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

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Rohit Khuranna

If you’re involved in international remittances, getting purpose codes right is crucial. These alphanumeric codes are used to define the reason for a transaction, and using the correct one is key to smooth payments.

A wrong or missing purpose code might lead to:

Rejection of the payment and its return to the source, or

Delays while the bank verifies the transaction’s purpose

To avoid these issues, Skydo is here to ensure your international payments are fast, easy, and compliant. Let’s explore how our autosave purpose code feature supports you in creating a seamless payment experience.

Skydo: Simplifying Purpose Code Allocation

For Indian businesses, handling international payments and invoicing can be both complex and time-consuming. From creating invoices and tracking payments to managing purpose codes, the process can take up a lot of your time.

That is where Skydo comes in. We offer automation features that make these tasks easier, helping you manage cross-border transactions more efficiently.

With Skydo, you can automate invoice generation, payment tracking, and purpose code management, so you can focus more on your business and less on paperwork.

Steps to Autosave Purpose Code in your Invoice with Skydo

If you cater to several foreign clients and send out invoices regularly, manually entering purpose codes in hundreds of invoices over a long period can not only be tedious but very prone to potential human errors.&nbsp;

But with Skydo, you can eliminate the manual effort and mitigate risk because it saves the purpose code in its database and prefills it corresponding to the services offered.

Let’s understand the step-by-step process of creating an invoice on Skydo and how the purpose code feature works:

Realizing Efficiency Gains and Compliance

As we’ve seen, using incorrect or missing purpose codes can cause significant problems for cross-border transactions. Banks may flag these transactions as suspicious, which can lead to delays or even failures in processing payments.

When a transaction is flagged, it can disrupt your business cash flow and create obstacles for smooth operations. This not only affects your current transactions but can also hinder your ability to scale and grow your business.

To avoid the inconvenience of delays and complications with international transactions, Skydo takes care of the purpose code for you. By adding the correct purpose code based on your previous input, Skydo ensures that your inward remittance arrives on time.

This accuracy not only reduces your business risks but also supports rapid growth and scalability. Plus, Skydo’s approach helps you stay compliant with regulatory requirements, minimizing the risk of hefty penalties.

By facilitating accurate purpose codes, Skydo contributes to a smoother global financial ecosystem, making cross-border transactions seamless and efficient.

RBI purpose codes play a key role in a stable financial system, enabling the monitoring of foreign funds and preventing fraud. Accurate use of these codes facilitates smooth international transactions and supports business expansion.

We understand that manually handling these purpose codes can be difficult and prone to mistakes. Skydo’s automated feature makes this task easy and ensures compliance, so you can focus on growing your business.

<a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Join the Skydo payment platform today</a> to experience seamless cross-border transactions and mitigate financial and non-compliance risks!

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India is fast growing as a gig economy, and projections indicate the gig economy can contribute 1.25% to India’s GDP while creating a staggering <a href="https://www.indiatoday.in/education-today/featurephilia/story/indias-gig-economy-navigating-the-path-to-prosperity-and-inclusivity-2430035-2023-09-02">90 million non-farm jobs. </a>While it is natural to assume that gig workers are generally freelancers, that’s not always the case. Professionals and sole proprietors also form a significant contributor to the gig workforce.&nbsp;

Sole Proprietorship and Freelancer may both feel the same. You may picture a one-man (or woman) army juggling all tasks alone. A freelancing business may transition into a sole proprietorship or any other business structure. The same is the case with sole proprietorship. However, there are substantial differences between their features, regulations, characteristics, and growth potential. But to start off, what should be your business structure between <a href="https://www.skydo.com/blog/exploring-sole-proprietorship-is-it-the-right-business-structure-for-you?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">sole proprietorship</a> and freelancing? The blog sheds light on the key differences, letting you choose the most suitable one.&nbsp;

Freelancers are self-employed individuals who offer their services, skills, or expertise to various clients without being exclusive. Although they provide their services to a host of clients, such as companies, they are not considered salaried employees of the company, i.e., they are not on payroll.&nbsp;

Freelancers are not bound to a long-term commitment with a single employer and have the flexibility to choose their clients, projects, and working hours. A freelance contract is generally time-bound and is specified in the agreement signed by the freelancer and the client before the offering of the service begins.&nbsp;

Freelancers do not have any limitations on the type of service they can offer across industries as long as the nature of work is legal and is offered after signing a valid freelance contract. <a href="https://www.skydo.com/blog/top-3-freelancing-trends-in-the-gig-economy?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Freelancers offer their services</a> in industries such as:&nbsp;

Freelancing is one such type of business that allows freelancers to earn at their convenience, but it may have some disadvantages. Here are the pros and cons of freelancing:&nbsp;

Sole Proprietorship is a business owned, managed, and operated by a single individual. It is one of the simplest forms of business structures and offers simplicity and ease of operation. Since the business owner, called the sole proprietor, operates and manages the business independently, the sole proprietor is held accountable and answerable for all of the business’s debt, liabilities, and losses.&nbsp;

Furthermore, the sole proprietor realises all the profits and can use them for personal or business purposes. Here are some of the most common characteristics of a sole proprietorship:&nbsp;

Similar to freelancing, sole proprietorship also comes with its set of advantages and disadvantages. These are:&nbsp;

Sole Proprietorship vs. Freelancer: What's the difference?

