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.

What is FIRC? FIRC Full Form, Meaning and More

As we've covered, the full form of FIRC is a Foreign Inward Remittance Certificate and it serves as a proof of foreign transfers. Until 2016, <a href="https://rbidocs.rbi.org.in/rdocs/FEMAMASTER/PDFs/1061.PDF?no_follow=true/">AD Category I Banks</a> were authorised to issue FIRCs to exporters for receiving international payments. 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.

Changing RBI Guidelines: From FIRC to FIRA

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 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>

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.

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

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Prashanth Kumar

Inward remittance simply means receiving funds from abroad in your bank account in India. As per <a href="https://publications.iom.int/books/world-migration-report-2024">Global Migration Report</a>,&nbsp;India stands as the largest recipient of inward remittance globally, thanks to globalization which has enabled Indians to travel outside for work as well as enabled Indian residents to work with global clients remotely.

Getting money from abroad—whether it’s payment from a client or a transfer from family—can feel a bit overwhelming. It’s not as straightforward as domestic transfers, thanks to forex rates, international systems, and RBI guidelines.

But don’t worry. In this blog, we’ll break down everything about inward remittance—what the rules are, how to keep your money safe, how long it takes, and the easiest ways to manage it. Plus, we’ll show you how Skydo can make receiving global payments faster, simpler, and more affordable. Let’s dive in!

Inward remittance is simply money sent to your bank account in India from someone living abroad. It could be funds from an NRI family member helping with education or medical bills, or even a foreign employer or client paying your salary or invoices.

The money arrives in foreign currency and gets converted into Indian Rupees at the current exchange rate. Whether it’s personal support or business payments, understanding how inward remittance works makes it easier to manage and maximize what you receive.

What are the FEMA Guidelines for Inward Remittance in India?

In India, the RBI and <a href="https://enforcementdirectorate.gov.in/fema">FEMA</a> (Foreign Exchange Management Act) have set out <a href="https://www.skydo.com/blog/compliance-guideline-for-inward-remittance">specific guidelines</a> for receiving inward remittances in India:&nbsp;

<a href="https://rbidocs.rbi.org.in/rdocs/FEMAMASTER/PDFs/1061.PDF">&nbsp;Only Authorised Dealer Category I&nbsp;</a>(AD Cat I) banks are allowed to receive foreign inward remittances in India.&nbsp; The AD Cat I banks are financial institutions that hold a license issued by the Reserve Bank of India (RBI) to buy and sell foreign currency for capital and current account transactions.

Each foreign inward remittance must contain a<a href="https://www.skydo.com/blog/rbi_purpose_code_for_inward_remittance"> purpose code.</a>&nbsp;The code defines the purpose of inward remittances like education, investments, remuneration, travel, insurance and more.&nbsp;For example:

If your inward remittance is payment for selling goods/services abroad then it must be accompanied by an FIRA. <a href="https://www.skydo.com/blog/all-you-need-to-know-about-firc-a-complete-guide">FIRA&nbsp;</a>is proof that you have received a <a href="https://www.skydo.com/blog/how-to-receive-international-payments-in-india">foreign payment </a>in India and is issued by the AD Category I banks.

Transfers related to lottery winnings, gambling, and other illegal activities are prohibited under FEMA guidelines.

For most foreign inward remittances, there’s no<a href="https://www.skydo.com/blog/compliance-guideline-for-inward-remittance#do-you-have-to-pay-tax-on-remittance"> tax liability</a> in India. However, if the remittance is income from sources like investments, salary, or business, it will be taxed according to your applicable income tax slab rate.

What Documents Are Required for Receiving Inward Remittance in India?&nbsp;

The list of necessary documents you will need to accept foreign inward remittances will depend on whether it’s a personal transfer or a business payment. We have shared the list for both the categories here:

You fall into this category if you’re an exporter, freelancer or someone who provides services to international clients. Here’s the document list:

You can find a detailed explanation of the<a href="https://www.skydo.com/blog/compliance-guideline-for-inward-remittance#what-are-the-documents-required-for-inward-remittance-in-india"> documents required for inward remittance in India right here</a>

How Do You Receive Inward Remittance in India?

