As an Indian exporter, navigating the complexities of international transactions and compliance can feel like solving a complex puzzle. Today, we'll explore a crucial piece of that puzzle: FIRC

FIRC full form is Foreign Inward Remittance Certificate. It is a document issued by banks as proof of receiving international payments. Over the years, regulations around FIRC have changed significantly, creating confusion and mystery around this important document. Let's clear the air and decode the what, who, and why of FIRC.

FIRC or Foreign Inward Remittance Certificate serves as a proof of foreign money transfer for exporters in India. Until 2016, <a href="https://rbidocs.rbi.org.in/rdocs/FEMAMASTER/PDFs/1061.PDF">AD (Authorised Dealer) Category I Banks</a> were authorised to issue FIRCs to exporters for receiving payments from foreign sources. This document was essential for exporters to obtain after each cross-border payment. It served not only as proof of payment receipt but also as a crucial document for claiming export-related incentives, such as tax exemptions on foreign currency payments received in India.

As we've covered, the full form of FIRC is Foreign Inward Remittance Certificate and for a long time it served as proof of export income from abroad. However, with changing regulations, the function of FIRC has also changed significantly. Let's take a look:

FIRA is often still referred to by its old name, FIRC. While both documents serve the same purpose, FIRC is technically only issued for returns on&nbsp;Foreign Direct Investment (FDI )or Foreign Institutional Investment (FII). For all other export collections, FIRA/BIRC is what you need.

For clarity, we'll use the term FIRC moving forward, but it refers to FIRA throughout.

Anyone receiving foreign payments needs FIRC.&nbsp; Beyond goods and service exporters engaging in international trade, many individuals and entities may receive international payments without realising it.&nbsp;

Overall, the following typically require a FIRC:

Beyond compliance, here’s why FIRC is crucial for exporters:

FIRCs are issued by AD Category I banks. You can contact your bank to get your FIRC after receiving your foreign payment. <a href="https://www.skydo.com/blog/how-to-get-firc-certificate-online">Alternatively, you can also use platforms like Skydo to get your FIRC instantly after every payment.&nbsp;</a>

Who Needs FIRC and Why It’s Important for Exporters?

FIRC (Foreign Inward Remittance Certificate) is essential for anyone receiving foreign payments, including:

Exporters, in particular, rely on FIRC for two key reasons:

FIRC is issued by Authorized Dealer (AD) Category I banks, and businesses can obtain it directly from their bank. However, it is usually a cumbersome process requiring multiple follow-ups and most banks charge around INR 500 to issue each FIRC.&nbsp;In contrast, platforms like Skydo offer a fast, hassle-free solution, providing an instant FIRC for free after every foreign payment—no manual requests, no extra costs.

This is a sample FIRC document. All crucial remittance details have been masked for security purposes. Now let’s break the content of a FIRC down: 

Receiving your export payment directly through your bank can make obtaining an FIRC a lengthy process. You need to submit a request to the bank, and the bank typically takes 7-15 days to provide the FIRC. You may also need to follow up multiple times, and banks often charge at least INR 400 to issue the FIRC, depending on the institution.

<a href="https://www.skydo.com/blog/how-to-get-firc-certificate-online">Getting a FIRC</a> might sound like a hassle, but with Skydo, it's a breeze. Our fully automated payment system along with built-in partnerships with banks, ensures effortless compliance with RBI guidelines, without needing any manual intervention.

When you receive an export payment through Skydo, we automatically generate the required FIRC for you at no extra cost. Just log into our user-friendly dashboard, and you'll find your FIRC ready to download, complete with all the details you need. 

In conversations around FIRC, there are a few more terms that get frequently mentioned, one of them being eFIRC. So what exactly is <a href="https://www.skydo.com/blog/efirc-firc-brc-essentials-differences">eFIRC?</a>

What is the difference between eBRC and FIRC?

Generally speaking, e-BRC applies mostly to goods and software exporters (under <a href="https://stpi.in/en/home?no_follow=true/">STPI</a>). If you are one of them, you can use this simple decision tree to understand which documents you will need:

Exporting goods and services is considered Zero-Rated Supply, meaning it is subject to 0% GST. However, to claim a GST refund for the input tax credit, exporters must provide the required documents including FIRC. These documents authenticate that the business is claiming a refund because it exported services and couldn't offset its input tax credit as it would in normal domestic business. Without FIRC, claiming a GST refund may not be possible

As we surge in cross-border transactions, ensuring compliance and safeguarding against illicit activities has become a pressing concern. However, at Skydo, we believe your focus should be on advancing your business, not on grappling with compliance challenges.

