India taxes individuals based on a system of income slabs. Different tax rates are assigned to different ranges of income.&nbsp;

Understanding tax slabs is crucial for several reasons.

As a person earns more, the tax liability also increases, creating a fair and progressive tax system in the country. To achieve this, the government regularly updates and announces changes to tax slabs in the Union Budget.

The income tax slabs differ between the old and new tax regimes. Let's explore the specific slab rates applicable to Individuals for FY 2022-23 (AY 2023-24) and FY 2023-24 (AY 2024-25).

Income Tax Slab Rates For FY 2023-24 (AY 2024-25)&nbsp;

Rates of the old tax regime slabs are categorized into three groups:

The new tax regime applies uniform tax rates to all individuals, eliminating the age-based distinctions in the old system. The new tax regime slabs 2023-24 are outlined below.

Applicability of Surcharge for FY 2023-24 (AY 2024-25)

The income tax <a href="https://incometaxindia.gov.in/charts%20%20tables/tax%20rates.htm">surcharge</a> is an extra fee imposed on top of the <a href="https://www.skydo.com/blog/how-to-file-taxes-under-44ada?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">regular income tax</a>. An additional tax is applied to individuals with higher income earnings in a specific financial year. Let’s look at the applicable surcharge rate under the Old and New tax regime.

However, 25% or 37% surcharge rates will not apply to income under the following sections.

Consequently, the highest surcharge rate on the tax payable for such incomes will be 15%.

Starting from the Assessment Year 2023-24, the maximum surcharge rate on tax payable for dividend income or capital gain specified in Section 112 will be capped at 15%.&nbsp;

A 4% Health and Education cess will be applied to all cases’ total income tax liability and surcharges.

Comparison of tax rates under the New tax regime and the Old tax regime for FY 2022-23 (AY 2023-24)

How do you calculate the income tax from the income tax slabs?

Let’s understand the calculation with an example.

Sanjana, aged 35, has a total taxable income of Rs. 8,50,000. She has opted for the old tax regime. Her income includes income from salary, interest and rental income. Deductions under section 80 have been reduced. Now, Sanjana wants to know her <a href="https://www.skydo.com/blog/gst-requirements-international-service-sales?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">tax liability</a> for FY 2022-23 (AY 2023-24).

*Sanjana, an individual taxpayer under the age of 60, enjoys an income exemption limit of up to Rs 2,50,000. Other taxpayers, i.e., senior and super senior citizens, have higher income tax exemption thresholds of Rs 3,00,000 and Rs 5,00,000, respectively.

Please be aware that the tax rates in the New Tax Regime are uniform for all categories of individuals, including regular individuals, senior citizens, and super senior citizens.&nbsp;

Individuals with a net taxable income of up to Rs 5 lakh qualify for a tax rebate under section 87A, resulting in zero tax liability in both the New and Old tax regimes. It's important to note that in Budget 2023, the rebate under the new regime has been extended, making income up to Rs 7 lakh tax-free from the FY 2023-24 onward.

Let's delve into effective strategies to maximize your investments while minimizing the associated tax burdens.

ELSS mutual funds provide a dual benefit of potential capital appreciation and tax savings under Section 80C of the Income Tax Act. Investing in ELSS reduces taxable income and offers a path for long-term wealth growth.

2. Explore tax-efficient investment avenues

Health insurance qualifies for tax benefits under Section 80D. You can claim tax benefits on premiums paid - up to Rs 20,000 for senior citizens and Rs 15,000 for others. For example, if you pay Rs 15,000 for your policy and Rs 20,000 for your senior citizen parent, you can claim a total tax benefit of Rs 35,000.&nbsp;

Maturity value is tax-free for sums received under critical illness insurance policies.

This strategy entails selling loss-making assets to realize the capital loss and using it to offset the gains earned by profit-making assets.

For instance, if you have a loss of Rs. 20,000 in Stock A and a gain of Rs. 30,000 from Stock B, you can sell Stock A during a market downturn to offset the gains. This way, you can reduce your taxable income. The saved amount can be reinvested for portfolio growth.

Ensure that tax loss harvesting aligns with your overall financial goals and plan by considering a discussion with a financial professional or tax advisor.

