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

TechX, a growing software company, recently expanded internationally. However, they unintentionally violated data protection and payment laws by neglecting <a href="https://www.skydo.com/blog/ensuring-financial-compliance-5-tips-to-safeguard-your-businesss-finances?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">compliance requirements</a>. Unaware of complex regulations, their negligence enabled data theft and scrutiny from regulatory bodies. This resulted in the revocation of their license, barring further exports.

These incidents showcase the critical need for tech exporters to prioritise global compliance. Though regulations may seem like jargon. But following them is vital for smooth international trade, mitigating reputational risks, and succeeding globally.

With complicated guidelines, global compliance is tricky yet acts as a protective guard amid competitive pressures. Mastering it is essential for tech export companies.

Compliance in the tech export industry refers to following the laws, regulations, and industry standards to ensure ethical and legal business practices. It encompasses various aspects, such as data protection, payment laws, and industry-specific regulations.&nbsp;

According to experts in the field, compliance is crucial for tech exporters as it helps build trust and credibility among stakeholders, including customers, partners, and regulatory bodies.&nbsp;

Compliance protects sensitive data, fosters transparency in financial transactions, and helps navigate the ever-changing regulatory landscape. This way, tech exporters can create a secure and reliable environment, mitigate risks, and establish themselves as responsible players in the industry.

Implementing data protection measures in India requires a proactive approach. Small businesses often handle customer data, and a failure to comply with data protection regulations can have severe consequences, especially considering limited resources and brand reputation.&nbsp;

Customers often choose a company that prioritises data security and respects privacy. This way, ensuring data protection compliance can provide a competitive advantage over non-compliant competitors.

Several regulations and frameworks govern data protection practices in India, providing a framework for businesses to follow.

Experts also emphasise the importance of implementing privacy policies and consent mechanisms that align with Indian data protection laws. Businesses must ensure that individuals are adequately informed about the purpose and nature of data processing and have the right to access, rectify, and delete their personal information.&nbsp;

The Reserve Bank of India (RBI) governs payment systems and regulates transactions in India. The Foreign Exchange Management Act (FEMA) also plays a significant role in regulating <a href="https://www.skydo.com/blog/future-of-cross-border-payments-2030-and-beyond?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">cross-border transactions</a> and foreign exchange transactions.

Non-compliance with payment laws can have severe implications for tech exporters. The RBI and guidelines set by FEMA can initiate inquiries and impose penalties for violations. These penalties may include monetary fines, suspension of payment licenses, or even imprisonment in extreme cases. Non-compliance can disrupt business operations, cause reputation loss, and strained relationships with business partners and customers.

A budding e-commerce brand, Company B, faces industry-specific regulations related to consumer protection, data privacy, and online transactions. They prioritise transparency by clearly outlining terms and conditions, refund and privacy policies.&nbsp;

Additionally, Company B invests in <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">secure payment gateways</a> and encryption technologies to protect customer data. They create a trustworthy user environment and build long-term customer relationships by complying with industry regulations.

To comply with changing regulations, tech exporters can follow these steps:

Global compliance software and tools offer features such as automated regulatory monitoring, document management, risk assessment, and audit trails. These tools help exporters stay updated on changing regulations, maintain documentation, and ensure adherence to compliance requirements.&nbsp;

Expert recommendations and authoritative reviews can guide tech exporters in selecting the most appropriate compliance software and tools. 

Agencies for Providing Guidance on Regulatory Compliance

Numerous local, state, and federal agencies oversee laws and regulations applicable to organisations. These entities, and occasionally additional groups, offer guidance to assist companies in comprehending and adhering to the applicable laws and regulations. This list encompasses some of these agencies and groups:

1. Directorate General of Foreign Trade (DGFT)&nbsp;

The DGFT is the nodal agency for administering India's foreign trade policy. They offer extensive guidance on r<a href="https://www.getsignify.com/blog/regulatory-compliance-in-manufacturing-ensuring-product-quality-and-safety">egulatory compliance</a> for export businesses, including:

2. Export Inspection Council of India (EIC)

The EIC oversees the quality and standards of exported goods. They offer:

The BIS sets national standards for various products and services. They play a vital role in:

The Customs Department facilitates smooth import and export clearance. They offer:

EPCs are industry-specific organisations that promote exports from India. They offer:

Moreover, If you're working with clients in the US, it's important to know about these local market agencies. They can have a big impact on your success and help you navigate the ins and outs of the market.