There are three primary means to receive foreign inward remittances in India:

Let’s explore each medium and the steps in collecting inward remittances in India.&nbsp;

Banks are one of the most popular ways of transferring money from overseas to India. To receive inward remittance you must share your Indian bank account details like account number, bank and branch name, and <a href="https://www.skydo.com/blog/swift-money-transfer-ultimate-guide">SWIFT code</a> with the sender. You can find the<a href="https://www.skydo.com/swift-code-finder"> SWIFT code of your bank right here.&nbsp;</a>

<a href="https://www.skydo.com/blog/paypal-in-india-charges-review-alternatives">PayPal supports</a> over 100 currencies and has gained popularity in India as a medium to receive inward remittances. You can use the PayPal website or download their app to receive foreign remittances. Link your bank account to PayPal, so that you can withdraw money when you like.

I<a href="https://www.skydo.com/blog/virtual-account-numbers">nternational virtual accounts</a> are like digital gateways linked to your real bank account. They don’t store money themselves—when funds are credited, they’re transferred to your bank account. With platforms like Skydo, you can use virtual accounts to receive payments in different foreign currencies, making cross-border transactions simple and hassle-free.

What Are The Bank Charges for Inward Remittances?

The cost of processing inward remittances varies across banks and can include charges like SWIFT fees, forex markups, and additional service fees. For business payments, it’s crucial to understand these charges, as they are often borne by the recipient.

Here’s a breakdown of inward remittance charges at popular Indian banks:

Understanding these fees can help you plan your payments better and avoid unexpected deductions.

PayPal Charges for Receiving Inward Remittance

PayPal also comes with a hefty price tag for receiving foreign remittances in India especially when it comes to business payments. It charges a flat 4.4% transaction fee on every transaction. Additionally, you have to bear a fixed fee, which depends on the currency and a currency conversion fee of 4% on the current exchange rate. To get an in-depth explanation of each charge, check out our blog on<a href="https://www.skydo.com/blog/paypal-in-india-charges-review-alternatives"> PayPal India Charges</a>.

International virtual accounts Charges for Receiving Inward Remittance

Virtual accounts do not charge SWIFT fees because it’s treated as a local transfer making it a more affordable option. Here’s a quick breakdown of how much Skydo charges for receiving international payments via virtual accounts:&nbsp;

With Skydo, for payments up to USD 2,000, you pay $19. For payments between 2,000 to 10,000, you pay $29. So for a USD 5000 inward remittance, you can expect to receive INR 5,424 more compared to banks and INR 32, 862 more compared to PayPal.

Is There Tax on Inward Remittance in India?

Are you supposed to<a href="https://www.skydo.com/blog/decoding-gst-on-foreign-exchange"> pay taxes on inward remittances</a>? According to the income tax rules for international remittances, it depends on the purpose of the remittance. We have covered three different scenarios to give you a snappy overview:

Find out <a href="https://www.skydo.com/blog/how-to-receive-international-payments-in-india">how to receive foreign payments in India.</a>&nbsp;

How Much Inward Remittance is allowed in India?

According to the framework set by RBI for<a href="https://www.skydo.com/blog/online-payment-gateway-service-provider-opgsp?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link"> Online Payment Gateway Service Providers</a> (OPGSP), there are no limitations on personal transfers.&nbsp; However, <a href="https://www.rbi.org.in/commonman/English/scripts/FAQs.aspx?Id=1692#:~:text=There%20is%20no%20limit%20on,lakh%20for%20trade%20related%20transactions.">as per RBI</a>, there is a cap of INR 15.00 lakh for trade-related transactions.

Receive Business Inward Remittance Seamlessly with Skydo

For an exporter or a freelancer, paying hefty charges for inward remittances is a huge loss to their earnings. They deserve a platform that offers transparent pricing and advanced features for invoicing.<a href="https://www.skydo.com/"> Skydo</a> fits the requirements perfectly and is a trusted partner for business owners looking to scale their revenue from international clients.