<a href="https://www.skydo.com/blog/how-can-the-right-chartered-accountant-help-your-tech-export-business?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Consult financial professionals or tax advisors</a> for effective tax planning and strategic advice. Their expertise can provide tailored insights aligned with your financial goals and ensure a well-informed approach to optimize your tax situation.

If you need help deciding what is right for you, we will connect you with our panel of Indian and US-based CA / CPAs. Feel free to reach out to us.

Q1. How is a taxpayer's income categorized?

Ans: A taxpayer's income falls into five categories outlined in Section 14 of the Income Tax Act. These include Income from salary, Profits from a business or profession, Income from House Property, Capital Gains, and Income from Other Sources.

Q2. Is it possible to avail of 80C deductions while choosing the new tax slabs 2023-24?

Ans: No, under the new tax regime, several deductions and exemptions, including those under section 80C, are not permitted. Opting for the new tax regime means foregoing the ability to claim deductions under section 80C.

Q3. What do "Previous Year" and "Assessment Year" mean?

Ans: We have two important terms in income tax provisions: (i) Previous Year and (ii) Assessment Year. Previous Year is when you earn income, typically from April 1st to March 31st. The year right after the Previous Year, from April 1st to March 31st, is called the 'Assessment Year.'

For example, the Previous Year is from April 1, 2023, to March 31, 2024 (FY 2023-24). The corresponding Assessment Year is from April 1, 2024, to March 31, 2025 (AY 2024-25).

Q4. What is the tax exemption limit for calculating income tax rebate under section 87A?

Ans: For FY 2023-24 (AY 2024-25), the rebate limit has been increased to Rs. 7,00,000 under the new tax regime. This means a resident individual with taxable income up to Rs 7,00,000 will receive Rs 25,000 or the amount of tax payable (whichever is lower) as tax relief. However, the old tax regime's threshold limit will remain the same, i.e., Rs 12,500 if taxable income is up to Rs 5,00,000.

Q5. How much is the standard deduction for FY 2023-24?

Ans: You can claim a standard deduction of ₹50,000 to the income taxable under the head ‘Salaries.’ The standard deduction is a tax benefit that can be claimed irrespective of the amount spent on Transport or Medical Allowance. It applies to individuals earning a salary or pension income.

Prepare for the upcoming year's tax season by understanding the tax slabs for 2023-24 and optimizing your tax savings. 

Tax Slabs in 2023-24: Plan Ahead for Next Year Tax Savings

Tax Slabs in 2023-24: Plan Ahead for Next Year Tax Savings Th

Rohit

medium_Rohit.png

small_Rohit.png

thumbnail_Rohit.png

Rohit Khuranna

TDS on foreign remittance keeps many Indian business owners awake at night.&nbsp; Questions like: Do I need to deduct TDS while paying a foreign vendor? Should I worry if my US client doesn’t deduct TDS while paying me? Keep circling in their head.&nbsp;

If that sounds relatable, this blog will be your single source of truth for all things TDS on foreign payments. We’ll provide detailed and jargon-free answers to tell you exactly when TDS applies, who needs to apply, and how to avoid costly mistakes.

TDS on Foreign Payments: What Does It Actually Mean?

TDS (Tax Deducted at Source) is a system used by the government to collect tax at the point where income is paid. Under Section 195 of the Indian Income Tax Act, if you’re an Indian resident or a non-resident making a payment to a foreign vendor or a Non-Resident, and if that income is taxable in India, you’re required to deduct the TDS before transferring the amount. There are a few exceptions to this rule, like the salary paid to a foreign individual.&nbsp;&nbsp;

But you have to deduct TDS when you pay an annual licensing fee to a software vendor based in the US. For example, your design team uses the Adobe Photoshop premium license to design various assets. Adobe Inc. is a USA-registered company, so TDS will apply to it. If the annual license costs $10,000, you must deduct 10%, i.e. $1,000 as TDS. The purpose of this system is to keep track of cross-border payments and prevent tax evasion.

But the real challenge for export-focused businesses and freelancers is knowing which payments actually require TDS. Do all outgoing payments attract TDS? The answer is no. It depends on multiple facets. Here’s a small table to show you when the TDS will be applicable:

If You’re Receiving Foreign Payments – Does TDS Apply?