It is important to understand the difference between freelancing and sole proprietorship to choose the ideal business structure. Here is a detailed table to understand the difference between sole proprietorship &amp; freelancing:

Making A Choice: Sole Proprietorship or Freelancer?&nbsp;

Before&nbsp;choosing sole proprietorship or freelancing, consider the following factors: 

How to Build a Website and Portfolio for Your Services

Building a website and portfolio/brochure is crucial for freelancers and small business owners to showcase their services, attract clients, and establish a professional online presence.

Once you have defined your brand, niche, or services, you can utilize numerous tools, such as <a href="https://www.wix.com/">Wix</a>, <a href="https://wordpress.com/">WordPress</a>, <a href="https://webdesigner.withgoogle.com/">Google Web Designer</a>, <a href="https://www.notion.so/">Notion</a>, <a href="https://www.canva.com/">Canva</a>, etc., to create a free website. If you find it complex, you can hire a third-party website design agency to make one for you.&nbsp;

If you’re a freelancer in the media/marketing space, you can create an online portfolio to showcase your past work using tools such as Behance, Adobe Portfolio, Dribble, Crevado, etc.&nbsp;

As long as business structures go, both sole proprietorships and freelancing offer simple processes to establish, manage, and operate the business with utmost flexibility. However, the choice between a sole proprietorship and freelancing hinges on various factors, each with its advantages and disadvantages.

Sole proprietorships offer a more formal and recognised business structure but lack the flexibility and convenience provided by freelancing. However, it entirely depends on the sole proprietors or freelancers to scale the business to new heights, which may result in higher earnings while retaining all the advantages.&nbsp;

When choosing between the two, you should analyze your personal preferences, career aspirations, and the desired level of involvement in business operations. If your business results in onboarding foreign clients, you can create an account on <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Skydo</a> to receive foreign currency payments seamlessly.&nbsp;

Q1. Can I transition from freelancing to a sole proprietorship or vice versa?

Ans: Yes, there are no restrictions for transitioning between freelancing and a sole proprietorship and vice versa. Many individuals start as freelancers and later transition into a sole proprietorship. Conversely, some business owners may freelance in specific projects while operating as a sole proprietor.

Q2. Can I earn more in sole proprietorship than freelancing?

Ans: The earning potential entirely depends on the nature of the business and how many clients or customers choose your products or services. You can increase your earning potential in both the business structures by creating a website and portfolio and by marketing your business.&nbsp;

Q3. What factors should I consider when deciding between sole proprietorship and freelancing?

Ans: Consider your long-term goals, the scale of your business, the nature of your services, industry and sector demand, risk tolerance, and financial and legal considerations.

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Outdated financial systems and processes can create significant inefficiencies and costly business errors. Finance Heads are often forced to spend time firefighting instead of strategising. Unfortunately, the role of the modern Finance Head is about more than just overseeing financial operations; it's about leading businesses through uncharted waters.&nbsp;

Platforms like <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Skydo</a> offer a solution to these deep-rooted problems through their payment platform. This guide explains how you, as a Finance Head, can make your organisation more agile, and efficient, and stay ahead of the curve with Skydo.

As a key strategic partner in driving growth, you navigate the complexities of a globalised business landscape. Despite this expanded role, there are still numerous challenges that come with being at the top of the finance tier in a company.

Ensuring Data Security and Fraud Prevention

Being a modern Finance head comes with its share of challenges but also great influence and strategic importance. To effectively address these challenges, a combination of technology, process optimisation, and forward-thinking is necessary. With the right approach, you can have a major impact on a company's success.

Overcoming Finance Challenges with Skydo: A Comprehensive Solution

Skydo’s payment platform is designed specifically to address the pain points of Finance Heads iterated above. Here's how we help overcome these challenges and achieve company goals.

Navigating Regulatory Compliance with Ease

1. <a href="https://www.skydo.com/blog/automated-firc-simplifying-international-payments-compliance">Auto-generated FIRAs </a>Operating in international markets includes the daunting task of ensuring compliance with local regulations. But with Skydo, this process is simplified thanks to our auto-generated Foreign Inward Remittance Certificates (FIRAs). As soon as the amount reaches the business bank account, the FIRA is available to download to ensure compliance.

Businesses can rest assured that they are always compliant without dealing with manual hassle.

2. Purpose Code according to RBI guidelines

Skydo's purpose code field ensures that every transaction aligns with RBI guidelines, eliminating the risk of non-compliance. This pre-filled field includes the suggested codes relevant to your business, which you can simply select once the invoice is generated. 

Different transactions have different purposes, and the Reserve Bank of India (RBI) mandates specific codes for each, which must be followed to comply with regulations.

Say goodbye to manual invoicing and chasing clients for payments. <a href="https://www.skydo.com/blog/transforming-your-invoicing-experience-with-skydo?Internal%20links%20should%20have%20the%20UTM%20tag%20-%20utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Skydo offers automated invoice creation</a> and timely payment reminders, ensuring a steady cash flow for businesses. This allows you to focus on strategic financial planning without the hassle of administrative tasks.