With Skydo, enjoy seamless international payments, delivered promptly and without any hidden fees. But that's just the beginning! Every time you receive a cross-border payment, an auto-generated FIRC is readily available for you to download, relieving you of compliance burdens so you can devote your energy to what truly matters: driving your business forward.

FIRC full form is Foreign Inward Remittance Certificate. Learn what FIRC is, its importance for exporters and freelancers, and how to obtain it easily

FIRC: Full form, meaning and RBI guidelines

Dive into the world of FIRC. Explore the full form, importance, and process of obtaining FIRC for your international transactions

Foreign Inward Remittance Certificate (FIRC): Full form, meaning and RBI guidelines

Prashanth

small_63aec75c493ff751315d72ac_63948a436dc07c0bec0374ea_uA3i3IUVLPHk_-xjAlW9Z7bxKaOLRCylGX1byeHyzyE.png

thumbnail_63aec75c493ff751315d72ac_63948a436dc07c0bec0374ea_uA3i3IUVLPHk_-xjAlW9Z7bxKaOLRCylGX1byeHyzyE.png

Prashanth Kumar

Receiving international payments in India can feel complex, between traditional bank wires, PayPal, and new-age fintech platforms, each method comes with its own process and costs. Here’s a quick step-by-step overview to help you understand how it works:

How to Receive International Payments in India: Step-by-Step

This guide goes beyond the basics, read on as we break down each method, compare fees, timelines, and real-world use cases, so you can choose the best solution for your business. (Updated for 2025)

&nbsp;How to Accept International Payments in India?

Here are the main ways to receive international payments in India

Before deciding on your preferred way, it is important to evaluate each method on parameters like timeline, fees etc to find out which fits your needs the best. So let's understand these parameters in some detail:

Things to Note Before Receiving International Payments in India

Unfortunately, international money transfers, especially payments aren’t as straightforward as domestic ones. Different countries have different regulations and multiple financial institutions are involved in the process as well. 

So here are a few things to watch out for before receiving payments from abroad:

In India, we’ve become accustomed to instant payments thanks to UPI—, ust a quick scan, and it's done. However, international payments are a different story and the settlement time depends on the mode of payment primarily. For example, banks may take upto 7 business days to settle your payment while international virtual accounts can do it within 48 hours.

International payments often undergo strict scrutiny due to concerns around money laundering and terror financing. Hence, when choosing your international payment platform, check if it is approved by the RBI, <a href="https://www.skydo.com/blog/all-you-need-to-know-about-firc-a-complete-guide">provides FIRA</a>&nbsp;and has the necessary security certifications. For example, In January 2025, Skydo received <a href="https://economictimes.indiatimes.com/tech/startups/skydo-secures-rbi-licence-to-offer-cross-border-payments/articleshow/117413507.cms?from=mdr">in-principle authorisation from the Reserve Bank of India (RBI) </a>to operate as a Payment Aggregator-Cross Border (PA-CB) entity ensuring the highest level of compliance and security.

Charges are one of the key factors when deciding on how to receive international payments in India. You need to be aware of the fees associated with each payment platform and make sure there are no hidden fees that are sneaking in. For example, most platforms including banks apply a markup on the ongoing exchange rate, if the actual rate is 1 USD = ₹84, banks might offer ₹82, with the small difference adding up over multiple transactions. Similarly, platforms like <a href="https://www.skydo.com/blog/top-paypal-india-alternatives-for-international-payment">PayPal </a>charge a 4% currency conversion fee, along with an additional 4.4% transaction fee and a fixed fee, further eating into your payout. While some costs are unavoidable, being aware of these charges allows you to make smarter choices and maximize your earnings by opting for more cost-effective payment methods.

Do I Have to Pay Tax on International Payments in India?

Exports in India are considered zero-rated supplies, meaning you don't have to pay <a href="https://www.skydo.com/blog/how-does-gst-affect-foreign-payments">GST on your export income </a>if you receive your payment in foreign currency.&nbsp;

However, note that regardless of whether you receive a salary from an overseas employer or payments from foreign clients as a freelancer or business, your income will be taxed in India based on the applicable income tax slab rates.