TDS is not deducted on incoming payments. When you get paid by a foreign client, they may not deduct tax on the amount. Why?

1. Your income accrues in India:&nbsp;This means you are providing goods or services to foreign clients from India and earning money from it. Therefore, it will be treated as income earned and accrued in India

2. The Indian tax laws do not govern your foreign clients. They are not required to comply with Indian TDS provisions because they operate outside India’s tax jurisdiction.&nbsp;

3. As an Indian resident, you’re responsible for declaring your income and paying tax to the Indian government, not your client.

Keep your documents well-organised and thoroughly check them so that you receive the payment from your foreign client without hiccups. For example, always use the correct purpose code. You can always refer to a<a href="https://www.skydo.com/blog/rbi_purpose_code_for_inward_remittance"> Purpose Code finder</a> if you’re not sure which one applies to your business. Likewise, keep your invoices, GST details, and <a href="https://www.skydo.com/blog/automated-firc-simplifying-international-payments-compliance">Foreign Inward Remittance Advice (FIRA)</a> accessible.&nbsp;

We will cover these documents in more detail in the later part of the blog

TDS Rates on Foreign Payments (2025 Update)

The TDS rate depends on the nature of the payment and whether the Double Taxation Avoidance Agreement (DTAA) applies. We will get to the meaning of DTAA in a bit. 

Before that, let’s take a look at some of the TDS rates for foreign payments to a US vendor. The final applicable TDS rate is the lower of the TDS rate mentioned in the Finance Act and the DTAA.

 If the TDS rate according to the Finance Act is lower, then the final rate is calculated as TDS rate + Surcharge + Cess (0.4% of TDS rate + Surcharge)

The Double Taxation Avoidance Agreement (DTAA) is a treaty India signs with other countries, so you don’t have to pay tax twice on your earnings. At present, India has signed DTAA with 85+ countries. 

Imagine you’re a freelancer working with a US-based client. Under the India-USA tax treaty, you can fill out the W8BEN form and send it to your client. The<a href="https://www.skydo.com/blog/filing-w-8ben-and-w-8ben-e-a-guide-for-indian-freelancers-and-businesses"> W8BEN form </a>is a declaration that you’re a resident of India and not subject to U.S. tax withholding.

While filling out the form, you must also quote the article to take advantage of the DTAA. Freelancers must mention Article 15: Independent Personal Services in the W8BEN form. Indian businesses must quote Article 7: Business Profits in the W8BEN-E form.

How to Reduce or Avoid TDS on Foreign Payments (Legally)

To claim the benefit of DTAA and pay low or no TDS, first check if India has a DTAA with your vendor’s country. After you confirm that, you will need the following documents from the client:

Tax Residency Certificate (TRC): The TRC is an official certificate issued by the local tax authority of your vendor’s country. It proves that your client is a tax resident of the country and is eligible for DTAA benefits. Think of it as the foreign version of the PAN Card.

Form 10F: Your vendor must fill out the Form 10F as a self-declaration after registering themselves on the Income Tax portal. This form is used to confirm the vendor’s basic details like name, address, nationality, and Tax Identification Number (TIN). You can download the Form 10F <a href="https://incometaxindia.gov.in/forms/income-tax%20rules/103120000000007197.pdf">here</a>.

No PE declaration: PE is short for Permanent Establishment. This is another declaration where the vendor confirms that they don’t have a fixed office or a permanent base in India. If they have one, they might not be eligible for the DTAA benefits. You can take a look at the sample No PE declaration <a href="https://www.netapp.com/media/117680-no-pe-declaration-form.pdf">here</a>.

After you know that the vendor has completed the above steps, you can file Form 15CA and 15CB with the help of a Chartered Accountant (CA) to remit the payment legally and support the reduced TDS claim.

