Refunds 2 Reversals: What Indian Freelancers Must Know

Key takeaways

Refund vs reversal in international transfers: what it really means

Refund and reversal sound similar, but they operate at different stages with different success rates, costs, and risks. A reversal attempts to cancel or recall funds before they are credited to your account. A refund returns money after it’s already credited, via a new outbound transfer.

• Reversal: Payment still in flight or pending at the beneficiary bank, initiated by the sender’s bank or provider, typically 1–10 business days, success depends on beneficiary bank cooperation.
• Refund: Payment already credited to your account, initiated by you or mutually agreed with the client, typically 5–21+ business days, exposes both parties to fees and FX changes.

Think of it like a relay race. You can call the baton back while it’s being passed. Once you’re holding it, you must hand it back yourself.

How cross border money moves and why timing matters for reversals

ACH (US), SEPA (EU), FPS (UK), and SWIFT (Global) each have distinct settlement speeds. Faster rails like FPS leave a tiny recall window, slower rails like SWIFT offer a longer window but involve more intermediaries and compliance checks.

• ACH: Usually clears in 1–2 business days domestically.
• SEPA: Typically 1 business day across EU/EEA.
• FPS: Seconds to hours within the UK.
• SWIFT: 3–5+ business days cross border, with intermediaries adding complexity.

Until your account shows the credit, a reversal is theoretically possible, but practicality depends on whether the beneficiary bank halts or returns the payment. Time zones, weekends, holidays, and compliance screening can stretch timelines.

SWIFT reversals: the practical process for international wires

A SWIFT reversal uses an MT199 recall message while funds are in flight or awaiting posting. Your bank references the original MT103 and UETR, explains the reason, and requests the beneficiary bank’s cooperation.

Key limitation: An MT199 recall is a request, not a command. Success depends on the beneficiary bank, the recipient’s consent, and funds still being available. For an in depth overview, see the SWIFT refunds guide.

Typical timelines: 1–3 business days if you act fast; 2–4+ weeks if the beneficiary bank is slow or compliance checks trigger.

What to provide: Your MT103 reference, UETR, clear reason, supporting evidence, and client’s bank details. The more complete your submission, the faster the review.

Refund flow: post credit process for settled payments

Once funds are credited to your account, a reversal isn’t possible. You must process a new outbound transfer to refund the client.

1. Confirm receipt and align in writing: Verify credit, agree on the refund amount and currency, and document the reason.
2. Assess FX and fees: Outbound transfer fees are typically $100–$200+; FX can move 1–3% over days. Set expectations on who bears the cost.
3. Initiate outbound transfer: Use exact beneficiary details, request confirmation (MT103 or trace number).
4. Keep linked documentation: Invoice, e-FIRA, refund note, outbound transfer reference, all stored together.
5. Accounting: The original e-FIRA remains on record; adjust income with your CA and include a credit note if required.

Example: If USD/INR moved from 82 to 83 between inward and refund dates, sending back the same USD amount costs more INR. Someone must absorb the difference. Clarify this upfront.

Beneficiary bank: the gatekeeper in reversals

The beneficiary bank acknowledges recall requests, checks fund availability, contacts the account holder for consent, and then approves or declines. Their decision governs the outcome.

• Delays may arise from: AML/sanctions screening, name mismatches, time zones, holidays, and multiple correspondent banks.
• Reasons to refuse: Funds already withdrawn, ongoing compliance investigations, recipient refusal, or internal prioritization.

Act fast, provide complete references, and follow up daily. Speed and clarity materially improve your odds.

Timelines across ACH, SEPA, FPS, and SWIFT

• ACH (US): Same day to 2–5 business days for reversals if not posted. Once posted, refund only. For broader context, see Can you reverse international bank transfers.
• SEPA (EU): 1–5 business days recall window; post credit requires a new refund transfer.
• FPS (UK): Posts in seconds to minutes; recalls depend on beneficiary bank cooperation, typically 1–3 business days if accepted.
• SWIFT (Global): 3–10 business days for reversals; with compliance or intermediary delays, 2–4+ weeks. Refunds often take 5–21+ business days depending on route and FX booking.

Decision framework: when to use refund vs reversal

• Payment still in flight or pending? Attempt a reversal immediately; for SWIFT, request an MT199 recall with MT103 and UETR.
• Payment already credited? Process a refund via a new outbound transfer.
• Error type (wrong amount, duplicate, wrong beneficiary)? Reversal if caught early; otherwise refund with written agreement on FX and fees.
• Service dispute or cancellation? Use a refund pathway, document terms and cost responsibilities.
• Wrong beneficiary details? Request immediate reversal; if credited, coordinate with the wrong beneficiary’s bank for return.

Who initiates: Reversal is initiated by the sender’s bank on your request; refund is initiated by you or your client as a fresh transfer.

