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

Despite the efforts of business owners to manage their finances, they face various international payments-related problems, such as late payments, non-payment, fraudulent transactions, and fluctuating currency rates. These issues significantly impact a business's cash flow, profitability, and general operations.

Moreover, banks impose significant fees for payment-related services, including transaction, currency conversion, and processing fees. A study by Forrester found that companies lose an average of 2% of their revenue to payment processing fees.&nbsp;

Let’s drill down five major payment problems that business owners frequently encounter.

#1: Complicated processes and high fees of banks

Banks are vital for financing, foreign exchange transactions, and international payments. However, their products and services are often not tailored to specific business needs, resulting in high fees, poor experience, and cumbersome processes.&nbsp;

Navigating the banking world can feel like a game of Minesweeper, where a wrong move could result in an explosion of high fees and cash flow difficulties. For instance, if you choose a bank with high foreign transaction fees, you could lose more money every time you transfer funds.&nbsp;

Choosing between a standard checking account and an <a href="https://www.skydo.com/blog/eefc_account_overview_full_form_meaning_eligibility_benefits">EEFC account</a> can be further challenging. An EEFC account allows foreign currency transactions, while a standard one allows local currency transactions exclusively. Different banks have distinct requirements for opening and maintaining an EEFC account. Choosing the right account type can help manage cash flows efficiently and minimise foreign exchange risks.

#2: Inefficient and expensive payment systems such as PayPal and Stripe

<a href="https://www.skydo.com/blog/top-paypal-india-alternatives-for-international-payment">PayPal</a> and Stripe are popular payment systems used for international payments. However, these payment systems have high <a href="https://www.skydo.com/blog/cut-international-transaction-costs?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">transaction fees</a>, conversion charges, and regulatory issues that may affect your profit. Additionally, they take longer to provide the FIRA document, which is proof of payment for foreign transactions.

Freelancer.com faced financial difficulties in 2018 when PayPal froze $380,000 of its funds due to restrictions on certain transactions and compliance with <a href="https://economictimes.indiatimes.com/industry/banking/finance/paypal-faces-rs-96-lakh-penalty-for-violating-indias-anti-money-laundering-processes/articleshow/79823500.cms?from=mdr">anti-money laundering</a> regulations. Freelancer.com had to explore alternative payment methods to continue its global operations and mitigate the risks of relying solely on PayPal for its transactions.

Similarly, in December 2020, Patreon faced a backlash from the community when they passed on new fees from Stripe to their creators. The new fees included additional fees for international and European transactions, resulting in higher transaction costs for Patreon creators and impacting their earnings.

Comparison of PayPal and Stripe as payment systems–

#3: Currency exchange and fluctuation issues

<a href="https://www.skydo.com/blog/how-to-choose-the-right-currency-exchange-rate-for-invoicing?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Currency exchange</a> rate fluctuations can significantly impact your profitability in the global market, requiring constant monitoring and adjusting prices.

Currency exchange providers add a markup to the exchange rate, an additional fee they charge for the service. By overlooking the hidden foreign exchange costs and focusing solely on the sale price, you may have unknowingly incurred losses due to FX markup.

While this cost may seem like a small percentage, it compounds over time. This markup can affect the money you receive, reducing the exchange rate and increasing the transaction cost.&nbsp;

Furthermore, currency exchange volatility caused by the pandemic has significantly impacted business owners, leading to the following.

You can take several steps to manage currency exchange and fluctuation issues, such as–

Payment security is a concern due to fraudulent transactions, inaccurate invoicing, and cybersecurity threats like phishing and hacking. 74% of companies experienced attempted or actual payment fraud in 2020, with wire transfer fraud being the most common.

Additionally, disparate payment systems and processes across different countries and currencies can create complexities and inefficiencies, further complicating payment tracking and reconciliation.

Some common security threats in export payments include the following.

Ensuring proper documentation, using secure payment methods, and verifying the counterparty's identity can help mitigate these risks, ensure smooth transactions, and stay vigilant against potential fraud or cyber-attacks.

#5: Cash Flow issues due to delayed payments

Delayed payments in a business are like that one friend who always promises to pay you back but never actually does. You may feel like you're constantly chasing them down for payment, but in the end, you still have to wait for the money to come in. Some common reasons for delayed payments for business owners are–

<a href="https://iccwbo.org/publication/global-survey/">64% of respondents</a> in a related survey reported that late payments significantly impact their business operations, with 33% indicating that it affects their ability to pay suppliers. It further results in cash flow problems and affects their ability to fulfil orders, pay suppliers, and invest in future business ventures.&nbsp;

Additionally, you may lose customer trust and credibility if you cannot manage your finances effectively.

