable for export payments under FEMA?

No, FEMA requires authorized banking channels, use ACH, SEPA, FPS, wire, or SWIFT into a compliant account, for example via Karbon Business, and always ensure you receive the e-FIRA.

How do I track realization deadlines efficiently for multiple invoices?

Use a simple spreadsheet with invoice date, client, currency, amount, realization due date, and e-FIRA number, set reminders at month 12 and month 14, Karbon Business dashboards surface upcoming deadlines automatically, so you can request extensions in time.