Gaining a Holistic View of Financial Operations

At Skydo, we understand that every client is unique, and their financial interactions with your business reflect that. Skydo provides a <a href="https://www.skydo.com/blog/make-data-driven-business-decisions-with-customer-level-revenue-analysis?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">client-specific overview</a> to help you gain a deeper understanding of each client's financial footprint.&nbsp;

This insight allows for better relationship management and strategic decision-making to drive success for both your clients and your business.

2. Track international accounts in one place

Businesses operating globally often face the challenge of managing multiple international accounts. Skydo offers a solution that consolidates all international accounts to simplify this process, providing a unified view.&nbsp;

Enhancing Real-time Visibility and Control

1. <a href="https://www.skydo.com/blog/real-time-tracking-of-international-payments?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Real-time payment tracking</a>

Tracking payments in real-time is essential for efficient <a href="https://www.quadient.com/en/learn/accounts-receivable/how-ar-automation-affects-cash-flow">cash flow</a> <a href="https://www.quadient.com/en/learn/accounts-receivable/how-ar-automation-affects-cash-flow">management</a>. With our cutting-edge technology, Skydo provides real-time payment tracking, ensuring they are always in the know and can make proactive decisions to drive their business forward.

Financial transparency and accountability are crucial for any business. Thus, Skydo's ledger view is a must-have tool, providing a detailed record of all financial transactions to ensure clarity, accuracy, and informed financial planning.&nbsp;

As finance heads face significant challenges, such as regulatory compliance and real-time data visibility, they can overcome these hurdles with the proper strategy and tools.

Skydo's payment platform is a comprehensive and innovative tool designed for modern finance heads. With features like auto-generated FIRAs and real-time payment tracking, it offers a holistic solution to the challenges faced by top finance officials. With Skydo, you can ensure compliance and efficiency while also utilising real-time data to make strategic decisions.

If you are a CFO or financial leader looking to transform and elevate your financial operations, Take the first step towards a more efficient, strategic approach to financial management with <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Skydo</a> today.

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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

RBI Description:&nbsp;Hardware consultancy

When to Use:&nbsp;This code is used when exporters receive foreign payment for providing hardware consultancy or implementation services abroad.

When to Use:&nbsp;This purpose code for inward remittance is used for foreign exchange transactions related to business travel, particularly when someone converts currency for a work trip abroad.

RBI Description:&nbsp;Off-site Software Exports

When to Use:&nbsp;This code signifies that an Indian company is receiving payment for software development or IT services provided to a foreign client, but the work itself is done in India.

How and Where to Declare the RBI Purpose Code

Choosing the right RBI purpose code for inward remittance is only half the job, you also need to make sure it’s declared at the right stage of the transfer so banks can process it smoothly.

Most international transfers require the sender to enter a purpose when initiating the payment.

(Example: HDFC Bank’s wire transfer form from the US specifically asks for the purpose of remittance and provides a dropdown of RBI-approved codes.)

2. If the bank asks you (as the recipient) later

Sometimes, the bank receiving the funds will seek additional confirmation from you. In this case:

Banks may ask for basic proof to ensure your RBI purpose code for inward remittance matches the transaction. Here’s what’s typically needed:

Tip: Make sure your invoice or declaration clearly matches the selected purpose code, as it reduces bank queries and speeds up credit.

What Happens If You Use the Wrong RBI Purpose Code?

Using the wrong RBI purpose code for inward remittance can create more problems than most exporters, freelancers, or individuals expect. Because banks are required to match the declared purpose with supporting documents and report it to RBI under FEMA, any mismatch immediately slows things down.

Likely outcomes of an incorrect purpose code

Always share the correct purpose code with your payer before the transfer starts. Many international platforms ask the sender to select the code at setup, so confirming it upfront avoids mismatches and saves you from unnecessary compliance hassles.

Decoding RBI Purpose Code: Essential Guide

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Picture this: you're running a successful export business, orders are flowing in, and everything seems smooth until you realise your invoice management system is no longer compliant.&nbsp;

India's GST framework now mandates e-invoicing for businesses above certain turnover thresholds - and if your annual aggregate turnover exceeds ₹5 crore, you must generate e-invoices for all B2B transactions and exports. Not generating valid e-invoices can lead to non-compliance, penalties, and delayed input credits.&nbsp;

This guide explains how e-invoicing applies to exporters, outlines the necessary steps, and provides guidance on automating the entire process.&nbsp;

E-Invoicing involves uploading your invoice details to a government portal, which provides you with a unique ID number and a QR code to verify the authenticity of your invoice.

You create invoices the same way you always have, using your accounting software or billing system. The difference is that now you need to send the invoice data to the <a href="https://einvoice5.gst.gov.in/index">Invoice Registration Portal (IRP)</a> for verification.&nbsp;

Any GST-registered business with an annual turnover above ₹5 crore must generate e-invoices for B2B transactions. This includes all export transactions, whether you're selling goods or services to customers outside India.