Then, how can you manage payments effectively?

In the highly competitive landscape of today's business world, you need a reliable partner to traverse the intricacies of international trade. Skydo assists you in managing international payments by setting up international accounts to accept payments seamlessly and unlock:

These let you focus on core business activities, confidently expand your operations and maximise cash flow.&nbsp;

<a href="https://www.skydo.com/">Contact us</a> today to manage your payments effectively and excel in the global marketplace.

Q1. What steps can businesses take to mitigate currency exchange and fluctuation issues?

Ans: Businesses can use financial instruments, diversify their customer base and product offerings, and maintain strong relationships with banks and financial institutions.

Q2.How can businesses ensure payment security and tracking in international transactions?

Ans: Ensuring proper documentation, using secure payment methods, and verifying the counterparty's identity can help mitigate security risks and ensure smooth payment tracking.

Q3. How do currency exchange and fluctuation issues impact global businesses?

Ans: Currency exchange fluctuations can affect profitability. Hidden foreign exchange costs, added by providers, compound over time. Managing these issues involves using financial instruments and maintaining strong relationships.

Q4. What security concerns do business owners face in international payments?

Ans: Security issues include fraudulent transactions, invoice fraud, payment fraud, and cybersecurity threats. Mitigating risks involves proper documentation, secure payment methods, and identity verification.

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Doing your GST refunds as a business owner can feel like trying to solve a Rubik's Cube. The complicated forms, constant compliance checks, and fear of messing up and facing penalties can be overwhelming, not to mention the delays, cash flow issues, and even legal obstacles that can occur if you make one wrong move. Instead of spending time on growing your business, you're buried in paperwork and tax codes.&nbsp;

What if there's a way to make all these problems go away?&nbsp;

<a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Skydo</a> is an approved tool by chartered accountants that makes <a href="https://www.skydo.com/blog/how-to-claim-input-tax-credit-refund-in-india?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">GST refunds</a> easier than ever before. No longer will you need to stress over a long and tedious refund process, as Skydo makes the process accurate, quick, and hassle-free – so you can get back to what matters most: running your business.

Let’s learn how Skydo helps with GST Refunds.

Skydo is revolutionizing the current financial landscape with its advanced platform. With its cutting-edge technology and user-centric features, Skydo has quickly become the go-to platform for anyone needing help with GST-related compliances.

Key features that make Skydo a standout choice

1. Effortless Letter of Undertaking (LUT) Integration

An <a href="https://www.skydo.com/blog/everything-you-need-to-know-about-lut?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">LUT is vital for GST compliance</a>. To draft the LUT, you can simply log into the GST portal—an efficient digital platform. Go to the 'SERVICES' Tab &gt; 'User Services' &gt; Select 'Furnish Letter of Undertaking (LUT)'.

Select the financial year applicable for this LUT and fill in the necessary details on the Letter of Undertaking Form/GST RFD-11 that appears on the screen. Once you receive confirmation, you can capture the details of the LUT for further reference.

When creating your invoice on Skydo's platform, you'll find a dedicated section to include the LUT, accommodating up to 200 characters. This means that as you generate invoices for your international clients, you can effortlessly ensure tax efficiency.

You can seamlessly integrate the LUT into your invoice during its creation, avoiding delays and the hassle of jumping through multiple hoops for tax compliance.

2. FIRAs (Foreign Inward Remittance Advice)

Traditionally, you'd have to wait for days to receive a <a href="https://www.skydo.com/blog/all-you-need-to-know-about-FIRC-a-complete-guide?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Foreign Inward Remittance Advice (FIRA)</a> to confirm payment settlement. However, Skydo steps in to change the game. As soon as your client's payment is settled, you receive the FIRA instantly. This real-time availability doesn't just accelerate your financial processes; it's like having a financial assistant ensuring that you're always in the know.

When you <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">accept international payments</a> to your bank account, the bank requires you to specify the purpose code and provide supporting documents like FIRA against each inward receipt.