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When receiving payments from the sale of Employee Stock Option (ESOP) shares, selecting the correct purpose code is essential for complying with RBI and FEMA regulations. The P0021 purpose code is designated for financial derivative transactions, specifically for receipts on account of share sales under ESOPs. This guide will walk you through the significance of the P0021 code, its role in <a href="https://www.skydo.com/blog/how-do-you-receive-a-foreign-remittance-in-a-savings-account">inward remittances</a>, and how to ensure smooth processing in compliance with RBI rules.

The P0021 purpose code is used when an individual or business receives payments for the sale of shares acquired through Employee Stock Option Plans (ESOPs). This code ensures that the foreign exchange inflow is categorized accurately as a financial derivative transaction under RBI guidelines.

Using the P0021 code helps maintain transparency in foreign remittances and ensures compliance with FEMA. If you’re new to understanding the purpose code system, refer to what purpose codes are to get familiar with their role in monitoring foreign exchange transactions.

Importance of P0021 Purpose Code in Inward Remittance

The P0021 purpose code plays a crucial role for individuals and businesses receiving payments from the sale of ESOP shares. These payments represent gains or earnings from financial derivative transactions. Selecting the correct code ensures that the receipt is reported properly to the RBI and complies with FEMA guidelines.

Misreporting such transactions can result in regulatory scrutiny, delays, or even penalties. By applying the P0021 code correctly, businesses and individuals can ensure smooth processing of payments and avoid unnecessary complications. This code provides clarity and transparency, enabling effective management of foreign exchange inflows.

Understanding Purpose Codes: Beyond P0021

The P0021 purpose code is specific to financial transactions involving ESOP share sales. However, the purpose code system covers various types of transactions to ensure that foreign inflows are tracked correctly. The RBI monitors these inflows to ensure compliance with FEMA regulations and maintain economic stability.

There are different codes for other types of financial or business transactions, such as investments, consultancy services, or trade. To explore other relevant purpose codes, check out this list of purpose codes and guide on finding your purpose code. Using the wrong code could result in delays, misreporting, or penalties, so it’s crucial to select the right one.

How to Select the Right Purpose Code for Your Transaction

Selecting the correct purpose code is essential for inward remittances to comply with RBI guidelines. Use the P0021 purpose code when you receive payment for the sale of ESOP shares. Before finalizing the transaction, confirm that the payment is for shares acquired through an employee stock option plan.

Providing proper documentation—such as share sale agreements or ESOP certificates—will ensure the smooth processing of the transaction. If you are unsure whether the P0021 code applies, consult your bank or a financial expert to avoid delays or errors in reporting.

Conclusion: Ensuring Compliance with the P0021 Purpose Code

The P0021 purpose code is essential for individuals and businesses receiving payments from ESOP share sales. By using the correct code, you ensure compliance with RBI and FEMA regulations, facilitating smooth foreign exchange inflows. Always verify your transaction type and provide accurate documentation to avoid delays or penalties. Selecting the right purpose code ensures seamless processing and regulatory compliance.

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P0021 purpose code

Handling cross-border payments for business services requires selecting the appropriate purpose code to stay compliant with RBI and FEMA regulations. The S1007 purpose code applies to payments for services like advertising, trade fairs, market research, and public opinion polling. This guide will walk you through the significance of the S1007 code, its role in inward remittances, and how it ensures smooth transactions under RBI guidelines.

The S1007 purpose code is used when Indian businesses or agencies receive payments from foreign clients for services related to advertising, participation in trade fairs, market research, or public opinion polling. This code ensures that the foreign exchange inflow is correctly categorized as business services under <a href="https://www.rbi.org.in/commonman/English/Scripts/Notification.aspx?Id=1410?no_follow=true">RBI guidelines.</a>

Using the S1007 code allows companies to track and report these payments accurately, ensuring compliance with<a href="https://enforcementdirectorate.gov.in/fema?no_follow=true"> FEMA</a> and avoiding regulatory complications. If you’re new to purpose codes, explore what purpose codes are to understand how they streamline cross-border transactions and maintain transparency in foreign exchange operations.

Importance of S1007 Purpose Code in Inward Remittance

The S1007 purpose code is essential for businesses offering services related to advertising, trade shows, market surveys, or polling. These services often involve foreign clients who make payments to Indian agencies or companies. Proper classification of these payments under the S1007 code ensures compliance with RBI guidelines and smooth processing of foreign exchange inflows.