Fees, FX, and risk management for international refunds

Fees: Cancellations often cost $75–$120; recalls $100–$200; outbound refunds $100–$200+ with potential intermediary deductions.

FX exposure: 1–3% swings are common, creating shortfalls when converting between INR and foreign currency. Clarify who bears FX differences.

Mitigation:

• Hold foreign currency: Some providers let you hold USD/EUR for up to 60 days, reducing FX risk; Karbon Business supports such holds for flexibility.
• Hedge: Use forwards or swaps for large invoices.
• Contract clarity: State that client bears FX differences and bank fees for client errors.
• Negotiate fees: Agree to split costs or assign responsibility by error origin.

Clause example: “In the event of a refund due to client error, the client shall bear all bank fees and FX differences between inward and refund dates. The freelancer will refund the original amount in the original currency.”

Indian freelancer specific pitfalls and remedies

• Name mismatches: AML holds and delays arise when beneficiary name doesn’t match the account name. Remedy: Share your full legal name and ID proof, consider a $1 test transfer for large amounts.
• Intermediary deductions: Correspondent banks may deduct $10–$50 each. Remedy: Agree on OUR vs BEN fee split upfront; document deductions for refunds.
• Cash flow strain from disputes: Refunds when funds are already spent hurt liquidity. Remedy: Use staged invoicing (50/50), request 5–10 days to arrange funds, maintain a reserve.
• e-FIRA & tax confusion: e-FIRA remains after refund. Remedy: Maintain an audit trail (invoice → e-FIRA → credit note → outbound confirmation), and inform your CA to adjust ITR.

Step by step: how to request a payment reversal

If you need a reversal (payment in flight or not credited)

• Step 1: Act immediately. Contact your bank or provider within 6–24 hours.
• Step 2: Request a recall. For SWIFT, ask for an MT199 recall; for ACH/SEPA, request cancellation or recall.
• Step 3: Provide full details. MT103, UETR or ACH trace, amount/currency, beneficiary details, reason, evidence.
• Step 4: Seek acknowledgement. Ask your bank to confirm beneficiary bank receipt and fund availability.
• Step 5: Follow up daily. Escalate to international payments or compliance if no update in 2–3 business days.
• Step 6: Expect 3–10 business days. If reversal fails, pivot to refund planning.

Step by step: how to process a refund

If you need a refund (payment already credited)

• Step 1: Confirm credit. Ensure funds are available, not pending.
• Step 2: Agree in writing. Amount, currency, timeline, fee and FX responsibility, reason.
• Step 3: Calculate costs. Outbound fee, FX rate, likely intermediary deductions.
• Step 4: Initiate transfer. Exact beneficiary details, purpose “Refund,” and request confirmation.
• Step 5: Request MT103/trace. Share references with the client immediately.
• Step 6: Archive documents. Invoice, e-FIRA, refund note, outbound confirmation.
• Step 7: Update books. Record refund as income reversal; issue a credit note if needed; inform your CA.
• Step 8: Communicate status. Give ETA (5–21 business days) and warn about possible intermediary deductions.

Prevention checklist: avoid refunds and reversals

Before payment

• Share a detailed invoice and confirm beneficiary name and account details exactly.
• For large amounts, run a $1 test transfer.
• Confirm rail (SWIFT, ACH, SEPA, FPS) and expected timing.
• Agree in writing who bears fees and FX if a fix is needed.

Contract terms

• Define refund policy, timeline, FX and fee responsibility, and dispute steps.
• Client must notify errors within 24–48 hours to enable reversal attempts.
• Refunds post credit follow outbound rail timelines and fees.

Payment method strategy

• Use payment links for recurring clients where refunds are simpler and FX is transparent.
• Prefer local rails (ACH for US, SEPA for EU) for large one off transfers to reduce intermediaries.
• Avoid SWIFT for urgent deadlines; reversal windows are unpredictable.

Karbon Business offers virtual USD, GBP, EUR, and CAD accounts with local transfers, 24–48 hour INR settlement, automatic e-FIRA, and a transparent 1% flat fee with zero FX markup, a practical setup for Indian freelancers who want fewer surprises.

Templates: copy paste for your emails

Template 1: Request your bank to initiate a SWIFT reversal

Subject: URGENT: Request for SWIFT Recall – Transaction [MT103 Reference]

Dear [Bank Name] – International Payments Team,

I request an immediate recall (MT199) for a SWIFT transfer processed on [Date]. Details below:

Original MT103 Reference: [MT103 number]
UETR: [UETR number]
Amount: [Amount] [Currency]
Beneficiary Bank: [Bank Name], [Country]
Beneficiary Account: [Account Number]
Reason: [Duplicate payment / Wrong amount / Wrong beneficiary]
Evidence: [Brief description or attached document]

Please send the recall request to the beneficiary bank immediately and request confirmation of the current status (funds available? Consent obtained?). Please reply with the recall status within 24 hours.

