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

Tax Slabs in 2023-24: Plan Ahead for Next Year Tax Savings Th

Rohit

medium_Rohit.png

small_Rohit.png

thumbnail_Rohit.png

Rohit Khuranna

India’s service export industry is booming and how.&nbsp; As of 2023, India's service exports soared by an impressive <a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/indias-services-exports-grow-11-4-in-2023-unctad-report/articleshow/109602819.cms?from=mdr">11.4%</a>, outpacing China and hitting a remarkable <a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/indias-services-exports-grow-11-4-in-2023-unctad-report/articleshow/109602819.cms?from=mdr">$345 billion</a>!

A major driver of this exponential growth is the Indian government's proactive strategy to boost exports. Recognizing the potential of the services sector, the government launched initiatives like the <a href="https://www.dgft.gov.in/CP/?opt=seis">Service Exports from India Scheme (SEIS) </a>to give Indian service exporters a competitive edge in the global market. So, without much ado, let’s dive into the what, why, and who of SEIS.

Understanding SEIS and Its Importance for Service Exports

SEIS, or its full form, Service Exports from India Scheme, was introduced by the Directorate General of Foreign Trade (DGFT) on April 1, 2015. It's a reward-based incentive program designed to boost India's service exports.&nbsp; In this blog, we will be breaking down the details of what these rewards and incentives are, what are the eligibility criteria for availing SEIS,&nbsp; how you can apply for the scheme, and more. &nbsp;You can also find the detailed guidelines for this scheme in Chapter 3 of the <a href="https://content.dgft.gov.in/Website/FTP%20Chapter%203%20as%20on%20June%2030%202019.pdf">Free Trade Policy 2015-20.&nbsp;</a>

The Service Exports from India Scheme (SEIS) supports service exporters by granting them Duty Credit Scrips. These scrips are certificates issued by the government that exporters can use to pay <a href="https://delhicustoms.gov.in/files/tughlakabad-imports/public-notices/SCAN0220.PDF">various taxes and duties</a> associated with exporting services from India. The value of these scrips is<a href="https://nacin.gov.in/resources/file/e-books/Service%20Exports%20from%20India%20Scheme%20(SEIS).pdf"> 3% or 5% </a>of the exporter’s <a href="https://content.dgft.gov.in/Website/FTP%20Chapter%203%20as%20on%20June%2030%202019.pdf">net foreign exchange earnings</a>—the total foreign exchange earned by an exporter minus all expenses incurred.

For example, if a service exporter’s net earnings are Rs. 10,00,000 for a particular order, they can receive Duty Credit Scrips worth Rs. 30,000 to Rs. 50,000, depending on the type of export services.

These Duty Credit Scrips can significantly reduce the cost of exporting services by covering various customs duties and taxes, thereby boosting profit margins. Since the scrips are based on foreign exchange earnings, they also provide a buffer against foreign exchange risks and uncertainties in international trade.

Eligibility Criteria for SEIS Participation

Here are the eligibility criteria for exporters to register themselves for the SEIS scheme:

Note that if you receive foreign remittances against the following activities, you will not be eligible for SEIS:

Here is a <a href="https://nacin.gov.in/resources/file/e-books/Service%20Exports%20from%20India%20Scheme%20(SEIS).pdf">detailed table with major services and rates of rewards</a> under the SEIS scheme:&nbsp;

Application Process for SEIS Benefits&nbsp;

If you're a <a href="https://www.skydo.com/blog/guide-for-tech-exporters-on-global-compliance?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">service exporter</a> aiming to avail of benefits under the SEIS scheme, here's a breakdown of the application process:

4. Last Date For Filling Application&nbsp;

There’s no doubt that it is only onwards and upwards for Indian exporters from hereon. However, despite government initiatives, service exporters often lose a chunk of their earnings due to hefty bank and forex charges on international payments.

At <a href="https://www.skydo.com/">Skydo</a>, we're dedicated to helping exporters retain more of their hard-earned money. With a flat, minimal transaction fee and zero forex or hidden charges, Skydo ensures that receiving international payments is both cost-effective and seamless. Make the switch to <a href="https://www.skydo.com/">Skydo</a> today and feel the difference.