With Skydo, you no longer need to worry about remembering purpose codes or flipping through thick rulebooks when sending invoices. The system will automatically provide the correct purpose codes based on the code you provided before, eliminating the need to go to the bank to obtain new ones each time.&nbsp;

It's like having a built-in expert to handle the intricacies of compliance, making your life simpler and your business more efficient. 

As a business owner preparing for an upcoming audit, you need access to comprehensive transaction records. With Skydo receipts, you get a detailed breakdown of your transactions, serving as a reliable tax invoice. It's like having an accountant at your fingertips, simplifying accounting, record-keeping, and financial transparency.

Skydo's technology streamlines the process while adding layers of accuracy, transparency, and efficiency, not typically found in traditional methods.

Skydo is more than just a payment and refund system - it provides an all-in-one solution for managing your financial operations such as:

Skydo is the perfect partner for making your financial life easier.&nbsp;

With Skydo, you don't need to be an expert in tax law because the easy-to-navigate interface is designed for simplicity. In addition, automated processes ensure accuracy and financial compliance, saving time and effort.&nbsp;

The platform's transparency feature lets you track payments and refunds in real-time. With features like budgeting, bill payment, and account monitoring, you can easily streamline your financial processes. Make sure not to miss out on all that Skydo has to offer and<a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link"> book a demo today</a>.

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In India's bustling world of startups and service exporters, dreams are becoming reality as businesses expand their horizons across international borders. However, this journey has its challenges. The hard-earned revenues of these enterprises often get eroded by various transaction fees associated with cross-border payments.&nbsp;

Just as travellers entrust their luggage to the skies, businesses entrust their earnings to an international payment system. They find themselves entangled in a web of hidden charges and pathways.&nbsp;

Meet Shubham, an entrepreneur in India who runs a thriving tech export business. His business has been getting international recognition, attracting customers worldwide. However, he witnessed a shrinking growth in the global market. The reasons include the following.

1. Currency conversion and exchange rate fluctuations&nbsp;

Shubham successfully bagged a great project and completed it. He was basking in the satisfaction of doing the work that was well appreciated and eventually compensated. However, due to unfavourable exchange rates, the amount he received post USD to INR conversion was at rates that significantly impacted his profit margins.&nbsp;

It affected his bottom line and eroded his confidence in the reliability of traditional banking systems.

2. Regulatory and compliance issues&nbsp;

Each jurisdiction has its rules, making operating without legal compliance challenging for a business. Since there was a delay in receiving funds, Shubham faced issues with meeting these compliance requirements. The paperwork and the back-and-forth with the payments vendor left him frustrated and doubting the efficiency of existing payment methods.

Shubham's frustration deepened as he encountered payment processing delays that led to missed opportunities. A client's payment took several days to reach his account due to the involvement of intermediary banks and complex clearing processes. The unexpected processing fees associated with cross-border transactions also chipped away at his profits.

4. Impact on efficiency and customer satisfaction

Shubham's business prides itself on efficiency and customer satisfaction. However, his team spends valuable time grappling with administrative hurdles instead of focusing on innovation. It affected the quality of service he could offer his international clients, risking their satisfaction and loyalty.

Shubham’s story is similar to the plight of many other businesses of all sizes in India facing similar challenges.&nbsp;

Skydo promises a transformative solution to international payment challenges. It revolutionises how businesses handle international payments and overcomes these roadblocks for Shubham and many other companies. &nbsp;

Skydo - Your Passport to Effortless International Payments

Skydo breaks the barriers most enterprises face and bridges the borders for Indian tech exporters to achieve payment success with maximum revenue and efficiency for those looking to expand overseas. Its top features include the following.

Skydo offers live or real-time foreign exchange rates and no hidden margins. For example, you have sent an invoice for $500, and the client has dispatched the payment. The amount you receive is equivalent to the globally set conversion rate when it hits the Skydo account.&nbsp;

The flat fee attached earlier to the invoice will translate into the same Fx rate, which will be visible in the payment tracking system alongside every invoice. There are no hidden charges.

Traditional methods often involve separate platforms or software to generate invoices, which can be time-consuming and require additional financial resources. However, Skydo redefines this process by offering a <a href="https://www.skydo.com/blog/transforming-your-invoicing-experience-with-skydo?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">built-in invoicing feature</a> that simplifies and streamlines the invoicing experience.

Here's how you can create a free invoice.

If you're invoicing a new client, add a new client name in the 'Bill to' field, or you can search from the existing clients list. Provide the address, select the country, and click save and continue.

