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

The traditional banking experience was a revolution upon discovery. However, the integration of technology in banking has resulted in the need to continuously innovate to make the entire transacting experience easier.&nbsp;

Imagine a financial world where you have the power to mix and match services from various providers, creating a truly personalised banking experience. Enter open banking – the current revolution in the financial industry where the talks around the utilities, possibilities, and risks associated with open banking are reaching a fever pitch.

Open banking attempts to break the monolithic structures of conventional banks and institutions and bring a ‘mix-and-match’ of services from multiple financial providers catered to the consumers. It is a system where customers can securely share their financial data with authorised third-party service providers through APIs to allow greater collaboration and foster the development of innovative, tailored financial solutions.&nbsp;

Open banking shifts the focus of financial services from a single-bank model to a collaborative approach. It helps securely and effectively <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">leverage consumer data</a> to foster an ecosystem based on data portability and interoperability.&nbsp;

This article aims to address some of these opportunities in the context of cross-border payments and international banking.&nbsp;&nbsp;

Open Banking and Global Payments: Bridging Distances

When expanding globally, businesses face major constraints while navigating payment cultures in different countries. For instance, corporate credit cards are most prevalent in the US, but most of Europe relies on wire transfers.&nbsp;

Payments through ACH (Automatic Clearing Houses) can take days to get authorised. The constant back-and-forth between multiple banks and clearing houses painfully limits and slows the process. There are also specific regulatory abidance for each country that businesses need to adhere to.&nbsp;&nbsp;

Open banking makes it possible for fintech services to serve customers at their homestead. It addresses the fundamental problems in traditional payment mechanisms and eases bank-to-bank payments. It automates manual processes to help customers authorise payments in a few clicks.&nbsp;

Open banking further cuts the fluff involved in <a href="https://www.skydo.com/blog/benefits-of-multi-currency-accounts?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">international banking transactions</a> to help businesses attain global growth.&nbsp;

For instance, assessment, interchange, and processing fees cost<a href="https://www.bankrate.com/finance/credit-cards/merchants-guide-to-credit-card-processing-fees/"> 1.5% to 3.5% of every credit card transaction</a> to merchants in 2020. Open banking cuts out the intermediaries and directly connects customer’s bank accounts. This arrangement saves considerable time and costs for businesses with slimmer margins.&nbsp;

Open Banking: A Pathway to Financial Innovation

Earlier, customers were at the mercy of the banks. Most of the banks provided similar services, often limited in nature. The open banking framework has turned the tide in favour of customers. Fintech service providers compete to build a wide range of products and services that deliver a stupendous experience, ease of use, transparency, and cost efficiency.&nbsp;

Stripe and Braintree have disrupted the payment scenario by granting access to the underserved. In China, WeChat and AliPay are the new digital finance ecosystems serving customers based on their needs.&nbsp;

UPI and mobile wallets are among India's biggest use cases for domestic payment solutions based on open banking. In the US, large banks have struck data-sharing deals with third-party providers. Chase partnering with Intuit and Wells Fargo with Xero and Finicity are a few examples.&nbsp;&nbsp;&nbsp;

Customer Empowerment Through Open Banking

Open banking further empowers customers through data ownership and control. Fintech startups, technology companies, and financial institutions are synergising their efforts to enhance the overall customer experience by leveraging banking data.&nbsp;&nbsp;

Customers can enjoy seamless transactions, personalised financial insights, and transparent pricing frameworks while fully controlling with whom they share their financial data and to what extent.&nbsp;

APIs allow seamless integration of financial services such that businesses get a personalised suite of services for international dealings and cross-border payments. Many fintech service providers provide the dual benefit of the ease and simplicity of bank transactions and cutting-edge services like e-wallets, easy remittances, and currency exchanges.&nbsp;

In fact, the focus of such services and platforms is to provide their customers with the best user experience and innovative financial solutions. Yet, the pressing question remains about the regulatory and security aspects of this revolutionary banking avenue.