Service Export Essentials: A Comprehensive SEIS Guide th

large_Service Export Essentials: A Comprehensive SEIS Guide th

medium_Service Export Essentials: A Comprehensive SEIS Guide th

small_Service Export Essentials: A Comprehensive SEIS Guide th

thumbnail_Service Export Essentials: A Comprehensive SEIS Guide th

Planning any international travel or making an international purchase? You might be in for a surprise when it comes to taxes. Since the 2023 Union Budget, Tax Collection at Source (TCS) has become a crucial part of foreign remittances, impacting your tax obligations. If you’re sending money abroad or making outward money transfers, you could be facing a 20% tax under the <a href="https://www.skydo.com/blog/what-is-lrs?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Liberalised Remittance Scheme (LRS)</a>.

So next time you make a big foreign payment, expect to pay extra for TCS which is collected by the receiving bank or business. This blog will give a thorough understanding of TCS to help you navigate the complexities of cross-border payments.&nbsp;

What is TCS or tax on foreign remittance?

TCS (Tax Collected at Source) is a tax system in India where the seller collects a tax from the buyer on specific goods or services. This collected tax is then remitted to the Income Tax Department. One example is its application to transactions like sending money abroad under the Liberalised Remittance Scheme (LRS), which we'll be discussing in this blog. The primary purpose of TCS is to track large transactions and prevent tax evasion. The tax rate varies depending on the type of transaction and is added to the sale price.

Difference between TCS and TDS on foreign remittance

Given the lack of discussion on TCS, it's easy to mix it up with TDS. Let's clear the air and distinguish between the two.

TDS is the tax deducted by the payer while making certain payments from various sources. The most common instance is the TDS deducted by companies while paying salaries. TCS on the other hand, is the tax collected by the seller on the sale of certain goods. For example, when you buy alcoholic liquor, the price includes 1% TCS. In a nutshell, TDS is deducted by the payer while TCS is collected by the seller.&nbsp;

Let's dive deeper to understand everything about TCS on foreign remittance so that you can minimise your tax burden.

When is Tax Collected at Source (TCS) on Foreign Remittance applicable?

Tax collected at source (TCS) applies when you send over INR 7 lakhs abroad in a financial year. For instance, if you are buying foreign company stocks worth INR 9 lakhs, you need to pay 20% TCS on 2 lakh (9 lakhs - 7 lakhs).

Prior to 2023, TCS on foreign remittances under the LRS was 5%. However, in the 2023 budget, the new TCS rate was increased from<a href="https://pib.gov.in/PressReleasePage.aspx?PRID=1936105" target="_blank"> </a><a href="https://pib.gov.in/PressReleasePage.aspx?PRID=1936105" target="_blank">5% to 20% to boost</a> tax revenue and promote domestic spending.&nbsp;

The TCS on foreign remittance for medical and educational expenses stands at 5% if the amount remitted exceeds INR 7 lakh. However, if medical and educational expenses are funded by a financial institution, 0.5% TCS will be applicable.

The new TCS rates became applicable from October 1, 2023.

Here are the activities on which TCS will be applicable:&nbsp;

4. Medical and Educational Expenses&nbsp;

Here is the breakdown for new and old TCS rates on different types of foreign remittances. Note that the new TCS rates will be applicable from 1st September 2023:

Note that the new TCS rates will be applicable from 1st September 2023.&nbsp;

TCS rate on Foreign Remittance Post Budget 2023

Let's try to understand the applicability of TCS via certain examples.&nbsp; 

Consider buying stocks worth INR. 10 lakh in a US company. Now, since the amount remitted is greater than INR 7 lakhs, 20% TCS will be applicable.&nbsp;

As mentioned, TCS will be collected on the amount exceeding INR 7 lakhs, which in this case is INR 10 Lakhs - INR. 7 lakhs, which comes to INR 3 Lakhs. As mandated, 20% TCS will be collected from INR 3 Lakhs which equals to INR Rs. 60,000

So if you are investing INR 10 lakhs in US stocks, you are effectively investing only INR 9,40,000 as the rest INR 60,000 will be collected as TCS.&nbsp;

Now consider that you are sending the same INR 10 lakh to your sister studying in the US to pay her fee. Since this amount is being remitted for educational purposes, instead of 20%, 5% TCS will be applicable on the amount exceeding Rs. 7 lakh.&nbsp;

Therefore, the total taxable amount will stay at INR 3 lakhs (Rs. 10 Lakhs - Rs. 7 lakhs)

However this time, instead of 20%, 5% TCS will be collected bringing the total amount to INR 15,000 (5% of INR 3 lakhs).&nbsp;

However, note that if you are unable to prove that the money sent abroad is for educational or medical purposes, 20% will be applicable.