Using the right purpose code reduces the risk of misreporting, which could result in delays, fines, or regulatory scrutiny. By selecting the S1007 code, businesses can also avoid unnecessary disruptions in their international transactions, enabling better financial planning and operational efficiency.

Understanding Purpose Codes: Beyond S1007

Purpose codes, such as S1007, help categorise different types of international transactions to maintain transparency and regulatory oversight. The RBI uses these codes to monitor foreign exchange inflows and ensure compliance with FEMA. While S1007 applies to advertising and market research services, other codes are available for <a href="https://www.skydo.com/blog/guide-for-tech-exporters-on-global-compliance">software exports</a>, consultancy services, and personal remittances.

If you need to explore other codes relevant to your business, check out this list of purpose codes and guide on finding your purpose code to ensure that your transactions are correctly classified. Incorrect coding can lead to penalties, so it’s important to use the correct code for each type of service.

Choosing the correct purpose code is crucial for <a href="https://www.skydo.com/blog/time-taken-for-inward-remittances">inward remittances</a> to comply with RBI and FEMA guidelines. Use the S1007 purpose code when receiving payments for advertising services, market research, trade fair participation, or opinion polling.

Before submitting your transaction, confirm that the nature of the service matches the S1007 code. Providing proper documentation—such as contracts, invoices, or participation agreements—will further ensure smooth processing of payments. If you’re unsure about which code applies, consult your bank or a financial advisor to avoid any errors or delays.

Conclusion: Ensuring Compliance with the S1007 Purpose Code

The S1007 purpose code is essential for businesses that receive payments for advertising, trade fairs, market research, and public opinion polling services. Using the right code ensures compliance with RBI and FEMA regulations, allowing smooth foreign exchange inflows and seamless transactions. Always verify your transaction details and select the correct code to avoid delays or penalties. Proper documentation will further guarantee a smooth remittance process.

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S1007 purpose code

Imagine landing your first international client for your handmade jewelry, only to have your shipment held up at customs because your IEC (Importer Exporter Code) status shows "pending verification." This scenario plays out frequently for Indian businesses and freelancers who overlook IEC verification (an initiative by the government of India), leading to costly delays, storage charges, and potentially lost clients. The good news? A simple online verification process can help you avoid these headaches and ensure smooth international shipping.&nbsp;

This guide will explain how to check your IEC status online, understand different verification statuses, and prepare your business for hassle-free international trade.

An IEC is your passport for international trade. The Directorate General of Foreign Trade (DGFT) gives this unique 10-digit number to businesses and freelancers who want to trade internationally.

You need to verify your IEC details because:

There are two simple ways to verify your IEC

Step 1: Open your web browser and go to the <a href="https://www.dgft.gov.in/CP/">DGFT</a> website

Step 2: Look for the Login button at the top of the page. Type in your username and password

Step 3: Find and click on Services in the menu. Now look for IEC Management and click on it

Step 4: Here, you need to put in your PAN details and click Submit to see your IEC status or download your IEC certificate

Step 1: Visit the <a href="https://www.icegate.gov.in/">ICEGATE website</a>

Step 2: Find and click User Login under Services.&nbsp;

Step 3: After logging in, look for Check IE Code/BIN Status. Type in your IEC number, complete the captcha, and click IE Code @ ICEGATE to see your status

What are the Different Statuses of IEC Code Verification?

When you check your IEC application status, you'll see one of these status messages:

It means your application is being processed. You need to wait for four days to get the next update. During this time, DGFT officers review your documents and verify your international business details. You can use this waiting period to set up other aspects of your export business, like preparing product catalogs or finalizing your pricing strategy.

It means something wasn't quite right about your application process, and it got rejected (for example, maybe your address proof wasn't clear enough in the application). The next step could be to fix the issues and apply again (no extra fees needed). The good news is that the system will highlight which documents or details need correction, making fixing it easier. Most rejections are resolved within one resubmission, so don't get discouraged if this happens to you.

It means the DGFT has approved your <a href="https://www.skydo.com/blog/iec-code-apply-online">IEC application</a> and sent it to customs. The next step is to wait three days for customs clearance. During this time, your information is being integrated into the customs database, allowing you to ship goods internationally. You can track this status daily on the ICEGATE portal to know exactly when your code becomes active.