Here’s a quick overview of what these forms are:

<a href="https://www.skydo.com/blog/form-15ca-cb">15CA</a>: This form reports that you are making a payment to a non-resident individual or a company

<a href="https://www.skydo.com/blog/form-15ca-cb">15CB</a>: If your payment exceeds <a href="https://www.incometax.gov.in/iec/foportal/help/statutory-forms/popular-form/form15cb-um">Rs. 500,000</a> in a financial year, your CA certifies the payment, like TDS rate and deduction and issues a Tax Determination Certificate&nbsp;

How Exporters &amp; Freelancers Can Stay Compliant

When you’re managing international payments, airtight documentation is necessary. This is especially true in the case of TDS on cross-border payments. To help you stay compliant, we have created a short checklist based on whether you’re receiving an international payment or sending one.&nbsp;

If you’re receiving foreign payments:

There is no TDS. But these are the documents you must keep to have a smooth experience.&nbsp;

Use the correct purpose code: A <a href="https://www.skydo.com/blog/what-is-purpose-code-and-why-is-it-required">purpose code</a> is an alphanumeric code issued by the RBI. This code must be attached to every incoming and outgoing international payment to clarify the intended use of funds and regulate the cross-border flow. For example, <a href="https://www.skydo.com/blog/p0802-purpose-code-guide">P0802</a> is the purpose code used when Indian companies or professionals receive a cross-border payment for software consultancy or implementation services.&nbsp;

Maintain FIRA, eBRC, and IEC records: The Foreign Inward Remittance Advice (FIRA) proves you have received a foreign payment in India. The <a href="https://www.skydo.com/blog/what-is-e-brc">Electronic Bank Realisation Certificate (eBRC) </a>is a digital proof that you have received a payment for the goods or services exported. The<a href="https://www.skydo.com/blog/iec-code-full-form-importance-fees"> Import Export Code (IEC)</a> is a unique 10-digit code issued to every business engaged in cross-border trade. The IEC is needed during customs clearance, for taking export benefits, and making international payments.

File GST Returns Appropriately: Take care while filing your GST return, especially if you provide services to foreign individuals or companies. Under GST, the export of services must fulfil four conditions:&nbsp;

ii) The client must be located outside India

iii) The place of supply of the service must also be outside India

iv) The payment must be in foreign currency

TDS may apply, but you can also claim for DTAA benefits if you have the right documents

Check income chargeability: This must be your first step. Check if the income is chargeable in India. The following examples are not considered income in India:

Pure capital receipts (unless specifically taxed)

Loans and advances (not income until waived)

Check for DTAA: Check if India has a DTAA with the vendor country

Determine the tax rate: If there is a DTAA with the vendor country, compare it with the TDS rate mentioned in the Finance Act. Apply the one that is lower.

File form 15CA/15CB when required: These forms must be filled out before sending the payment to the foreign vendor. In Form 15CA, you declare that you’re making a foreign payment, and in Form 15CB, a CA certifies that the details are accurate.

While there is no TDS on incoming foreign payments, traditional banks can chip away a portion of your hard-earned money. To start with, banks don’t offer the best exchange rates.

They charge a forex markup as high as <a href="https://www.skydo.com/blog/forex-markup-fee-explained">3%</a> on the prevailing exchange rate, ultimately reducing your payout. Moreover, there are inward remittance fees, SWIFT charges,&nbsp; often passed on by the sender to the receiver, and intermediary bank fees eating into your profits.

This is where Skydo steps in as a smarter, quicker, and more cost-effective solution. With Skydo, you can create virtual accounts in key geographies like the US, UK, EU, and Australia right from India. 

These virtual accounts work as local digital addresses, so your clients pay you as if they are making a domestic transfer. This way, they bypass the SWIFT charges.

Skydo also offers live exchange rates with no hidden markups. The fee structure is transparent, so you always know how much will be deducted from your incoming payment.&nbsp;

After you receive the payment, the amount is credited to your bank account within 48 hours.

Sounds interesting? Why don’t you <a href="https://www.skydo.com">sign up</a> for a quick demo and get a first-hand experience?

Ways to Minimise TDS on Foreign Payments Th

large_Ways to Minimise TDS on Foreign Payments Th

medium_Ways to Minimise TDS on Foreign Payments Th

small_Ways to Minimise TDS on Foreign Payments Th

thumbnail_Ways to Minimise TDS on Foreign Payments Th

Freelancers in India often wonder which bank account to use for their business income. Can you run your freelance gig on a regular savings account, or is a current (business) account better? T

His guide explains the key differences between savings and current accounts, and tells you when to use each. We’ll cover interest rates, transaction limits, overdraft facilities, and tax compliance issues (like FIRA and GST) to help Indian freelancers make the right choice.