Let's say the total remittance for the year adds up to INR 8 lakh, and this amount is financed through an education loan taken from a bank approved by the Reserve Bank of India (RBI).&nbsp;

In this scenario, a TCS of 0.5% would be applicable only on the amount exceeding the threshold of INR 7 lakh.&nbsp;

So, in this case, TCS would be charged on INR 1 lakh (INR 8 lakh - INR 7 lakh) at a rate of 0.5%, which translates to INR 500 (0.5% of INR 1 lakh)

While Tax Collected at Source (TCS) is not completely avoidable, here are some strategies you can use to minimise its impact:

#1: Adjust the TCS Against Your Final Tax Liability

If you have no or low tax liability, you can get the TCS on foreign remittance as refund while filing your ITR. Make sure to keep the following documents handy:

For example, let's say you purchase an overseas tour program package worth Rs. 9 lakh. With the new regulations, a 20% Tax Collected at Source (TCS) applies to the amount exceeding Rs. 7 lakhs, totaling Rs. 40,000. If your total income tax liability for the year is INR 1 lakh, you can offset the Rs. 40,000 collected as TCS against your liability, reducing the total tax payable to Rs. 60,000.&nbsp;

Submitting an erroneous TCS return can lead to penalties as per Section 271H. The penalty for such errors can range from a minimum penalty of Rs. 10,000 to a maximum penalty of Rs. 1,00,000. It is important for tax collectors to ensure the accuracy of their TCS returns to avoid facing these penalties and maintain compliance with tax regulations.

Here’s a quick read to understand<a href="https://www.skydo.com/blog/how-to-file-itr-for-freelancer?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link" target="_blank"> </a><a href="https://www.skydo.com/blog/how-to-file-itr-for-freelancer?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link" target="_blank">how to file your income tax return</a>.

#2: Make Foreign Investments Through LLPs

If you're making foreign investments, consider doing so through a Limited Liability Partnership (LLP), as these entities are <a href="https://www.google.com/amp/s/www.livemint.com/money/personal-finance/loophole-in-indian-investment-rules-how-llps-can-help-ordinary-indians-invest-abroad-and-avoid-taxes/amp-11690477164919.html">exempt from TCS</a>. LLPs are permitted to invest abroad via two modes: overseas direct investments (ODI) and overseas portfolio investments (OPI). In case of overseas portfolio investments, the 20% TCS rate doesn’t apply.&nbsp;

TCS is not applicable to payments made through international credit cards while overseas. Therefore, you can make international credit card payments while travelling abroad to reduce TCS liability.

Visa and Mastercard are the two major payment networks that offer international credit cards through various Indian banks. Many banks like SBI Cards, HDFC Bank, ICICI Bank, and Axis Bank provide credit cards powered by Visa or Mastercard that can be used internationally.

Additionally, American Express (Amex) is another network offering international credit cards in India. You can find Amex cards through banks like IndusInd Bank and YES Bank.

Remember, if your total foreign remittances (excluding travel packages) are less than Rs 7 lakh in a year, TCS doesn't apply. Each family member can use their own Rs 7 lakh limit, so plan your foreign remittances accordingly.&nbsp;

Also, as we have mentioned, educational and medical expenses abroad are exempt from the 20% TCS rule. Keep the relevant documents handy to claim this benefit.

The introduction of TCS on foreign remittance addresses two crucial concerns: tax revenue and domestic spending. It's imperative to clarify that TCS isn't an additional tax but rather a mechanism ensuring financial transparency and compliance, particularly in cross-border payments.

Here at Skydo, we're committed to streamlining international payments while adhering to compliance and transparency standards. With Skydo, receive international payments swiftly, free from forex or conversion fees, in a secure and compliant manner.