Registered by DGFT and Accepted by ICEGATE

It means you're all set to start your import and export operations. This status confirms that DGFT and customs systems recognize your IEC as valid and active. You can now register with shipping companies, apply for export benefits, and start accepting international orders and gigs with confidence that your documentation is complete and valid.

What are the Benefits of IEC Code Verification?

Picture losing a ₹5 lakh international project because your IEC verification wasn't current—it happens more often than you'd think. Understanding the benefits of IEC verification isn't just about following rules; it's about protecting your business and unlocking opportunities that could take your export activities to the next level.

When your IEC is verified, you'll breeze through customs checks without delays. A verified status means your documentation moves much faster, saving you time and money.

A verified IEC builds confidence in your business relationships. International clients can easily confirm that you're a legitimate freelancer. For businesses, shipping companies are more likely to process your orders quickly (keep the shipping bills handy), and banks view you as a credible business partner for financial services.

Regular verification acts as a security measure for your business. You can quickly spot if someone tries to misuse your IEC number for unauthorized trades. This verification status also serves as solid proof of your legitimate trading activities if questions ever arise.

With a verified IEC, you can easily access government export schemes for businesses like yours. Banks are more willing to offer export financing options, and you can confidently register for international trade shows. Plus, claiming benefits like duty drawback becomes much smoother.&nbsp;

What are the Common IEC verification issues and their fixes?&nbsp;

Below are some of the common IEC verification issues and their fixes you must know of:&nbsp;

If the status isn't updating: The system typically needs 24 hours to reflect changes, so patience is key. Early morning hours often work best for checking status updates. If you're still having trouble, try clearing your browser data for a fresh start.

Having login troubles: Most login issues have simple solutions. Check if you typed your username correctly. If you can't get in, use the password reset option. A common oversight is having caps locked on, so watch out for that. Always use the email address you registered with.

Website issues: The best time to check is early morning, between 6 AM and 8 AM, when there's less traffic. If you're using your phone, try switching to a computer instead. Sometimes, the problem is as simple as an unstable internet connection.

What Happens if I Don’t Verify my IEC Code?&nbsp;

Here are the potential consequences of not verifying your IEC Code number:&nbsp;

Receive Export Payments Seamlessly with Skydo&nbsp;

Having a verified IEC is your ticket to smooth international trade. However, it's equally important to manage your global payments efficiently. While traditional payment methods can reduce earnings through high fees and exchange rates, modern solutions like Skydo offer better rates for local receiving accounts.&nbsp;

<a href="https://www.skydo.com/">Get started with Skydo!&nbsp;</a>

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Form W8 BEN and Form W8 BEN-E are crucial for Indian residents and businesses earning income from U.S. clients. These IRS forms ensure you don’t pay more tax than necessary by letting you claim reduced withholding rates under U.S. tax treaties.

For individuals, <a href="https://www.skydo.com/blog/w8-form-explained-what-indian-residents-must-know">Form W8 BEN</a> is the go-to form, while businesses need Form W8 BEN-E. Though they might seem complicated at first, filling them out is much easier than it looks.

In this article, we’ll walk you through how to complete these forms, highlight common mistakes to avoid, and share tips to simplify the process. If you're a Skydo user, our <a href="https://www.skydo.com/contact-us/support">customer support team</a> is also available to assist you every step of the way.&nbsp;

How to Fill Form W8 BEN as Indian Freelancers?

Form W8 BEN, also known as the "Certificate of Foreign Status," is for Indian individuals earning certain types of income from the U.S., including royalties or passive income.

This form proves you're a foreign person, Indian resident in this instance and ensures your income is taxed correctly. You’ll need to submit it when asked by the payer or withholding agent, basically your client or employer in the US. even if you’re not claiming a reduced tax rate or exemption from the standard 30% withholding.

This is how a Form W8 BEN&nbsp; looks like:

Part I: Identification of Beneficial Owner

This section contains your personal details as an Indian resident earning income from the U.S. Here’s how to complete it:

This is the most critical section. It allows you to claim tax treaty benefits under the <a href="https://www.irs.gov/pub/irs-trty/india.pdf">India-U.S. Tax Convention </a>to reduce or eliminate U.S. withholding tax.

