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

What is the Interest Equalisation Scheme in India?

In international trade, access to affordable finance is a crucial factor that impacts the&nbsp; profitability of exporters. Recognising this, governments often institute schemes to support exporters in accessing finance at competitive rates.&nbsp;

Interest Equalisation Scheme (IES) is one such scheme that provides pre and post-shipment credit to exporters at subsidised interest rates. It allows exporters easy access to credit and reduces their cost of borrowing.

Key Features of the Interest Equalisation Scheme

The Government of India launched The Interest Equalisation Scheme (IES) on 1st April 2015. Initially, the scheme was valid for five years until March 31, 2020. However, it has undergone several extensions in response to evolving circumstances, including the challenges posed by the COVID-19 pandemic.

According to a recent notification from the Reserve Bank of India, the government has extended the scheme until June 30, 2024. This extension offers specific benefits to various categories of exporters. Manufacturers and merchant exporters dealing with specified 410 <a href="https://mpeda.gov.in/exporters/?page_id=1840">HS lines</a> will be entitled to a 2% interest equalisation rate. Additionally, MSME manufacturers exporting under any HS line will receive a higher rate of 3%.

Eligible Exporters and Industries by HS code

Exporters can identify eligibility based on industry classification using Harmonised System (HS) codes. These codes categorise export products into specific industries, determining their eligibility for the scheme. The scheme extends to specific export products meeting predefined criteria, ensuring that it targets industries with significant export potential. 	

Official channels, such as the Indian trade portal, provide a comprehensive list of eligible exporters and industries and the corresponding interest equalisation rates. Below are some covered sectors:

Criteria for Export Products under the Scheme&nbsp;

Exports under the scheme must originate from India. The Rules of Origin in the Foreign Trade Policy 2015-20 outlines the minimum processing criteria to qualify as ‘originating from India.’ These include:

New applicants can successfully register for the scheme by following these steps:&nbsp;

One significant advantage of the Interest Equalization Scheme is its ability to lower borrowing costs for eligible exporters.&nbsp;

For example, XYZ Exporters, a medium-sized enterprise specialising in the export of textiles, is seeking export credit. If it takes credit from banks, it will have to pay the base interest + 3%-5% above the base rate. However, if it’s eligible for the Interest Equilisation Scheme, it can get export credit at a subsidized 3% interest rate.&nbsp;

The concessional interest rate enables them to lower their overall financing expenses and improve their profitability.&nbsp;

Furthermore, XYZ Exporters could offer more competitive pricing in the international market, attracting more customers and expanding their market share. They could redirect saved funds toward business expansion initiatives, product diversification, or enhancing operational efficiency.

Interest Equalisation Scheme in India provides exporters access to affordable finance. By subsidising interest rates on bank loans, the scheme effectively reduces borrowing costs, empowering exporters to optimise their financial resources and expand their business operations.&nbsp;

For eligible exporters, the time is now to explore the IES's benefits and take proactive steps toward gaining them. By initiating the registration process, engaging with relevant authorities, and adhering to the scheme's guidelines, exporters can unlock opportunities to lower financial burdens, improve competitiveness, and drive sustainable growth.



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What are your monthly sales and how much gross margin do you earn? What is your company's valuation? How much cash are you burning every month? — You must be familiar with these questions if you've been binging on Shark Tank India over the past couple of months. Sharks essentially ask these questions to assess a startup's financial performance and profit potential.

Therefore, these questions are pertinent for entrepreneurs, especially if you want to seek investment in the future or expand your business.&nbsp;

Understanding these financial principles helps you make better decisions and negotiate with investors to maximise valuation and minimise equity dilution. Let's see the most popular terms used in Shark Tank and how they apply to your business.&nbsp;

Top 10 Shark Tank terms you should know to maximize valuation while minimizing equity dilution

Valuation is the true value or economic worth of your startup. Sharks invest in a startup in exchange for a certain percentage of ownership or equity. Valuation helps determine the price per share of the company and the worth of the investor’s ownership of the company.

For example, if a shark has 10% ownership in a startup whose valuation is Rs. 1 crore, they get shares worth Rs. 10,00,000.

For early-age startups that do not have sufficient financial data to show their performance, valuation is calculated via multiple means like comparing the valuation of their competitors, the company's ability to prove its potential customer base, the strength of the founding team and more such parameters.&nbsp;

Investors consider various factors such as market size, revenue and financial performance, intellectual property, founder’s expertise and unique selling proposition to calculate a startup's valuation.