Understanding regulations, seeking legal counsel, and leveraging technology tools are crucial. Compliance ensures a trustworthy environment, mitigates risks, and protects customer data. It is an ongoing requirement in a changing landscape, providing a strategic advantage for tech exporters to build credibility and achieve long-term success.

Ans: Regulatory requirements are the rules, laws, and guidelines established by government authorities or regulatory bodies that businesses and individuals must adhere to in their operations. These regulations aim to ensure fair practices, protect consumers, maintain market stability, and address specific industry concerns. Failure to comply with regulatory requirements may result in legal consequences, fines, or other penalties, emphasising the importance of understanding and adhering to these standards within a given jurisdiction.

Q2. Which compliance talks about regulatory aspects?

Ans: Various laws and regulations governing specific industries or financial transactions primarily address the regulatory aspects concerning compliance. Concerning international payments, adherence to legal requirements such as import-export codes (IEC), GST regulations, and client agreements plays a crucial role.&nbsp;

Ensuring compliance with these measures is essential for businesses to operate transparently and within the legal framework, minimising risks and promoting financial integrity.

Ans: Global compliance refers to businesses' adherence to the diverse legal, regulatory, and ethical standards across international jurisdictions. It encompasses laws related to taxation, data protection, trade, and industry-specific regulations.&nbsp;

Achieving global compliance ensures that a company operates within the legal framework of each country it engages with, fostering trust, mitigating risks, and facilitating cross-border business transactions while maintaining ethical and legal standards on a global scale.

Ans: Regulatory compliance refers to the adherence of individuals or organisations to laws, rules, and regulations set by governing bodies. It ensures that businesses operate ethically, transparently, and within the legal framework of their industry or jurisdiction.&nbsp;

Compliance may involve meeting industry-specific standards, financial reporting requirements, data protection laws, and other regulations.

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Facilitating international transactions as an international business is as common as sipping a morning coffee. Yet, they must navigate a hidden financial obstacle: Forex markups. These stealthy charges on foreign exchanges can silently chip away at a company's profits, leaving you blindsided by unexpected costs.&nbsp;

Picture this - you've just closed an excellent business deal overseas, only to see a large chunk of your earnings disappear due to hidden fees. This is the danger of Forex markups; many times, these fees are hidden, until it's too late. These charges appear minimal at first look but add up quickly, resulting in much higher costs for businesses of all sizes.&nbsp;

These hidden expenses lurk at every step, whether you're a multinational company procuring supplies from overseas or an IT export startup paying distant developers in a different currency. But what if there was a way to bypass those unexpected fees, reduce lengthy wait times, and sidestep cumbersome paperwork?&nbsp;

<a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Skydo</a> makes it easier for businesses to identify and reduce hidden costs to keep more profits. Here’s how.

An issue that frequently arises in international trade is managing <a href="https://www.skydo.com/blog/future-of-cross-border-payments-2030-and-beyond?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">cross-border payments</a>. With their complex fee structures and lengthy processes, traditional banks have been the default choice yet completely outdated. Enter Skydo, a platform designed to alleviate these issues and promote transparency and efficiency.

When you receive an international payment via Skydo, you get real-time exchange rates for your transactions. This way, you get the most accurate and competitive rate in the market without any <a href="https://www.skydo.com/blog/hidden-fees-in-bank-rates?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">hidden charges</a> while achieving complete value for money on your transaction.

Our straightforward pricing model makes it easy for you to forecast your expenses. For transactions under USD 2,000, a fee of USD 19 is applied. For those exceeding this threshold, the fee is USD 29. With our transparent approach, you can have peace of mind knowing exactly what you're paying for.