In the next tab, select the payment currency and provide item details like the service provided, SAC, rate, and amount. You can also offer a discount in percentage. Skydo automatically displays the invoice amount after the discount.&nbsp;

Next, select the currency and subsequent account to receive payments.

On the right side of the screen, you've three options - to finalise the invoice, download the PDF or delete the invoice.&nbsp;

Upon finalising the invoice, the below screen appears. 

If required, you can manually enter the invoice number or stick to the one generated automatically. Next, select the due date of the payment.&nbsp;

To generate the e-invoice, click on “Generate E-invoice”. The system will automatically add the QR code to the invoice. You can also copy the IRN for the e-invoice for your reference.&nbsp;

Once all the invoice details are confirmed, click on “Email Invoice to Client”.

3. Auto-generate FIRA (Free Invoice Reconciliation and Accounting)

<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">Skydo's automated FIRA</a> generation ensures GST compliance is effortless. Once Skydo settles the payment in your bank account, you can select the invoice record and click “Download FIRA”.

You can also download the FIRAs for all invoices simultaneously with the option on the Invoices page as displayed below.

A business's powerful weapon is its revenue data. It provides valuable insights into the things that are working well for the firm. Skydo's Analytics feature provides business and client overviews to help you make informed business decisions.&nbsp;

The Business Overview compiles your revenue data into a visual graph displaying paid and outstanding invoices up to 6 months prior. The graph below also displays revenue generated per client. This way, you can tailor your marketing and sales strategies to pitch additional services.

Similarly, the Client Overview section provides a comprehensive overview of the client’s outstanding payments and revenue generated historically for up to 6 months. You can also analyse the average payment time and invoice amount to determine your top clients.

Skydo's commitment to comprehensive business solutions goes beyond seamless payments and transparent transactions. An essential feature that underscores this commitment is the ability to send payment reminders and maintain a detailed payment history directly within the platform.&nbsp;

This functionality empowers you to efficiently manage their financial interactions and enhance client communication.

For example, in Shubham’s case, he can effortlessly schedule automated reminders for upcoming payment deadlines. These reminders serve as gentle prompts, ensuring timely and hassle-free payments from clients across different time zones.

Skydo's payment reminders feature stands as an invaluable tool for businesses seeking to elevate their financial operations.

Additionally, in the event of a payment discrepancy, the Client Ledger serves as an objective record of financial interactions. It offers a step-by-step chronological overview of every payment transaction, creating an easily accessible and verifiable timeline. This documentation significantly reduces the scope for misunderstandings and disputes between businesses and clients.

6.&nbsp;Single Source of Truth Dashboard for International Payments

The dashboard encapsulates more than just transactions; it encapsulates your financial health. By offering an all-encompassing view of your global transactions, it empowers you to make informed decisions, strengthen client relationships, and drive overall business success.

Skydo redefines the way businesses engage with their financial data, paving the way for transparency, efficiency, and strategic advancement on a global scale. With Skydo's dashboard at your fingertips, harness the power of unified financial intelligence like never before.

Behind the Scenes: How Skydo Achieved Success

Behind the user-friendly interface and innovative features of Skydo lies a carefully crafted strategy and technological foundation.&nbsp;

In a world where success is the outcome of meticulous planning and technological innovation, Skydo stands as a testament to what can be achieved with the right blend of vision and execution. By building a global network, optimising payment routes, deploying advanced technology, securing regulatory approval, and prioritising data privacy, Skydo has carved a distinct niche as a trailblazer in international payments.

Unlock Effortless International Payments With Skydo

In a time when global businesses can only do so much, cross-border payments can be a formidable obstacle. Skydo simplifies the process of your international payments by helping individuals and organisations succeed in their businesses.&nbsp;

Discover the future of <a href="https://skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">international payments with Skydo</a> - an efficient and innovative merger to transform the global marketplace.

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The global trade business is more interconnected than ever. Technological advancements have made it possible to connect with buyers globally and track logistics in real-time.

However,&nbsp; receiving cross-border payments through the traditional banking system still remains a cumbersome and expensive process thanks to lengthy processing times, hidden charges, and tax compliance issues. This is where virtual accounts step in, offering an innovative alternative to physical bank accounts. It eliminates the above challenges and simplifies cross-border payments for exporters.

What exactly are virtual bank accounts? How do you even open a virtual account? We answer these questions and a lot more in this blog.