&nbsp;Best Way to Receive International Payment in India

There’s no one-size-fits-all answer to the question of how to receive international payments in India, it all depends on what matters most to you. Whether it’s faster settlement, favourable exchange rates, easy compliance, or other factors, the right option will vary.&nbsp;

 In this section, we’ll break down the different payment methods based on these key parameters to help you decide which is the best way to receive international payments in India.&nbsp;

Banks are often the traditional answer to the question of how to receive international payments in India, and online banking has made money transfer services more convenient as well. However, here are a few things that you need to know before deciding if banks are the right fit for you to receive international payments:

<a href="https://www.skydo.com/blog/international-wire-transfer-all-you-need-to-know">International bank wire transfers </a>can take upto 5 business days or even longer&nbsp;due to reasons like multiple intermediary banks, bank holidays, incorrect details etc.&nbsp;

Banks issue<a href="https://www.skydo.com/blog/all-you-need-to-know-about-firc-a-complete-guide"> FIRA for every foreign payment,</a> but it is not a default or free service. You have to follow up with your bank to get your FIR,A and banks often levy a fee for the same.&nbsp;Axis Bank, for example, charges INR 250 for every FIRA and an additional INR 100 for a duplicate FIRA.

Bank fees for international payments include a <a href="https://www.skydo.com/blog/swift-money-transfer-ultimate-guide">SWIFT fee,</a> which, while levied on the sender, is often passed on to the receiver. It might cost your client anywhere around USD 15-50 to send the international payment and more often than not, it will be passed on to you.

Further, as we've mentioned, banks mostly levy a <a href="https://www.skydo.com/blog/forex-markup-fee-explained">forex markup,</a> giving you a lower exchange rate than the market exchange rate.&nbsp;Let’s say you receive $5,000, and the real exchange rate is 1 USD = ₹84, so you expect ₹420,000. Instead, the bank offers a lower rate of ₹82 per USD, leaving you with ₹410,000, a loss of ₹10,000 on just one transaction.&nbsp;Beyond SWIFT and forex fees, banks tend to charge extra fees for various services. For example,&nbsp;Axis Bank&nbsp;charges ₹250 for issuing a FIRA and ₹500 to track SWIFT payments.

<a href="https://www.skydo.com/blog/paypal-in-india-charges-review-alternatives">PayPal's</a> credibility and global reach make it a popular choice for online money transfers as well as for receiving international payments in India. So is Paypal the answer to, "How to receive international payments in India?" Let's find out:&nbsp;

If your client pays you via PayPal, the amount appears in your PayPal account almost instantly, but it can take up to 5 business days to reach your bank account.

PayPal provides a monthly digital FIRA to businesses and freelancers. This FIRA covers all international transactions from the previous month, and it is only available by the 15th of the subsequent month.

PayPal fees for receiving international payments includes a 4.40% transaction fee, plus a&nbsp;fixed fee&nbsp;depending on the currency of the transaction along with 4% currency conversion fee to the prevailing exchange rate.&nbsp;For example, if the current market rate is INR 84 per USD, PayPal’s effective exchange rate would be 4% less, which is INR 80.64.

Virtual International Bank Accounts&nbsp;

New-age fintech platforms like Skydo,<a href="https://www.skydo.com/blog/transferwise-india-features-benefits-pros-cons"> Wise</a>, and <a href="https://www.skydo.com/blog/payoneer-payment-gateway-features-fees">Payoneer </a>are making cross-border payments seamless with international virtual accounts. These platforms provide users with<a href="https://www.skydo.com/blog/virtual-account-numbers"> virtual bank accounts</a> in countries like the US, UK, and Australia. Clients in these countries can send payments to these virtual accounts as local transfers, avoiding the hassle and cost of international transfers.

The platforms then consolidate these local payments and transfer them to the recipient’s personal bank account.&nbsp; Let's explore whether virtual accounts could be the answer to how to receive international payments in India.

Once the payment hits your virtual account, it’s quickly transferred to your personal bank account. For example, Wise deposits funds within 0-2 business days, while Payoneer and Skydo mostly settle payments within 24-48hours,&nbsp;all much faster than traditional bank transfers..