Imagine the savings your business could achieve by eliminating the cumulative costs of traditional banks for international transactions! With Skydo's currency conversions, businesses can save up to 10 lakhs annually. Don't just take our word for it; verify these savings using our<a href="http://bit.ly/3MOk7P0"> convenient savings calculator</a>.&nbsp;

The Skydo platform is meticulously designed to cater to global and emerging enterprises' needs. Our user-friendly interface offers a seamless experience, making international transactions straightforward and efficient.&nbsp;

With Skydo, setting up an international account is quick and hassle-free. In just 5 minutes, you can establish an account that upholds the highest legal compliance standards. No more lengthy processes, only business agility.

Skydo streamlines the entire payment process and brings transparency, cost savings, and unparalleled ease of use. With a range of innovative features, Skydo is the modern solution to age-old payment challenges. Here's the step-by-step process that makes cross-border transactions hassle-free and profitable for your business.

Step 1: Setting up your international bank account

With Skydo, it's a breezy <a href="https://www.skydo.com/blog/seamless-payment-experience-with-international-bank-accounts?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">5-minute</a> affair. All it takes is a straightforward KYC process, entering your business details, uploading a few documents and voilà, you're ready to roll.

Need to bill your clients? Create and send professional invoices at zero cost. With Skydo, invoicing isn't just free; it's incredibly intuitive.  

<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">Click here</a> to learn more about how to use Skydo’s invoicing tool free of cost.

Let your customer take the stage. They make local payments, enjoying the comfort and confidence of dealing within their region.

Step 4: Hello, Skydo international accounts

As soon as your client completes the payment, the funds are securely tucked in your Skydo international account, ready for the next move.

The funds begin their voyage, moving smoothly to Skydo's trusted bank partners in India.

Your money gets converted into INR. Rest assured, it's getting the best rates in town.

Step 7: A Warm welcome to your Indian bank account

Without much ado, the money finds its way to your Indian bank account, ready for you to use as you see fit.

An added service most valued by our customers–you get your FIRA and Skydo payment receipts generated, keeping everything above board and crystal clear.

In an era where clarity and transparency are essential, Skydo is leading the charge to set new standards for global financial transactions. With this innovative payments platform, you're not just adopting a system – you're joining a movement towards open, honest dealings.&nbsp;

See the difference firsthand with a <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">quick demo</a>. Experience the Skydo advantage and be at the forefront of this transformative trend in cross-border payments.

Q1. What are Forex markups, and how do they impact international business transactions?

Ans: Forex markups refer to the additional charges imposed on currency conversion in international transactions. They impact businesses by increasing costs, affecting profit margins, and potentially deterring international trade.

Q2. What steps can businesses take to identify and reduce hidden costs in international transactions?

Ans: Businesses can identify hidden costs in international transactions by thoroughly reviewing contracts, understanding exchange rate mechanisms, and leveraging technology to track transaction fees and fluctuations in currency values.

Q3. How can I assess the true cost of Forex fees on my international transactions?

Ans: To assess the true cost of Forex fees, businesses should calculate the total expenses, including transaction fees, currency conversion charges, and any other associated costs incurred during international transactions.

Q4. What types of Forex fees should I be aware of beyond transaction fees?

Ans: Beyond transaction fees, businesses should be aware of additional Forex fees, such as spread costs, intermediary bank charges, and potential regulatory fees, which can contribute to the overall expense of international transactions.

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A powerful empire crumbles, not from external forces, but from within. Like the parasite that silently multiplies and destroys, unchecked financial non-compliance can undermine even the mightiest businesses.

A <a href="https://www.pwc.com/gx/en/issues/upskilling/global-culture-survey-2021.html">survey report</a> found that 67% of firms believe business compliance is becoming more complex. With recession looming over the global economy, businesses cannot afford to take any risks when complying with financial regulations. The fallout from non-compliance can be severe, resulting in hefty fines, legal action, and damage to a company's reputation.&nbsp;

To avoid this, staying current with financial regulations and requirements is important. Let's drill down the five ways to make your business financially compliant this year.