Understanding Savings and Current Accounts

 Designed for individuals to save money. You can deposit funds and earn interest on your balance. In India, banks typically offer around 2–4% annual interest on savings accounts.&nbsp; 

Savings accounts usually have limits on free withdrawals and require a lower minimum balance (often ₹500–₹10,000). They are ideal for building an emergency fund or short-term goals, and come with basic facilities like ATM/debit cards and net banking.

Meant for business transactions. Current accounts do not earn interest on deposits, but they allow unlimited transactions and higher cash/deposit limits.&nbsp; They often require a higher minimum balance (₹10,000+). 

Current accounts provide business features like overdraft facilities (short-term credit) and multiple cheque books. They are tailored for professionals or businesses that handle frequent/large payments.

Key Differences at a Glance: Current Vs Savings Account

When to Use a Current Account (Why Freelancers Need One)

A current account is usually the safer, more flexible choice once your freelance business grows:

A savings account can be okay for very small-scale freelancers or those just starting:

However, remember, after your monthly business earnings exceed ₹2–3 lakh, a savings account is no longer suitable. Above that, the risk of account restrictions rises, and you lose out on business features.

Choosing the Right Account: Key Considerations

When picking an account, look beyond the basic category:

&nbsp;For most Indian freelancers, a current account is the better long-term choice once your earnings and transactions pick up. It handles high volume, provides professional tools (overdraft, cheques, FIRA/GST support), and separates business from personal funds. You might start with a savings account when your freelancing is very small-scale, but plan to switch or add a current account as soon as possible.

Current vs Savings Account: What Should a Freelancer Choose th

large_Current vs Savings Account: What Should a Freelancer Choose th

medium_Current vs Savings Account: What Should a Freelancer Choose th

small_Current vs Savings Account: What Should a Freelancer Choose th

thumbnail_Current vs Savings Account: What Should a Freelancer Choose th

India is seeing a massive surge in foreign remittances, from freelancers working with global clients to families receiving support from relatives abroad. But while sending money is easier than ever, receiving it efficiently, affordably, and compliantly still poses challenges for many.

In this guide, we break down everything you need to know to receive money from abroad in India, covering bank transfers, online platforms, virtual accounts, required documents, tax rules, and the smartest options for your needs.

What Are the Main Ways to Receive Money From Abroad in India?

Bank wire transfers via the <a href="https://www.skydo.com/blog/swift-money-transfer-ultimate-guide">SWIFT network</a> are one of the most common ways to receive international payments in India, especially for established businesses or high-value transactions.

A Bangalore-based IT services company receives $150,000 from a U.S. corporate client for a quarterly contract. The client uses SWIFT to transfer funds from Chase Bank to HDFC Bank.

<a href="https://www.skydo.com/blog/virtual-account-numbers">Virtual accounts</a> offer a modern, cost-effective way for Indian freelancers and businesses to receive international payments.&nbsp;Platforms like Skydo and Wise provide you with local receiving accounts in foreign countries, so clients can pay you like a local.

Steps to Receive via Virtual Account:

A freelancer in Pune provides design services to a client in New York. Instead of using SWIFT, the client pays via ACH using the freelancer’s virtual US bank account from Skydo. The money is converted and settled in INR within 24 hours, with no delays, no hidden forex fees.

<a href="https://www.skydo.com/blog/paypal-in-india-charges-review-alternatives">PayPal </a>and <a href="https://www.skydo.com/blog/stripe-india-charges-review-alternatives">Stripe</a> are two of the most popular global payment platforms for freelancers, agencies, and online businesses. They offer simple setups to receive payments from international clients, especially for small-ticket or card-based transactions.

These platforms act as intermediaries; your client pays using their preferred method (card, wallet, bank), and you withdraw the converted amount to your Indian savings account.