Submit the completed form to your employer or client. If you’re a Skydo user, our <a href="https://www.skydo.com/contact-us/support">customer support team</a> is available to assist you in filling out the form and addressing any concerns you might have.

You can also download <a href="https://www.irs.gov/pub/irs-pdf/fw8ben.pdf">Form W8 BEN right here</a>

Do Indian freelancers need to file a W8 BEN?

Yes, Indian freelancers working with U.S. clients must file Form W8BEN and submit it to their clients. This certifies their status as Indian residents and allows them to claim a 0% tax withholding rate under the India-U.S. Tax Treaty.&nbsp;

How to fill Form W8 BEN E as an Indian Business?&nbsp;

The W8 BENE form serves a similar purpose as the W8 BEN but is specifically designed for Indian businesses and entities rather than individuals. Like individuals, income earned by foreign entities from U.S. sources is also typically subject to a 30% withholding tax. However, by submitting a correctly completed W8 BENE, Indian businesses will qualify for a reduced withholding rate as per the India-US Income tax treaty.&nbsp;

Here’s what the first page of Form W8 BEN E looks like:

Part I: Identification of the Beneficial Owner

This section captures your business details:

Part II: Disregarded Entity or Branch Receiving Payment

This section applies only to Foreign Financial Institutions. For most Indian businesses, you can skip this section.

This is the most critical section of the form, as it deals with claiming tax treaty benefits under the <a href="https://www.irs.gov/pub/irs-trty/india.pdf">India-U.S. Tax Convention.</a>

Most of the remaining sections deal with specific entities like financial institutions, banks, and international organizations. These sections don’t apply to regular Indian businesses providing services to U.S. clients.

Filling out the W8 BEN E can feel intimidating at first, but when you focus only on the sections relevant to your business, it becomes much simpler. Take it step by step, and you’ll be done in no time!

Can I file a W8 BEN and W8 BEN E without a U.S. TIN?

Yes, most Indian freelancers and businesses working with U.S. clients likely won’t have a U.S. TIN (Tax Identification Number). Instead, they can use their PAN or GSTIN as their FTIN (Foreign Tax Identification Number) when filing Form W-8BEN or W-8BEN-E.

How to Avoid Common Mistakes When Filling Out W8 Forms?

Filling out W8 Forms isn't really complicated. However, it is important to avoid some common mistakes to&nbsp;ensure your submission is accurate and hassle-free:

There are five types of W-8 Forms, but most Indian freelancers and businesses will need Form W-8BEN or Form W-8BEN-E.

Choosing the correct form based on your status—individual or entity—is essential to avoid payment delays or incorrect tax withholding. Always double-check before submitting.

It is important to share your Tax Identification Number on the W8 Form. If you don’t have a U.S. TIN, use your PAN or GSTIN as your FTIN. Ensure the number matches your official records.

It is important to quote the correct tax treaty clause to be able to claim reduced tax withholding or exemption.&nbsp;For Indian residents, cite Article 15 (Independent Personal Services) or Article 7 (Business Profits) of the India-U.S. Tax Treaty. Clearly state your claim for a reduced or 0% withholding rate.

Selecting the wrong entity type or failing to declare your financial status can become a problem. Most Indian businesses are Active NFFE (Non-Financial Foreign Entity). Select the correct classification to avoid rejection.

W8 forms should always be submitted to the withholding agent requesting it, not directly to the IRS.

Receiving payments from U.S. clients can be complicated. Banks often charge hidden fees, add forex markups, and require multiple follow-ups to ensure payments arrive on time.

Skydo offers a simpler solution. With a virtual U.S. account, your clients can make local payments, eliminating SWIFT charges. Payments are converted at live exchange rates, ensuring you keep more of what you’ve earned.

If you need help filling out your W-8 form, our support team is here to assist. Once completed, receiving payments from the U.S. becomes straightforward and efficient with Skydo.

Focus on your work, not payment hassles. Let Skydo handle the rest.

How to Fill W-8BEN and W-8BEN-E Forms: A Guide for Indian Freelancers & Businesses