Tip 1: Stay Updated With Existing Laws + Regulatory Changes

A recent study conducted by PwC revealed that <a href="https://brandfolder.com/resources/compliance-challenges-for-financial-services/">40% of CEOs</a> are worried about the constant changes impacting their organisation, as they fear it may result in non-compliance with laws and regulations.&nbsp;

The utilisation of compliance calendars is a valuable asset in such circumstances. These calendars are frequently offered at no cost and serve the purpose of aiding individuals in monitoring important dates and obligations, such as tax deadlines, financial report filings, and various regulatory business compliance requirements including <a href="https://vakilsearch.com/gst/registration">registering GST online.</a>

Moreover, you can access different resources like government websites ( such as the <a href="https://www.rbi.org.in/">RBI</a>, <a href="https://www.sec.gov/">Securities and Exchange Commission</a>, <a href="https://www.ftc.gov/">Federal Trade Commission</a>, <a href="https://www.mca.gov.in/content/mca/global/en/home.html">MCA</a> and <a href="https://www.sebi.gov.in/">SEBI</a>), professional organisations, and <a href="https://legal.economictimes.indiatimes.com/etnewsletter.php">industry newsletters</a> to stay informed and updated. Your proactive approach saves you from potential fines and disruptions in your supply chain, and your customers appreciate your reliable and compliant business practices.

Tip 2: Implement Robust Financial Management Systems

Have you heard the story of the Roman Empire? They had lots of money from winning wars, but when they stopped winning, things got bad. They spent too much and messed up their money, which caused lots of problems and helped lead to their downfall. This shows us the importance of being careful and managing money well.

Like the Romans, we must also understand our money situation, especially when things change. Financial management systems can help us do just that. They give us a clear picture of how we're doing and help us make better money decisions. Believe me. We don't want to end up like the Romans!

As <a href="https://www.linkedin.com/in/mrdeepshah/">Deep Shah</a>, Co-founder of <a href="https://www.linkedin.com/company/twiseidiot/mycompany/">The Wise Idiot</a>, explained - “The three major benefits of using financial management systems are: time-saving (since it's directly linked to my bank account, enabling faster payments and reconciliation or even GST filing), ease of use (with intuitive UI and cloud-based technology), and easy analysis (almost every report I need is already templated and ready).”

But the foundation of any effective financial management system rests upon the fundamental accounting process. Here are some basic steps of accounting:

To automate the above process, you can use standard accounting software. This tool allows for streamlined financial record-keeping, reducing the likelihood of errors and improving efficiency. With <a href="https://www.skydo.com/blog/top-accounting-tools-for-a-streamlined-bookkeeping-experience-for-tech-exporters?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">accounting software</a> like ZohoBooks, and Xero, businesses can easily track expenses, manage accounts payable and receivable, and reconcile bank statements.

<a href="https://www.linkedin.com/in/kevinsyng/">Kevin Singh</a>, Founder of <a href="https://www.linkedin.com/company/viralinbound/">Viral Inbound</a>, described - “Using popular accounting software has been essential for our business to operate smoothly and make informed financial decisions. It's a valuable investment that has helped us save time, reduce errors, and focus on growing our business. And for us, ZohoBooks has been a great choice for our accounting needs.”

Another key component of the financial management systems is financial audits. These audits are important to ensure accuracy and business compliance. They identify errors and areas for improvement, build trust with investors, and demonstrate a commitment to transparency.&nbsp;

Just as a seatbelt is vital for safety and protection in an accident, accurate financial records are essential for protection and accountability in an audit or investigation.

While explaining the importance of record-keeping, CA <a href="https://www.linkedin.com/in/kanan-bahl/">Kanan Bahl</a>, Founder of Fingrowth Media, describes, "It is a famous saying in the CA Practice lobby - Compliance is costly, but non-compliance is far more costly. If applicable, one must keep appropriate financial records per the relevant statutes.

There are many penalties under <a href="https://www.skydo.com/blog/gst-format-matters-heres-why-and-what-it-includes?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">GST and Income tax laws</a>. Just to name one small cost of non-compliance - ₹25,000 is the penalty u/s 271A of the Income Tax Act, 1961 for not keeping book-keeping records u/s 44AA."