Regulatory Navigation in the Open Banking Era

Most apps and platforms based on open banking are built on robust security protocols and comply with their country's stringent data protection regulations. The General Data Protection Regulation (GDPR)&nbsp; is an important EU law that governs data sharing.&nbsp;

PSD2, another set of data protection rules in Europe, explicitly grants the authority to share data to account holders instead of banks. India also passed its new data protection bill in the recently concluded monsoon session. Many regional <a href="https://www.skydo.com/blog/mastering-compliance-a-step-by-step-guide-to-data-protection-payments-laws-and-industry-regulations-for-tech-exporters?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">regulatory frameworks</a> mandate consumer protection and privacy to the highest degree.&nbsp;

Third-party service providers need to ensure compliance at multiple levels as different data requires different levels of security. Data sharing is mostly risk- and permission-based in financial services. It must have proper audit trails per the regulations and risk management guidelines.&nbsp;

Fintech services can follow enhanced KYC procedures, identity validation, and fraud detection for compliance and regulatory adherence.&nbsp;

Addressing the Risks: Security in Open Banking

Open banking is based on data sharing of personal and sensitive information. Securing such information is the elephant in the room, which needs addressing. It poses risks in the form of increased exposure and vulnerability of data toward potential breaches, frauds, misuse, and hacks.&nbsp;&nbsp;

Fintech services and platforms must implement robust security measures and data protection guardrails such as encryption, monitoring, authorisation, and authentication. Measures like two-factor authentication, KYC norms, in-built security walls, etc., enhance data protection and eliminate manipulation or tampering.&nbsp;

The Horizon of Open Banking: Glimpse into the Future

<a href="https://assets.kpmg.com/content/dam/kpmg/ua/pdf/2019/09/future-of-digital-banking-in-2030-cba.pd.pdf">A KPMG report</a> states the banking industry will see more changes in the next decade than it has in the past 100 years.&nbsp;

The Integration of IoT (Internet of Things) and AI (Artificial Intelligence) with open banking will help customers embark on a journey of autonomous financial experiences. Fintech services and banks will have a greater insight into their customers’ lives, which calls for greater trust and robust security mechanisms. New business models and use cases for financial services will emerge to redefine the service provider-customer relationship.&nbsp;&nbsp;

Consolidation of services into a ‘super app’ will occur as AI and other emerging technologies interface with open banking solutions. AI will play a critical role in helping customers overcome their low levels of financial literacy. Technologies such as IoT and Distributed Ledger Technologies (DLT) will create trustless models of customer engagement and automation in financial services.&nbsp;

Businesses need to accept the change if they seek growth and relevance readily. Along with this technology adoption, IT exporters and international businesses need to be at the forefront of compliance and security to provide their customers with the best experience and smoothly functioning business processes.&nbsp;&nbsp;&nbsp;

Currently, the world relies on heterogeneous modes of payments, and abiding by all can get time-consuming and expensive for small-scale IT exporters and businesses. Open banking is revolutionising the banking sector and creating opportunities for businesses to grow globally.

Furthermore, cross-border payments are expected to reach<a href="https://www.bankofengland.co.uk/payment-and-settlement/cross-border-payments#:~:text=The%20value%20of%20cross%2Dborder,trillion%20in%20just%2010%20years."> $250 billion by 2027</a>. Consequently, the need to smoothen the creases and bumps in the international payments process is more pertinent than ever.&nbsp;

Fintech solutions like <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Skydo</a>, driven by open banking, will be crucial in building and streamlining collaborative <a href="https://www.skydo.com/blog/seamlessly-accept-international-payments-in-india?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">international payments</a> infrastructure from scratch.

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India has witnessed an impressive surge in its startup ecosystem in recent years. Factors such as a large and diverse consumer base, a burgeoning middle class, access to talent, and increasing investor interest have contributed to this growth. Indian startups are making strides in various sectors, including technology, e-commerce, healthcare, and fintech.

As this ecosystem continues to evolve, Indian startups are poised to play a pivotal role in shaping the future of India and the global business landscape.

<a href="https://www.skydo.com/blog/what-are-capital-and-current-account-transactions?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Current accounts</a> play a pivotal role in the financial operations of businesses, including startups, for several reasons:

Now, imagine you're the founder of a promising startup in its early stages. Your venture is fueled by ambition, innovation, and a grand vision. However, in these initial phases, your resources are limited, and you're carefully managing every rupee going in and out of your company. By design, current accounts don't pay any interest and hence shouldn’t ideally charge any fee or have a mandatory Minimum Account Balance (MAB). However, some current accounts impose a high MAB.