Valuation is of two types: pre-money and post-money valuation. The pre-money valuation is the value of your company before seeking investment. Once you seek outside investment, the valuation increases and is called post-money valuation.

For example, if your pre-money valuation is Rs. 1 crore and you receive an external investment of Rs. 70 lakhs, the post-money valuation will be Rs. 1,70,00,000.

Equity means the total ownership of your startup and is calculated in percentage. If you are a sole entrepreneur and haven’t sought outside investment, you have complete ownership or 100% equity in the company.

In the case of two co-founders, the ownership or equity is either divided equally (each founder has 50% ownership of the company) or proportionately based on capital invested, expertise and other factors.&nbsp;

When investors agree to invest in a company, they get a certain ownership or equity in your business. So when a shark says that they want to invest 50 lakhs in a startup for 6% equity, it means that they get 6% ownership in the company whereas the founders are left with 94% equity.&nbsp;

For example, Nascher Miles, a luggage brand, had initially pitched for ₹3 crore funding for 0.75% equity in Shark Tank India season 3. However, they received ₹3 crore funding at 1.5% equity and a ₹200 crores valuation. This means that sharks own 1.5% of the company.

As startups go through subsequent funding rounds, the equity gets distributed to new investors and even valuable employees as <a href="https://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/ESOPs-and-Other-Benefits-Plans-for-Employees-in-India.pdf">employee stock option plan (ESOP).</a>&nbsp;

Cash flow is defined as the movement of cash in (while receiving customer payments) and out of the business (for vendor payments or other expenses).

When the cash inflow is higher than the outflow (income is higher than the expenses), the cash flow is termed positive. However, when money moving out is more than the cash coming in, you have a negative cash flow.

Cash flow is different from profits which represents the balance amount after deducting all expenses. Even if your company has generated profits but the customer payments are delayed, you wouldn't have sufficient cash to manage your daily operations such as purchasing new inventory or paying rent. Therefore, a positive cash flow is important for business survival.&nbsp;

Margin is the difference between the selling price and the cost price of a product.&nbsp;For example, if the cost to produce a product is ₹50 and the selling price is ₹75, the gross profit margin will be 33.33%. This margin, also known as the gross operating margin, focuses solely on direct costs such as materials and labour, excluding indirect expenses like overhead or marketing

However, the net profit margin is calculated by deducting taxes, interest, and any other expense from the income.&nbsp;

Higher profit margins indicate a positive financial health of the company. Investors can understand how much a company can earn after deducting the expenses and whether it will have sufficient funds in the future for sustainable growth.

Gross profit means the profit generated after deducting the cost of goods sold from the revenue. Here the cost of goods sold includes direct expenses such as the cost of raw materials and labour costs.&nbsp;

Net profit means the final profit after deducting all the operating expenses, taxes and interests. While gross profits help determine the profitability of a product, net profit provides more realistic information about the overall financial health of a company.&nbsp;

ROI is a performance metric to determine the profitability of an investment.

Startup founders can use this formula to calculate the effectiveness of their investment and other business decisions.&nbsp;

From an investor’s perspective, high ROI means that a startup is likely to generate higher profits for the investors. Investors also calculate and compare the ROI of several startups to find the most suitable startup for investment.&nbsp;

For example, in Shark Tank India Season 1, Aman Gupta, the co-founder of boAt invested ₹20,00,000 in Skippi, an ice popsicle brand and received ₹6 crore return. The ROI on this deal is 2900%.

Learn More: <a href="https://www.skydo.com/blog/what-is-your-role-as-a-tech-startup-founder?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">What is Your Role as a Tech Startup Founder</a>

EBITDA full form is Earnings Before Interest, Taxes, Depreciation, and Amortization. It is used to calculate the net income after deducting the cost of goods sold excluding the money spent on taxes, depreciation, interest and amortization.&nbsp;

It helps investors know and compare the profitability of a company without considering the impact of a particular financing method on a business.

However, solely relying on EBITDA can sometimes show a false picture, especially for debt-funded companies because it does not consider interest payable. Investors can assess the actual revenue after deducting interest and other expenses.&nbsp;

Annual Recurring Revenue (ARR) means the projected annual revenue from existing customers. ARR is usually calculated for SaaS startups working on a subscription-based model. It helps predict future cash flow.

High ARR means better revenue predictability and helps investors understand projected revenue and potential business growth.

Burn rate refers to the rate at which a startup spends its cash reserves or venture capital to cover its operating expenses before it starts generating revenue.