Accurate financial records clearly show a company's financial activities, ensuring transparency and accountability. Therefore, it's essential to prioritise the accuracy and completeness of financial records to ensure business compliance with regulations and maintain the company's reputation and financial stability.&nbsp;

Here are some tips for proper record-keeping for your business:

Tip 4: Engage a Professional Financial Advisor

Embarking on international business can be exciting, but many financial challenges exist, including cash flow problems due to long payment terms. The production, technical expenses, and maintenance costs can be challenging to manage upfront. Moreover, the fallout from non-compliance can have serious consequences, including significant financial penalties, adding another layer of complexity to the business.&nbsp;

With a wealth of knowledge and expertise in finance, taxation, and regulations, a financial advisor can help you successfully navigate the challenges of conducting business internationally and ensuring your company remains financially stable. Here are some more benefits of having the right professional financial advisor.

However, when seeking to engage the services of a financial advisor or accountant, assessing their performance becomes imperative by examining specific Key Performance Indicators (KPIs). This is essential to guarantee that their services align with your business's long-term objectives. Consider the following significant KPIs when evaluating potential candidates:

As per business requirements and need, companies can also hire an in-house financial expert.&nbsp; This person can manage the day-to-day financial operations of the business, provide strategic financial advice, and ensure compliance with relevant regulations.&nbsp;

Rohit Khurana, a Chartered Accountant professional and finance lead at Skydo, gives insights on hiring a full-time financial expert “Despite the business needs, if your turnover is more than ten core, then you have hired a full-time CS or CA as per Govt. law”. An in-house financial expert can also work closely with other departments within the business to develop financial plans and budgets.

To mitigate the risks associated with financial compliance, businesses should collaborate with a financial advisor and provide ongoing employee training. This will effectively ensure that employees stay up-to-date with the latest financial compliance requirements and possess the knowledge to comply.

Regular training sessions can be offered to employees to inform them about changes to financial compliance rules and procedures. Standard operating procedures (SOPs) can also be created to educate employees on various financial compliance topics, such as:

Moreover, a C-suite executive can act as a compliance officer to establish and maintain a culture of compliance in the organisation. This includes setting compliance objectives, monitoring compliance activities, and regularly training employees. Businesses can protect their financial stability and uphold a favourable reputation by prioritising financial compliance and offering continuous support and training to employees.

Maintaining financial compliance is not an option. It is necessary for any business that wants to succeed in today's world. Navigating the complex web of financial regulations and requirements can be daunting. Still, with the right mindset and tools, it is possible to make your business financially compliant this financial year.

Start prioritising your financial compliance today to minimise the risk of financial non-compliance and keep your business running smoothly in the long run!

Q1: Why is financial compliance important for businesses?

Ans: Financial compliance is crucial for businesses as it ensures adherence to laws and regulations, preventing hefty fines, legal action, and damage to the company's reputation. Non-compliance can lead to severe consequences, making it essential for businesses to stay current with financial regulations.

Q2: How can businesses stay updated with existing financial laws and regulatory changes?

Ans: Businesses can stay updated by utilizing compliance calendars, accessing government websites (such as RBI, SEC, FTC, MCA, and SEBI), following professional organizations, and subscribing to industry newsletters. Proactive monitoring helps prevent non-compliance and ensures reliable business practices.

Q3: What are the benefits of implementing robust financial management systems?

Ans: Implementing financial management systems provides benefits such as time-saving, ease of use, and easy analysis of financial data. Standard accounting software like ZohoBooks and Xero can automate processes, streamline record-keeping, and improve overall efficiency.

Q4: Why is proper record-keeping essential for financial compliance?

Ans: Accurate record-keeping is vital for transparency, accountability, and compliance with regulations. It helps in demonstrating financial activities, ensuring accuracy, and protecting a company from potential penalties and fines.

Q5: How can businesses mitigate financial challenges and ensure compliance when operating internationally?

Ans: Engaging a professional financial advisor can help businesses navigate international challenges. Financial advisors assist in managing finances, identifying and mitigating financial risks, developing long-term financial plans, ensuring compliance with regulations, and providing objective advice.

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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.