Most platforms offering international virtual accounts in India&nbsp;also provide FIRA to their users.&nbsp;While Wise charges a fee for issuing FIRA, both Payoneer and&nbsp;Skydo offer it free&nbsp;and instantly, making the process smoother and more convenient for users.

Since virtual bank accounts skip&nbsp;SWIFT transfers,&nbsp;no SWIFT fees apply. However, each platform has its own charges:

For a detailed breakdown, check <a href="https://www.skydo.com/blog/payoneer-fees-india-guide" target="_blank">Payoneer’s fees here.</a>

<a href="https://www.skydo.com/blog/wise-transfer-charges-in-india" target="_blank">You can read more about Wise’s pricing right here.&nbsp;</a>

Remittance Platforms like Wise and Western Union

P2P transfer services like Wise and Western Union let individuals abroad send money directly to Indian bank accounts, with conversion at competitive rates and delivery usually within a day. Wise supports multiple currencies and offers transparent fees, while Western Union provides both bank transfers and cash pickup options at thousands of locations. These services are best for personal remittances, not business payments, due to compliance and documentation limits.

Google Pay, through its partnership with international money transfer services like Wise and Western Union, now allows users in India to receive cross-border payments directly into their bank accounts using UPI.&nbsp; While convenient for individuals, this option isn’t designed for business payments or freelancers, and transaction limits may apply as per RBI guidelines.

Which platform should you choose to receive international payments in India?

If you’re a large business handling high volumes of cross-border payments, banks might be the answer to how to receive international payments in India. They often offer competitive exchange rates and personalized services that smaller clients might not receive.

Many businesses and freelancers also prefer PayPal for its global credibility and acceptance, offering a payment option their international clients are familiar with.

For individual freelancers and small to medium businesses, international virtual accounts are often the most practical choice. These fintech platforms provide a seamless payment experience without the hassle of dealing with banks. By bypassing the SWIFT network, they eliminate SWIFT fees and typically offer faster settlements. Many platforms also include FIRA to simplify compliance. However, before deciding on how to receive international payments in India, carefully review their fees, foreign currency conversion rates, and customer support to ensure they meet your needs.

Here's a quick comparison chart to help you decide the best way to accept international payments in India based on your needs:

Take Rohan, a freelancer in India who <a href="https://www.skydo.com/blog/how-to-receive-money-from-usa-to-india">regularly invoices clients in the US </a>and UK. For his $5,000 project payment, platforms like Skydo allow him to receive funds quickly, with zero hidden forex markups and instant access to FIRA,&nbsp;meaning he keeps more of what he earns, and compliance is hassle-free. This transparency and speed are ideal for freelancers and small businesses managing frequent, mid-sized payments from abroad. On the other hand, for large enterprises handling high-value transactions, often in the hundreds of thousands, traditional banks, with their dedicated relationship managers and tailored corporate solutions, can sometimes offer negotiated rates or advanced treasury services better suited to those needs.

In short, while platforms like Skydo are a game-changer for small businesses and freelancers, banks may still be preferable for companies with very large, complex payment volumes.

How to Receive International Payments in India with Skydo?

While there are several ways to receive international payments in India, virtual bank accounts are quickly becoming the preferred option for businesses and freelancers due to their simplicity and affordability. With Skydo, setting up an international account takes just five minutes, helping you easily do business in markets like the US, Europe, Singapore, and Australia.

Skydo streamlines your payments by offering live Forex rates with no hidden fees or currency markups. To keep things hassle-free and compliant with RBI regulations, you’ll get instant FIRA downloads after every transaction. Plus, each user benefits from a dedicated representative who’s ready to provide guidance and support whenever you need it.

If you're looking to avoid high fees on international transfers and make your foreign payments seamless and compliant, Skydo is the perfect solution!

How to receive international payment in India

large_How to receive international payment in India

medium_How to receive international payment in India

small_How to receive international payment in India

thumbnail_How to receive international payment in India

If you've ever waited on an international payment that seemed to vanish into thin air, you’re not alone. Whether you're an exporter, freelancer, or business owner dealing with cross-border transactions, one document that often comes up during these moments of confusion is the SWIFT MT103.

Think of it as the digital receipt for your international wire transfer — a standardised message issued by the sender’s bank that includes key details like the sender, recipient, transfer amount, currency, reference numbers, and even charges applied along the way.