Virtual bank accounts are digital accounts linked to your physical bank account. Each virtual bank account has a unique 18-digit number you can share with your international clients to receive payments. However, virtual bank accounts have one notable difference from physical bank accounts. The difference is they cannot actually hold money, they are like digital delivery agents receiving payments and delivering them to your bank account.

Virtual accounts add two major advantages for exporters:&nbsp;

By sharing your virtual unique account number, you don't have to reveal your bank account details. Keeping bank details private reduces the threat from security breaches.

When you work with multiple clients across multiple regions and countries, you can open different virtual bank accounts in each such country and consequently receive payments in different currencies each assigned to a different client. This way you can keep track of every client's payment history more efficiently.

Before we get to the working of virtual accounts, here's something you must know. Virtual accounts can be created for both domestic and international transactions. In the case of domestic transactions, each account has a unique virtual account number that can receive payments only in Indian Rupee (INR). However, the real utility of virtual bank accounts lies in international transactions. Let's understand this with the help of an example.

Imagine you're an exporter receiving payments from multiple international clients. You can share your physical bank account number with them, but it has challenges for them and you. For starters, your clients might be sceptical about making payments to a foreign bank account because of security issues like financial fraud or data breaches. For you, it's an expensive option because various charges are deducted from the amount before finally crediting it to your traditional bank account.

We have listed down the different charges that are typically deducted to help you understand better:

<a href="https://www.skydo.com/blog/swift-money-transfer-ultimate-guide">SWIFT Fees</a>: This ranges from Rs. 500 to Rs.1000 depending on the bank. Now while SWIFT fee is levied on the sender, more often than not, it will be passed on to the receiver.&nbsp;

Currency Conversion Markup: Banks charge a forex markup on the current exchange rate. For example, if the current USD to INR exchange rate is Rs. 85, the bank might deduct a markup of Rs.2 on every dollar. So when a client sends USD 10,000, the real exchange value is Rs. 850,000, but the bank will credit Rs. 830,000 after deducting the markup.&nbsp;

<a href="https://www.skydo.com/blog/automated-firc-simplifying-international-payments-compliance">Foreign Inward Remittance Advice (FIRA)</a> fees: After the amount gets credited, you must also pay the bank to obtain FIRA as proof that you have received an international payment.

Should you open multiple foreign bank accounts then?

Opening bank accounts where your clients are based is a valid option to bypass these charges. However, that's also an expensive process because you must pay maintenance fees for each account. Moreover, you have to face numerous regulatory hurdles.&nbsp;

A virtual account works as a win-win solution here. You can open virtual international bank accounts in your client's country without your presence and extensive paperwork.&nbsp;

For example, you open a new virtual account in the US for your American clients. They can transfer the payments in US Dollars like a local transfer therefore there are no SWIFT fees involved. Once the amount is received in your virtual account, it’s consolidated first, then converted into a currency of your choice – which is INR in most cases for Indian exporters – and deposited into your bank account. You can open virtual accounts in the same manner for different customers based out of countries like the UK, Singapore and more.

Opening a virtual bank account is much simpler and takes less time compared to opening a traditional bank account. The process is streamlined and requires less documentation. In India, platforms like<a href="https://www.skydo.com/"> Skydo</a> and<a href="https://www.skydo.com/blog/wise-transfer-charges-in-india"> Wise Business</a> offer international virtual<a href="https://www.skydo.com/blog/benefits-of-multi-currency-accounts"> multicurrency accounts</a> to manage receivables from different countries.

Here's how the 5-minute onboarding process at Skydo looks like:

What Documents Are Required to Open a Virtual Bank Account?

Here are the list of documents you must keep in handy to open a virtual bank account:

Client Contract: A copy of the contract with an international client

Last 3 Months Bank Statements: This necessary information is required to prove the transaction history between you and the client

Importer Exporter Code (IEC): The<a href="https://www.skydo.com/blog/iec-code-apply-online"> Importer Exporter Code (IEC)</a> is a unique 10-digit code for businesses and individuals engaged in the import and export of goods and services

Sales and Income Tax Returns: You must share the income tax filing details with acknowledgement to prove that you have no unpaid taxes

Business PAN Number: To verify the business' identity

Director's Aadhar Number: The Director's Aadhar Card must be shared while signing up as identity proof. The mobile number linked with this Aadhar Card will receive the OTP for verification

Director's PAN Card With Picture: This is required to cross-check the name and other identity details on the UIDAI website