In such a scenario, a Zero Balance Current Account (ZBA) becomes an invaluable asset and an indispensable financial tool.

Introducing Zero Balance Current Accounts

In the nascent stages of a startup, every penny counts. A ZBA allows you to operate your business with minimal financial constraints. You don't need to maintain a substantial minimum balance, which means you can invest your limited funds in growing your business rather than locking them in a bank account.

It removes the financial burden, provides flexibility, and enables financial inclusion.

A Chartered Accountant of a fintech startup with such an account explained, “Most startups keep their money in an overnight fund which earns them ~6% interest and conveniently transfer the funds from it to a zero balance account just when they need to disburse them.”

Steps for Zero Balance Current Account Opening Online

Follow these steps to open a zero-balance current account.

The specific steps would differ depending on the financial institution.

Documents Needed to Open Zero-Balance Current Account Online

The specific documents required to open a zero-balance current account online may vary depending on the bank or the financial institution. However, here is a list of common documents that are typically requested when opening a zero-balance current account online:

Does your business need a Zero Balance Current account?

It is not compulsory to have a zero-balance current account because the monthly average balance requirement is not very high in non-zero-balance accounts. For instance, a <a href="https://www.hdfcbank.com/content/bbp/repositories/723fb80a-2dde-42a3-9793-7ae1be57c87f/?path=/Personal/Save/Accounts/Current%20Account/Premium%20Current%20Account/Non-Managed-Plus-Premium-Regular-Leaflet.pdf">regular current account</a> in the HDFC Bank requires you to keep an average quarterly balance of ₹10,000 on non-metro locations and its non-maintenance can cost ₹1,500.&nbsp;

But any money saved is equivalent to money earned. This part is vital for the following reasons.

Advantages of Zero-Balance Current Account

While zero-balance current accounts offer several advantages, they also come with certain challenges and considerations that businesses should know.

Zero-balance current accounts offer a compelling array of advantages that can significantly boost businesses' financial accessibility, cost efficiency, effective cash flow management, financial inclusivity, and streamlined operations.

You must choose a correct business account that helps you smoothen your daily operations with utmost efficiencies, and the least cost and zero balance current account can be a great starting point.

Q1. Can zero-balance current accounts support high transaction volumes for growing businesses?

Ans: Yes, one of the strong suits of a zero-balance current account is its ability to support high transaction volumes for growing businesses.

Q2. Are there any limitations or fees associated with zero-balance current accounts that businesses should be aware of?

Ans: Some zero-balance current accounts can impose limits on the number of free transactions or the total transaction amount within a specific period. Exceeding these limits can result in additional charges. While monthly maintenance fees for zero-balance current accounts are often lower than traditional accounts, there may still be fees for certain additional services.

Q3. How can businesses ensure they choose the right bank for their zero-balance current account needs?

Ans: One of the best ways to ensure the right bank for their zero-balance current account needs is to seek recommendations from their business networks and do your research, feature comparison, assess fees, and review customer support.

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Modern B2B payment platforms are revolutionizing the way businesses send and receive global payments. By eliminating excessive fees, streamlining workflows, and providing enhanced visibility, innovative solutions like Skydo offer immense value. This article explores the key features and benefits of platforms like Skydo that are driving the evolution of B2B payments.

Features and Benefits of Modern B2B Payment Platforms like Skydo

Modern business payment platforms, such as Skydo, offer a wide range of features that streamline and enhance the payment process for businesses. These platforms are designed with user-friendly interfaces and robust functionalities that cater to the specific needs of B2B transactions, like-

<a href="https://www.skydo.com/blog/forex-and-its-impact?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Forex margin</a> costs are the least favourite for overseas businesses. Platforms like Skydo charge zero forex margin on export payments. It also waives off <a href="https://www.skydo.com/blog/why-was-a-certain-amount-deducted-from-my-swift-payment?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">SWIFT fees</a> and you pay only USD 29 for any transaction.

You can <a href="https://www.skydo.com/blog/seamless-payment-experience-with-international-bank-accounts?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">get a local US account instantly</a> for local US client transfers with Skydo.