An Indian SaaS business uses Stripe to collect monthly subscriptions from global customers, offering seamless card payments and auto-billing. Meanwhile, a freelancer uses PayPal to invoice clients for one-off projects or small retainer work, offering a quick and familiar option for international clients to pay via card or wallet.

 Other Methods: Remittance Services &amp; UPI-Based Transfers

Apart from bank transfers, virtual accounts, and payment gateways, there are other ways Indian individuals receive money from abroad,&nbsp; such as cash remittance services (Western Union, MoneyGram) and UPI-linked international transfers.

These methods are typically more suited for personal remittances rather than business transactions.

Remittance Services (e.g., Western Union, MoneyGram)

&nbsp;UPI-Linked Transfers (via Tie-ups with NRIs or Global Apps)

A student receives ₹25,000 from their parents abroad via Western Union, or an NRI sends a small Diwali gift through a global app integrated with UPI. Quick, simple, but not appropriate for business invoices or export earnings.

When it comes to receiving international payments in India, the method you choose significantly impacts how much actually reaches your account. Below is a breakdown comparing traditional bank wire transfers, payment gateways (like PayPal, Stripe), and virtual accounts (like Skydo).

Typical Scenario: If you’re receiving $5,000, you might lose ₹5,000–₹10,000 in deductions before it hits your account.

Use Case: Good for small, frequent payments or client card payments, but costly for large transfers.

Best For: Exporters, agencies, and freelancers who want clarity, savings, and automated documentation.

 RBI Guidelines &amp; Tax: What You Need to Know

Whether you're a freelancer, a small business, or receiving money from friends or family abroad,&nbsp; it's important to stay <a href="https://www.skydo.com/blog/compliance-guideline-for-inward-remittance">compliant with RBI and Indian tax regulations</a>. Here's what you need to know:

All foreign inward remittances must comply with the Foreign Exchange Management Act (FEMA). The purpose of the transfer (gift, income, business payment, etc.) determines the applicable regulation and reporting requirement.

Virtual accounts (Skydo, Wise) offer ease, low fees, and instant FIRA.

Use virtual accounts for routine payments. For very large sums, occasional SWIFT transfers may still be necessary."

Payment gateways like PayPal or Stripe are convenient, but plan to avoid conversion markups by withdrawing via lower-cost alternatives or virtual accounts.

How to get paid for freelance work from abroad?

If you’re a freelancer in India, the easiest ways to get paid by international clients are:

For compliance, always keep your FIRA as proof of inward remittance.

If you’re a freelancer in India wondering how to get paid from abroad, the simplest way is through local account details or card payment links. Tools like Skydo give you both faster payments, live FX, and instant FIRAs,&nbsp; so clients pay easily and you receive without hidden costs.”

Tips to Avoid Overpaying While Receiving Money from Abroad

If you're tired of hidden bank charges, delayed settlements, and chasing compliance paperwork, Skydo offers a better way.
With RBI-approved virtual accounts, live forex rates (no markup), and instant, free FIRA for every transaction, Skydo makes receiving international payments faster, cheaper, and 100% compliant.

Whether you're a freelancer, an agency, or an exporter, Skydo helps you bring your payments home without the usual hassle.

large_How Do You Receive a Foreign Remittance in a Savings Account th

medium_How Do You Receive a Foreign Remittance in a Savings Account th

small_How Do You Receive a Foreign Remittance in a Savings Account th

thumbnail_How Do You Receive a Foreign Remittance in a Savings Account th

Receiving money from abroad in India

An RBI purpose code is a standardised, alphanumeric label that classifies the reason for a foreign inward remittance (e.g., P1401 salary, P0102 export realisation, P0802 software services). AD banks must capture and report it to the RBI for every incoming transfer under FEMA reporting.

Why the right RBI purpose code is critical (inward remittance)

Picking the correct RBI purpose code for inward remittance isn’t a formality; it directly affects compliance, speed of credit, and your documentation trail.