In this guide, we’ll walk you through what a SWIFT MT103 message actually is, why it matters (especially when payments are delayed or under dispute), how to get one from your bank, and how it can help you track down an international transfer.

We’ll also show you how platforms like Skydo make tracking international payments easier, no MT103 needed.

An MT103 is a standardised SWIFT message format used by banks to confirm that an international wire transfer has been sent. It acts as a proof of payment, kind of like a digital receipt that travels with your money.

When you send money internationally through the SWIFT network, your bank generates an MT103 message and shares it securely with the recipient’s bank. This document contains all the essential transaction details, including:

Banks use this message to track and trace international payments, especially when there's a delay or a dispute. You can request a copy of your MT103 document from your bank after the payment is sent.

What is MT103&nbsp;SWIFT document used for?

While not required for every international payment, the MT103 can be incredibly helpful, especially when you're sending or receiving large sums, or if something goes wrong. Here's why it matters:

1. Proof of Payment:&nbsp;Think of MT103 as your official receipt for a SWIFT transfer. If you're the sender, you can share it with your client to confirm the payment has been made. If you're the recipient, it helps verify that a payment is on the way and not just "in process."

2. Easy Tracking: If your money’s stuck or delayed somewhere, especially at an intermediary bank, the MT103 helps your bank trace the transfer. It shows where the payment has reached, which bank is currently holding it, and what step it’s at.

3. Fewer Misunderstandings: Because it follows a global standard, every bank understands the MT103 format. This makes it easier to resolve issues, confirm transactions, and keep communication clear between banks across countries.

Imagine you’ve paid an overseas supplier, but they claim the funds haven’t arrived. You contact your bank, and they confirm the SWIFT transfer went through, but now you’re stuck in the middle. This is where the MT103 comes in.&nbsp; By obtaining the MT103, you get a detailed record of the payment showing when and where the money was sent. You can forward this to the beneficiary as proof, and your bank can use the reference in the MT103 to help trace the payment’s path and find any bottlenecks.

MT103 Format and Fields (Understanding the Details)

An MT103 message contains various coded fields that together provide all the transaction information.&nbsp;

An MT103 SWIFT message contains all the details necessary for processing a transfer. Here’s what a typical MT103 includes:

All this information helps ensure that the transaction flows smoothly and gets where it needs to go.

Every MT103 message will have certain tags using which you can decode the MT103 message. Here we will be describing all the mandatory tags that are present in every MT103 SWIFT message and a few optional ones:

Beyond the mandatory tags, MT103 SWIFT message may also contain a few optional tags including:

You don’t necessarily need to memorise these fields, but if you ever receive an MT103, this breakdown can help you read it. For most users, the key things to check are: reference number, dates, amounts, and that the beneficiary info is correct

If you’ve made a SWIFT transfer and need proof that the payment was sent, the MT103 is what you’re looking for. Here's how to get it—step by step:

1. Make the Transfer:&nbsp;An MT103 is automatically generated every time a SWIFT transfer is made. But here's the catch: banks don’t send it to you by default. You’ll need to specifically request it.

2. Contact Your Bank:&nbsp;&nbsp;Once the payment is sent, reach out to your bank’s customer service. You can usually do this via phone or through online banking. Some banks have a “SWIFT copy request” option on their portal—check if yours does.

3. Provide Transaction Details:&nbsp;
Your bank may ask for information like the date of the transfer, the amount, and the recipient’s details. This helps them pull up the exact transaction.

4. Wait for the Document:&nbsp;
It can take anywhere from a few hours to a couple of days for the MT103 to be issued. Some banks may charge a small fee (typically between $20–$40), and they’ll usually email it to you as a PDF or hand over a physical copy.

Important Tip:
If you’re the receiver of the payment, you can’t request the MT103 directly from the sending bank. Only the sender or the sender’s bank can generate and share it. So if you’re waiting on funds, ask your client to contact their bank and send you the MT103.

In India,
some banks may refer to the MT103 as a “SWIFT Advice” or “SWIFT Copy.” The terminology can vary, so don’t worry if the term isn’t consistent; just ask clearly for proof of the SWIFT transaction.

When should you request it?
Since some banks may charge for it, it’s best to request an MT103 when you actually need it, like if a payment is delayed, stuck with an intermediary bank, or you need documentation for compliance or record-keeping.