GST can be complicated. But platforms like Skydo make sure you have it sorted with the <a href="https://www.skydo.com/blog/automated-digital-firc-implifying-international-payments-with-skydo?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">FIRA instantly</a> in your inbox to file your GST returns on time and efficiently.

Why spend time &amp; energy on invoicing when B2B payment platforms automate the process? Eliminate the need for manual invoicing, reducing errors, saving time, and ensuring prompt payments.

B2B payment platforms integrate with secure gateways, enabling businesses to accept various payment methods, such as credit cards, bank transfers, and digital wallets. This flexibility provides convenience to both companies and their customers or partners, improving the overall payment experience

B2B payment platforms often include allowing businesses to store and manage vendor details, payment terms, and transaction histories in a centralized system. This streamlines the process of managing and tracking payments to multiple vendors, fostering stronger supplier relationships

With the global nature of B2B transactions, modern payment platforms like Skydo facilitate seamless multi-currency payments. They provide real-time currency conversion, enabling businesses to transact in different currencies without the hassle of manual calculations or additional currency conversion fees.

B2B payment platforms prioritize data security and compliance with industry standards. They implement robust encryption, secure data storage, and authentication protocols to protect sensitive financial information and prevent unauthorized access. This instills trust and confidence in businesses and their partners when conducting transactions

Modern B2B payment platforms like Skydo offer robust analytics and reporting features that provide businesses with insights into their payment activities. They generate detailed reports and dashboards on payment statuses, cash flow analysis, and transaction histories, enabling businesses to make informed financial decisions and streamline their operations.

Role of Platforms like Skydo in the Evolution of B2B Payments&nbsp;

With innovative solutions and user-friendly interfaces, platforms like Skydo have revolutionized the way businesses transact, eliminating the complexities and inefficiencies of traditional B2B payment processes.

They act as comprehensive ecosystems, providing businesses with a one-stop solution for all their payment needs. From invoice management and payment processing to vendor management and reconciliation, these platforms streamline the entire B2B payment workflow, saving businesses time, effort, and resources.

Skydo is on a mission to make cross-border B2B payments hassle-free. How does it help a tech exporter like you?

Skydo: A Case Study in B2B Payment Innovation&nbsp;

<a href="https://www.linkedin.com/posts/skydo-official_skydo-testimonial-internetconference-activity-7085543935200165888-aGGq/?utm_source=share&amp;utm_medium=member_desktop">Code Matrix Software India Pvt. Ltd.,</a> a company established 8 years ago, delivers blockchain and AI/ML projects to their clients in the US and Europe. Previously, their mode of accepting payments was Transferwise, Payoneer, and Paypal, among other popular payment platforms. They consistently faced challenges in receiving money and lost a chunk of their revenue in commissions with every transaction.&nbsp;

The founder, Praveen Shrinivasa, stumbled upon Skydo and has been using the platform for all international business transactions. The benefits that contributed to his company’s success include:&nbsp;

The entire process from onboarding to keeping track of your payments is seamless. The results were accelerated business growth and complete customer satisfaction for the company.

The Future of B2B Payments: What to Expect?

In a <a href="https://www.pwc.com/gx/en/financial-services/fs-2025/pwc-future-of-payments.pdf">PWC survey</a>, 42% of respondents strongly felt that there would be an acceleration of cross-border, cross-currency, instant and B2B payments. As we gaze into the future of business-to-business (B2B) payments, one thing remains clear: the continued importance of innovative platforms like Skydo in simplifying and revolutionizing global transactions.&nbsp;

The integration of advanced technologies like AI, DLT, and machine learning into the payments sector will facilitate automation, enabling businesses to leverage these advancements and address the obstacles associated with international trade.

The dynamic nature of technology ensures that new advancements will continue to emerge, addressing challenges and enhancing the efficiency of B2B payments. This constant evolution will drive further innovation, making B2B payments faster, more secure, and more accessible than ever before.

According to a BCG <a href="https://www.bcg.com/publications/2023/future-of-fintech-and-banking">report</a>, “While payments led the last era, we expect that B2B (serving small businesses) and B2B2X (B2B to any user) will lead the next.” You can explore more on the rise of B2B cross-border payments in the below articles-

The Evolution of Modern B2B Payment Platforms Like Skydo & Its Impact

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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?