1) It’s a regulatory must-have (FEMA/RBI).
Authorised Dealer (AD) banks must capture and report every foreign inward transaction to RBI with a valid receipt (“P”) purpose code under FETERS. If the code is missing/wrong, banks can’t file accurate returns, triggering holds or rework.&nbsp;

2) It keeps your paperwork clean (FIRC/evidence).
The purpose you declare flows into your compliance evidence (e.g., FIRC details and audit trails). Declaring the accurate code up front helps your bank issue the right certificate without back-and-forth.&nbsp;

3) It prevents delays, manual reviews, and returns.
A vague or incorrect purpose (e.g., tagging a service payment as goods realisation) often triggers manual checks, queries, or even a return to sender until corrected.&nbsp;

4) It improves accounting clarity and BoP classification.
Purpose codes classify inflows (e.g., P01 goods exports, P08 computer &amp; information services, P10 other business services, P13 transfers, P14 income), allowing clean bookkeeping and accurate national statistics—another reason banks insist on precise coding.

5) It reduces compliance risk later.
If you repeatedly misclassify remittances, you create inconsistencies between invoices/contracts and RBI filings—raising the odds of additional questions or penalties under FEMA. Industry guidance stresses getting the code right at the remitter setup stage (sender’s bank/platform usually captures it) to avoid re-papering.&nbsp;

How to pick the correct code (step-by-step)

Find the right purpose code for inward remittance with Skydo

Our purpose code finder is your shortcut to identifying the correct purpose code for inward remittance and explaining when to use it. You can either search for the activity to find the relevant purpose code or directly look up the specific purpose code for a simple explanation of when to use it.&nbsp;

Please note that this tool doesn't contain the exhaustive purpose code list for inward remittance.&nbsp; For complete compliance and accuracy, it's always advisable to get in touch with your financial advisor for professional advice.

Personal vs. Business: Quick Selector for the Right Purpose Code

Personal / family inflows (individuals):

Business / freelance inflows (exporters, agencies, SaaS, consultants):

Common RBI Purpose Codes for Inward Remittance for Freelancers, Businesses, and Agencies

While there are over 150 RBI purpose codes for inward remittance, we break down below some of the commonly used ones especially for freelancers, businesses and agencies:

RBI Category:&nbsp;Computer &amp; Information Services

RBI Description:&nbsp;Software implementation/consultancy  (other than those covered in SOFTEX form)

When to use:&nbsp;This code signifies a foreign payment in exchange for software consultancy or implementation service, provided to a foreign client. It's important to note that P0802 applies specifically to software consultancy or implementation services that are not reported under the <a href="https://vjmglobal.com/fema/fema-fema/introduction-to-software-export-declaration-softex-form/?no_follow=true">SOFTEX form.</a> If your services fall under SOFTEX, a different code might be used.

RBI Description:&nbsp;Realisation of export bills (in respect of goods) sent on collection (full invoice value)

When to use:&nbsp;This code is used when an Indian company exports goods and receives payment for the full invoice value. Note that this purpose code is applicable only when the foreign client has received the shipment.

RBI Description:&nbsp;Advance receipts against export contracts (export of goods only)

When to Use:&nbsp;This is used when businesses receive advance payment against the contract of the goods to be exported. In other words, here the company receives payment for goods before they are shipped.

RBI category:&nbsp;Other Business services

RBI Description:&nbsp;Business and management consultancy and public relations services

When to Use:&nbsp;This code is applicable when an exporter receives payment against providing a combination of business expertise and/or public image management services to a foreign client.

RBI Category:&nbsp;Other Business services

RBI Description:&nbsp;Advertising, trade fair, market research and public opinion polling services

When to Use:&nbsp;This code is used when exporters receive a payment from a foreign client for providing  advertising, trade fair, market research or public opinion polling services.

RBI Description:&nbsp;Value of export bills negotiated/purchased/discounted etc. (covered under GR/PP/SOFTEX/EC copy of shipping bills etc.)

When to Use:&nbsp;P0101 is used when an Indian company exports goods and receives a foreign payment that is usually backed up by official export documentation like GR, PP, SOFTEX, or EC copy of shipping bills.

RBI Description:&nbsp;Goods sold under merchanting / Receipt against export leg of merchanting trade*

When to Use:&nbsp;This purpose code for inward remittance applies to situations where an Indian company acts as a middleman in an international trade transaction, but the goods themselves never physically enter India.

RBI category:&nbsp;Computer &amp; Information Services