Thank you,
[Your Name]

Template 2: Refund confirmation note with fee and FX responsibility

Subject: Refund Confirmation – [Invoice Number], [Date]

Dear [Client Name],

I confirm receipt of your request to refund the payment processed on [Date] for [Project/Service Name].

Refund Details:
Original Amount Received: [Amount] [Currency]
Refund Amount: [Amount] [Currency]
Bank Fee (Our Bank): $[Fee amount]
Outbound Bank Fee (Your Bank): Estimated $[Fee amount] (to be borne by you)
FX Impact: Original inward rate [Rate], today’s outbound rate [Rate]. [Difference in percentage] rate movement. [Client / I will bear this difference.]
Net Amount You Will Receive: [Final amount] [Currency]
Expected Delivery: [5–21 business days] via [SWIFT / ACH / SEPA]
Refund Reference: [Outbound MT103 / ACH trace / UETR – to be provided once processed]

Please confirm receipt of this refund note and your agreement to the terms above. I will keep you updated on the transfer status.

Best regards,
[Your Name]

Template 3: Checklist of documents for banks

Subject: Supporting Documents for Reversal/Refund Request – [Transaction Reference]

To submit with your reversal or refund request:
☐ Original invoice or statement of work
☐ Proof of duplicate payment (e.g., two invoices paid, two MT103s)
☐ Original e-FIRA (for inbound credit)
☐ Client’s written confirmation of the error or refund request
☐ Proof of the error (e.g., client’s e-mail stating “sent twice” or “wrong amount”)
☐ Your bank’s original payment confirmation
☐ Beneficiary bank details (if refunding) or recall request details (if reversing)
☐ Copy of your ITR or registration documents (if asked for verification)

FAQ

SWIFT reversal vs refund, which one should I try first if the client sent the wrong amount?

If the payment hasn’t credited yet, attempt a SWIFT reversal immediately by asking your bank to send an MT199 with the MT103 and UETR. If the money has already credited, you must process a refund via a new outbound transfer. Platforms like Karbon Business can help you track references and move quickly.

How long does a SWIFT recall usually take for Indian freelancers?

If you act within hours, simple recalls may resolve in 1–3 business days, but 2–4+ weeks is common with intermediary banks or compliance checks. Keep daily follow ups and complete references ready.

Who pays the bank charges and FX difference when I refund a US client from India?

There’s no universal rule, so clarify in your contract. Typically each party pays their own bank’s fees, and FX differences are assigned to the client if the error is on the client’s side. Karbon Business users often include clauses where the client bears FX and bank charges on client initiated refunds.

Can I reverse an ACH or SEPA payment after it shows in my account?

No. Once posted, a reversal isn’t possible on ACH or SEPA; you must do a refund via a new outbound transfer. Act within 24–48 hours for any chance of cancellation before posting.

What documents do I need to initiate a SWIFT reversal from India?

Provide the MT103, UETR, exact amount and currency, beneficiary details, and a clear reason with evidence (duplicate, wrong amount, wrong beneficiary). Karbon Business dashboards typically show UETR and credit confirmations to speed up bank communication.

How does a refund impact my e-FIRA and ITR filing in India?

The e-FIRA for the inward credit stays in your records even after refund. Maintain an audit trail (invoice, e-FIRA, refund note, outbound MT103), and inform your CA to adjust income so you don’t pay tax on refunded amounts.

Does the beneficiary bank have to cooperate with a SWIFT reversal request?

No. It’s voluntary. The beneficiary bank can refuse if funds aren’t available or compliance flags exist. Your best lever is speed, complete data, and the recipient’s consent. Using platforms that surface MT103/UETR quickly, such as Karbon Business, improves coordination.

How can I reduce FX risk if I might need to refund a USD payment?

Hold the foreign currency instead of converting to INR immediately, if your provider allows it. Karbon Business lets you hold USD/EUR for up to 60 days, so you can refund in the same currency with minimal FX loss.

What’s the best way to avoid reversals and refunds altogether?

Use a checklist: confirm exact beneficiary name and account details, run a $1 test transfer for large amounts, agree on fee and FX responsibility in writing, and choose local rails (ACH, SEPA) over SWIFT for predictable transfers. Platforms like Karbon Business add transparent fees and auto e-FIRA to reduce surprises.

If a client disputes my work and asks for a refund, how should I structure the process?

Move it out of the payments realm and into contracts: agree on the amount and timeline, specify who bears fees and FX differences, and document in writing. Initiate an outbound transfer, share MT103/trace, and update your books. A staged payment model via Karbon Business or similar tools helps protect cash flow.