A high burn rate indicates that the company is rapidly exhausting its cash supply. It might run out of capital soon and shut down.&nbsp;

A few effective ways to reduce burn rate are cutting down operational expenses such as payrolls by reducing tem size, efficient budget planning, reducing payment cycles and negotiating vendor payment terms.

The Customer Acquisition Cost (CAC) means all the money spent by a startup to acquire new customers. It is a sum of sales and marketing expenses such as the cost of producing content, salaries, payments for marketing and sales tools, and paid advertisements’ costs.

You can calculate CAC to understand which customer segment generates the most revenue for your business and measure the effectiveness of your marketing and sales strategies.

In addition to the above popular Shark Tank terms, you must know the following financial terms for a business:

Understanding the terms used in Shark Tank is crucial for startup founders and entrepreneurs. It empowers you to develop strategic business plans, allocate resources efficiently, and manage financial risks effectively. By mastering these terms, you can enhance your business valuation and communicate more effectively with stakeholders.

As an entrepreneur seeking investment, prioritising financial literacy is key. You can build your knowledge of Shark Tank business terms by reading articles, financial guides, or seeking mentorship from experienced professionals. Because investing in your financial education will pay dividends in your entrepreneurial journey.

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Skydo is a leading cross-border <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">B2B payment gateway</a> tailored for Indian businesses, spanning freelancers, sole proprietorships, and companies alike. We're dedicated to making B2B payment processing seamless, compliant, and cost-effective.

At the heart of our operations lie four fundamental pillars: regulatory compliance, secure money handling, data security, and prompt fund availability. These pillars are paramount in fostering trust and security, ensuring that businesses can conduct <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 confidence.

Let's explore how Skydo simplifies cross-border payments while prioritizing trust and security.

Skydo operates within the Reserve Bank of India's Operating Guidelines for Payment Gateways (<a href="https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10037">OPGSP</a>) framework. This regulatory framework outlines stringent guidelines for data privacy, transaction security, and operational practices.&nbsp;

By adhering to these regulations, Skydo ensures <a href="https://www.skydo.com/blog/ensure-rbi-guidelines-for-cross-border-transactions-with-skydo?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">compliance</a> with industry standards and instils confidence in our users regarding the security of their transactions. Additionally, Skydo is in the process of applying to become a licensed entity, aligning with the RBI guidelines.&nbsp;

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Ensuring the safety of your funds is our utmost priority at Skydo. We take security seriously and have implemented strong measures similar to those top financial institutions use to protect your funds.&nbsp;

We've partnered with respected financial institutions like <a href="https://www.dbs.com/in/index/default.page">DBS</a>, <a href="https://www.bankingcircle.com/">Banking Circle</a> and <a href="https://www.currencycloud.com/">Currencycloud</a> (a Visa entity) known for their commitment to security and reliability. These partnerships guarantee the safety of your funds and provide added assurance about how Skydo handles your finances as a payment partner.

At Skydo, safeguarding your <a href="https://www.skydo.com/blog/a-quick-guide-to-using-the-skydo-platform?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">privacy</a> is paramount, and we use a multi-layered approach to ensure the security of your data.

With these robust data security measures in place, Skydo ensures that your information is safeguarded at every step, giving you peace of mind while using our platform.

At Skydo, we understand the urgency of accessing your <a href="https://www.skydo.com/blog/seamlessly-accept-international-payments-in-india">funds</a> without delay. That's why we ensure that once we receive your funds, they are swiftly brought back to India within 12 hours. Following this, the conversion process takes place, and your funds are promptly transferred to your bank account.

This streamlined approach minimizes the risk associated with potential bank collapses and ensures quicker access to your funds when you need them the most.

Skydo is committed to providing you with a seamless and secure experience for cross-border payments. Our focus on regulatory compliance, secure money handling, data security, and prompt fund availability ensures transparency and trustworthiness in every transaction.

Delve deeper into what <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Skydo</a> offers and consider us for your cross-border payment requirements. With Skydo, you can confidently handle your transactions with the utmost reliability, security, and professionalism.&nbsp;

Trust Skydo for a reliable and secure solution for your B2B payment processing.



Why Skydo is Your Trusted International Payment Partner?

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For exporters, eBRC (Electronic Bank Realization Certificate) is a key compliance document that serves as proof of payment received from abroad for exported goods or services. It is especially important for goods and software exporters covered under SOFTEX.

In this blog, we’ll break down what eBRC is, why it matters, how to obtain it, and everything else you need to know.

An eBRC (Electronic Bank Realization Certificate) is digital proof that your bank issues once you receive payment for an export. Simply put, it confirms that you’ve been paid for your goods or services.