The sender of the international payment is usually the only one who can request an MT103 from their bank. That’s because MT103 is generated by the sending bank and often shared only with their account holder, not the recipient, for privacy and compliance reasons.

If you’re the recipient waiting on a payment, you won’t be able to request the MT103 directly from the bank. Instead, you’ll need to ask the sender (or their finance team) to get the MT103 and share it with you.

💡 Note for Businesses:
If you're managing payments on behalf of your company, say, in the finance or accounts team, you can request an MT103 just like an individual, as long as your company is the account holder making the transfer.

How to Track a SWIFT Payment Using MT103&nbsp;

International wire transfers via SWIFT can sometimes take longer than expected, especially if the funds are routed through multiple intermediary banks. If your payment hasn’t arrived within 2–5 business days, it’s natural to want to track where it’s stuck.

That’s where MT103 comes in. It acts like a tracking slip, providing key reference details that allow banks to trace the payment across the SWIFT network.

Using the MT103 Reference to Track Your Payment

Every MT103 document includes a unique reference code, known as the Transaction Reference Number or SWIFT reference (Field 20). Think of it as your payment’s tracking ID.

Once your bank has this code, or the UETR (Unique End-to-End Transaction Reference) found in newer <a href="https://www.swift.com/products/swift-gpi">SWIFT GPI </a>transactions, it can query the SWIFT system and check the status of your payment. This includes identifying where the payment currently is (e.g., still with the sender’s bank, in an intermediary bank, or already credited).

Many major banks now support SWIFT GPI, which updates payment status in real time. Some even offer customer-facing portals, while others can provide updates through support teams.

MT103 vs. SWIFT gpi: What’s the Difference?

MT103 is like your courier receipt; it proves you shipped something and gives you a tracking number.
SWIFT gpi is the live tracking system, showing you exactly where the parcel is on its journey.

Do You Always Need an MT103? (Alternatives and Best Practices)

While MT103s are undoubtedly helpful, especially when payments go missing, they’re not always the most convenient solution. You have to request them from your bank, wait a few hours (or days), and sometimes even pay for access. In 2025, businesses want something simpler.

That’s why modern fintech platforms have reimagined the experience.

Instead of waiting for a SWIFT receipt, platforms like Skydo offer built-in payment tracking. With Skydo, for example, you can see the real-time status of your international payment, whether it’s in transit, credited, or delayed, right from your dashboard. No need to call your bank or dig through emails.

You also avoid SWIFT fees entirely. Skydo gives you local virtual accounts in countries like the US, UK, and Europe, so your clients can pay you like a local via ACH, SEPA, etc. That means no $25-$40 charges, fewer delays, and no need for an MT103 in the first place.

Sometimes, not needing an MT103 is the best-case scenario, and platforms like Skydo are built exactly for that.&nbsp;

MT103 swift message: Format, Fields and How to get it

large_MT103 swift message: Format, Fields and How to get it

medium_MT103 swift message: Format, Fields and How to get it

small_MT103 swift message: Format, Fields and How to get it

thumbnail_MT103 swift message: Format, Fields and How to get it

International trade can be complex, and so can the codes on your bank statements.  Seeing 'P0108' might leave you scratching your head.  This guide clarifies this purpose code, focusing on its connection to merchanting trade and why it's important for your business.

P0108 Purpose Code Explained: The Essence of Merchanting

&nbsp;P0108 purpose code specifically refers to transactions related to goods sold under merchanting or receipts against the export leg of merchanting trade.  Let's break down what "merchanting" means in this context:

Merchanting trade involves a trader buying goods from a seller located in one country and selling them to a buyer in another country without the goods physically entering the trader's country.  Think of it as a triangular trade where the trader facilitates the transaction but the goods move directly from the original seller to the final buyer.

P0108 captures the financial aspect of this trade, specifically the receipt of funds from the buyer after the goods have been sold.

Why is Understanding P0108 Purpose Code&nbsp; Important?

Key Considerations for P0108 Purpose Code:

How Do You Choose the Right Purpose Code for Your Transaction?

Selecting the correct purpose code is essential for ensuring your international trade transactions comply with RBI guidelines. For businesses engaged in merchanting trade, where goods are bought and sold internationally without physically entering India, Purpose Code P0108 should be used when receiving payments from the buyer for the export leg of the transaction.

Before finalizing your transaction, carefully confirm the nature of the trade and ensure that the purpose code accurately reflects the merchanting activity.  Remember, P0108 specifically relates to the receipt of funds from the buyer after the goods have been sold in a merchanting arrangement.  If the transaction involves other aspects of the trade (e.g., the initial purchase of goods), a different purpose code might be applicable.

To avoid delays, misreporting, or potential regulatory issues, ensure you have all the necessary documentation to support the use of Purpose Code P0108.  This typically includes:

If you're uncertain about which purpose code applies to your specific transaction, consult your bank or a financial advisor to confirm the correct code.  Using the wrong code can lead to processing delays, inquiries from regulatory authorities, and potentially even penalties.  Accurate coding ensures smooth and compliant international trade operations.

large_P0108_Purpose_Code_Guide

medium_P0108_Purpose_Code_Guide

small_P0108_Purpose_Code_Guide

thumbnail_P0108_Purpose_Code_Guide

P0108_Purpose_Code_Guide

As an Indian importer or international trader, you may have occasionally spotted the mysterious purpose code "1501" on your bank statement. Purpose code 1501 primarily deals with refunds and rebates associated with imports. In this blog post, we will discuss this purpose of code, explain its importance and look at a few common scenarios where code P1501 is used.

Before we dive into the details of purpose code 1501, here's a brief snapshot of Purpose Code 1501:

With the Reserve Bank of India (RBI) releasing its <a href="https://kpmg.com/us/en/taxnewsflash/news/2025/04/india-revised-draft-export-import-regulations.html">revised draft </a>of the 'Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2025' on April 4, it’s crucial for businesses to stay informed about these changes to ensure ongoing compliance and avoid surprises down the line."

Purpose Code 1501 in India specifically denotes transactions related to refunds or rebates received on account of imports. This code signifies that you've received money back from foreign entities associated with goods or services previously imported into India.&nbsp;For example, imagine you run a business in India that imports electronic components from China, assembles them locally, and sells the final product. If one of the components you imported turns out to be faulty and you file a complaint, the supplier may issue a refund for the defective part. This refund would need to be categorized under Purpose Code P1501.

Why is Understanding Purpose Code 1501 Important?

Note that the purpose code 1501 is used specifically for inward remittances (receiving refunds) related to imports. For outward remittance, i.e for sending refund abroad, purpose code S1501 is used.

Claiming Import Duty Refund Using Purpose Code 1501

Imagine you're an importer in India and you've just received a shipment of goods from overseas. Let's say you paid some import duty on these items. Now, for some reason, maybe a few items were damaged, or you were overcharged, you're due a refund on that duty. Here's a simplified look at how that refund might come back to you and where Purpose Code P1501 plays a role:

So, in simple terms, if you get an import duty refund that comes from a company or entity outside of India, your bank will use Purpose Code P1501 to categorize this money coming into your account. It's like a special tag that helps everyone understand the reason for the transaction.

How to Select the Right Purpose Code for Your Transaction?

Choosing the correct purpose code is crucial to ensure smooth and compliant transactions, especially when dealing with international payments. If you're receiving funds from abroad related to imports, such as refunds, rebates, or adjustments, Purpose Code 1501 should be used.

Before finalizing any transaction, carefully review the nature of the payment to confirm it accurately reflects the purpose of the funds. For instance, if the payment is not related to an import-related refund or rebate (e.g., a personal remittance from abroad), a different purpose code would be applicable.

To avoid discrepancies or delays, ensure you have all the necessary documentation to support the use of Purpose Code 1501. This may include:

If you're uncertain about the appropriate purpose code for your transaction, consult your bank or a financial expert. Using the wrong code can lead to delays in processing, scrutiny from regulatory authorities, and even potential penalties.

By carefully selecting the correct purpose code, you can ensure smooth and compliant transactions while maintaining accurate financial records.

large_P1501_Purpose_Code_Thumbnail_1246x896.png

medium_P1501_Purpose_Code_Thumbnail_1246x896.png

small_P1501_Purpose_Code_Thumbnail_1246x896.png

thumbnail_P1501_Purpose_Code_Thumbnail_1246x896.png

P1501_Purpose_Code_Thumbnail

Most new exporters find the trade paperwork overwhelming. First, the volume and second, the lack of experience, lead them into a spiral of confusion.