This certificate is important because it helps you report your earnings, file taxes easily, and even access government benefits meant for exporters including low-cost loans, subsidies, duty exemptions and more.&nbsp;Since eBRC includes all the transaction details, it also makes compliance with authorities like the Income Tax Department smooth and hassle-free.

Before eBRC, getting a <a href="https://www.skydo.com/blog/bank-realisation-certificate-all-you-need-to-know">Bank Realization Certificate (BRC)</a> was a tedious process. Exporters had to visit their bank, apply for a physical BRC, and then submit it to the Directorate General of Foreign Trade (DGFT). The DGFT would manually enter transaction details, making the process slow and complicated—especially for claiming export incentives.

In 2012, the DGFT introduced e`BRC, eliminating the need for physical visits and paperwork. Now, banks issue BRCs digitally, making it faster, easier, and more efficient for exporters to claim benefits and comply with regulations.

In India, banks issue an -BRC to exporters through the following process.

How do you check the eBRC status on the DGFT Website?

Here are the steps to check the status of your eBRC (Electronic Bank Realization Certificate) online.

DGFT has made it mandatory for all exporters to apply for and receive the eBRC to demonstrate that they have received payment for their exported goods or services per DGFT regulations.

The eBRC system provides a digital record of export transactions, making it easier for exporters to maintain and retrieve records for audit and compliance.  Additionally, exporters can avoid visiting the bank and DGFT offices.&nbsp;

One of the main reasons exporters apply for the eBRC is to reap the benefits of various export benefits offered by the Indian government under its Foreign Trade Policy. Submitting an eBRC allows the exporters to be eligible for benefits such as low-cost loans, duty exemptions, subsidies, etc.&nbsp;

Enhancing transparency and accountability

The Indian government and authorities such as the Income Tax Department and the DGFT constantly monitor and manage the country's foreign exchange reserves and tax filing. Issuing e-BRC ensures that the foreign exchange earned through exports is accurately reported and accounted for with effective tax filing.&nbsp;

How to Claim Export Incentives using eBRC

In India, the DGFT decides on the value of the incentives which an exporter can seek under the various export benefits. The value is decided by analysing the Free on Board (FOB) of the exported goods and services mentioned in the shipping bills, and the total received payments per the eBRC.&nbsp;

Here's how you can claim these benefits with eBRC:

However, you must ensure that the bank has submitted an error-free e-BRC and it reflects the consolidated realisation value. Furthermore, you must enter freight values, insurance and commission values in the refund application, as the e-BRC excludes such values.&nbsp;

Here are some key resources and tools that can help you in your endeavour to obtain your e-BRC.

eBRC is a crucial certificate issued by the bank and verified by the DGFT for streamlining the payment procedure for exporters and working as an income proof for better transparency and tax filing.&nbsp;

It is mandatory for an exporter receiving payments for the export of goods and services to apply for eBRC and ensure that the bank uploads it on the DGFT website. Utilising the eBRC, exports can present their eligibility for various export incentives and increase their profit margin.&nbsp;

However, as an exporter, you must maintain accurate records of your export transactions and related documents to facilitate the e-BRC application process. Since the regulations and the procedure may change over time, it's important to stay updated with the latest information from official government sources and industry associations.&nbsp;

You can contact <a href="mailto:support@skydo.com">industry experts at Skydo</a> to help you with the eBRC process and in case you have any other queries related to foreign exchange.&nbsp;

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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

Director Email Address: This will be used for communication

Business Bank Account Details: This is the primary account that will be linked with the virtual account to receive payments

What Are the Benefits of Virtual Bank Accounts?

Here are the top three benefits of virtual bank accounts:

Fast Settlement: Virtual bank accounts are much faster than financial institutions like banks while settling transactions. In the traditional banking payment method, the processing time is long due to multiple participating banks, sometimes SWIFT transfer can take upto seven days to settle. Virtual account platforms like Skydo, transfer funds to your bank account within one day. As an exporter, this means better cash flow and more liquidity.

Cost-effective: With virtual bank accounts, you get most of the amount your client sends. Charges like SWIFT fees are not levied, plus, unlike banks,&nbsp; platforms like Skydo also offer you live forex rate, helping you keep the most of what you make.&nbsp;&nbsp;

Secure: Threats like data breaches and financial fraud always loom over traditional methods of international payments. In comparison, virtual accounts have enhanced security features like multi-factor authentication, encryption, easy tracking ability, and a real-time fraud monitoring system. Even if your virtual account number gets disclosed, it cannot be used to gain access to your physical bank account.