If you're experiencing a similar situation, we might have the right blog to start cutting through this confusion. Among the various documents, the proforma invoice is one of the most frequently used by exporters worldwide. Is it the same as a formal invoice? Not really. It plays a different role.&nbsp;

We suggest reading this comprehensive guide to find out everything about proforma invoices. It breaks down all the details, from their basic definition and purpose to practical formats and examples. 

A proforma invoice is a preliminary bill of sale that provides a detailed estimate of costs before the sale is confirmed. It defines the key transaction details upfront so that the buyer and seller understand the proposed terms before the transaction is initiated. This helps to streamline the sales process and avoid going back and forth.

A proforma invoice typically includes detailed information like item descriptions, prices, shipping weights, and transport charges. It’s important to remember that it is only a provisional document and must be followed up with a commercial invoice to request payment from the buyer.&nbsp;

Here’s a scenario to help you understand the practical application of a proforma invoice. Imagine a textile exporter in India receiving a bulk order of 1,000 meters of silk fabric. The exporter is new and eager to close the deal but is unsure about the exact shipping cost and&nbsp;customs duties. So, they share a proforma invoice that includes the fabric cost, estimated shipping to the U.S., potential customs duties, and other handling fees.

By providing this, the exporter gives the buyer a clear picture of the total cost. The buyer can use this information to negotiate with the exporter and make a more informed decision. They can also use it to arrange import permits or financing.

Here are the most common reasons why exporters choose to use a proforma invoice in international trade:

Negotiation and Transparency: It provides a clear preview of the proposed international transaction and invites open discussion about prices, terms, and conditions

Professional Commitment: The invoice shows the seller's willingness to provide goods at the agreed price and duration, which establishes trust with potential customers

Buyer Acknowledgement: It formally recognizes the buyer's intent to purchase and outlines the mutual understanding of the transaction

Streamlined Process: By defining transaction details upfront, proforma invoices reduce back-and-forth communications, saving time for both parties.

Internal Approvals: Buyers use proforma invoices to get internal purchase approval and help their finance and procurement teams understand the transaction details.

Cost Efficiency: Proforma invoices help businesses reduce administrative overhead by simplifying the quote-to-cash process - the entire cycle from the buyer showing interest to receiving the payment.

Here are two sample proforma invoices to give you an idea about the presentation of the above details:

You must have observed the following details present in both the images, which resonates with what we covered in the previous section:What we covered in the previous section:

You might have also observed that while both the proforma invoice templates are acceptable, they differ in design. The first is more modern and has a spacious layout. It also covers only the basic shipping information, like the port of loading and discharge. The second is more compact in design and looks more traditional, but it covers detailed shipping information, including the number of packages, weight, and carrier name.

Is Proforma Invoice Required For Indian Exporters?

A proforma invoice is not legally compulsory for Indian exporters, but it has become an essential document in the export sales process. For you as an exporter, a proforma invoice acts as a preliminary document that confirms the importer's order and provides a detailed breakdown of shipment costs. It also becomes a foundational document that you can use to prepare the final commercial invoice.

From an importer's point of view, the proforma invoice gives them detailed information on the goods they will receive. It specifies the item quantity, price, and other relevant transaction information. This ensures transparency and mutual understanding between you and the importer before any goods are shipped.

The other significant advantage of a proforma invoice is its ability to establish payment arrangements. You can use it to set up letters of credit or to secure trade financing.

In summary, while the law does not mandate a proforma invoice, it is a good practice to follow. It provides a detailed, preliminary account&nbsp;of the transaction, builds trust and transparency with the buyer, and reduces financial risks.

Receive Seamless Export Payments With Skydo

A proforma invoice is not a legal document that can be used to request payment from buyers, but it is still a strategic tool for an exporter. It builds trust and irons out misunderstandings, helping to push the deal to the next stage. But as you move towards finalizing the deal with the buyer, you need a trusted invoicing and payment platform.

This is where Skydo comes in. It is a comprehensive solution for Indian exporters like you to manage invoices and multi-currency payments in one place. Let's talk about Skydo's invoicing capabilities first.

But Skydo's real strength lies in collecting payments from your buyers. You might have heard from fellow exporters losing money to high transaction fees and forex markups during international transfers. Skydo takes a much cost-effective approach to ensure you get the maximum value.

Skydo works with you like a strategic partner to take your business global. Sign up now and revolutionize your international payment process