Have further questions about TCS on foreign remittance? Join our global community, where our panel of experts assist you in navigating the ever-evolving regulatory landscape.

large_TCS on foreign remittance_th

medium_TCS on foreign remittance_th

small_TCS on foreign remittance_th

thumbnail_TCS on foreign remittance_th

TCS on foreign remittance_th

The Reserve Bank of India (RBI) serves as the supreme authority overseeing and regulating India's money market. RBI imposes penalties on banks and Non-Banking Financial Companies (NBFCs) for failing to comply with prescribed frameworks and guidelines, implementing necessary restrictions when required.

A significant recent operational restriction imposed by RBI was on Paytm Payments Bank. This blog aims to provide insights into the <a href="https://www.rbi.org.in/commonperson/English/scripts/FAQs.aspx?Id=3573#:~:text=After%20March%2015%2C%202024%2C%20you,Bank%20after%20March%2015%2C%202024">Paytm Payments Bank RBI ban</a> and explore strategies for ensuring better compliance moving forward. Join us to understand this important development and its implications.

It was all smooth sailing for Paytm and its subsidiary, Paytm Payments Banks, until January 31st when the RBI announced that it had placed major restrictions on the NBFC. The RBI was exercising its right under Section 35A of the Banking Regulation Act of 1949, to issue directives to banks and NBFCs to protect their customers’ financial interests.&nbsp;

On January 31, RBI imposed the following restrictions on Paytm Payments Bank, which it extended till March 15th.

Why Did RBI Put Restrictions on Paytm?&nbsp;

Here are the main reasons that led to RBI putting restrictions on Paytm and Paytm Payments Bank.

Under RBI’s guidelines for payment banks, they can not undertake lending activities. However, RBI identified that although Paytm Payments Bank does not lend to customers directly, it indirectly provides third-party <a href="https://www.niti.gov.in/sites/default/files/2023-02/DigitalBanking07202022_compressed.pdf">credit-dispensing products</a>.&nbsp;

One example is when you apply for loans from Paytm’s platform, they do not provide the loan directly but offer credit-dispensing products from top NBFCs.&nbsp;&nbsp;

Paytm owns 49% of Paytm Payments Bank, and the remaining 51% is owned by its founder and CEO, Vijay Shekhar Sharma. Although founders and parent entities can own a business, RBI requires the operations to be run independently by the company management to ensure they are aligned with customer interests.&nbsp;

RBI noted that although Paytm has maintained that the bank is run independently without any external influence, the governance has been highly influenced by Paytm and its CEO.&nbsp;

Thousands of bank accounts were identified to have been linked with a single PAN. RBI noted that if multiple fake accounts are created without the PAN holder's knowledge, the intention must be to use them for laundering money because it is difficult to identify the beneficial owner in such cases.&nbsp;

Furthermore, it drastically eroded the trust of users and seriously jeopardised the operational and security protocols needed for regulatory compliance.&nbsp;

Paytm and its founder and CEO Vijay Shekhar Sharma have announced that they are in frequent touch with RBI and holding talks to determine the next course of action to ensure the lifting of Paytm bank RBI ban. In an official response, Paytm announced that the ban would hurt its annual earnings by a staggering <a href="https://www.ndtv.com/india-news/paytm-paytm-news-explained-why-rbi-has-put-restrictions-on-paytm-payments-bank-4970845">₹300 crore to ₹500 crore</a>. Meanwhile, Paytm Payments Bank has paused its primary services, such as credit and deposit transactions, FASTag services, and onboarding of new customers.&nbsp;

Best Compliance Practices For Fintechs in India

The fintech segment in India has to comply with extensive regulatory and supervisory compliance requirements from various authorities such as the RBI and SEBI. Similar to Paytm, there are over <a href="https://www.cashfree.com/blog/fintech-companies-in-india/#:~:text=According%20to%20the%20reports3,amalgamation%20of%20finance%20and%20technology.">3,000 fintech firms in India.&nbsp;</a>

However, to ensure that they don’t experience the same restrictions as Paytm, here are some of the best compliance practices to consider.

Since the Paytm Payments bank, customers and merchants have been forced to look at alternatives. However, the platform or institution they choose must have ideal policies and frameworks to ensure seamless RBI compliance.&nbsp;

Similarly, with international payments, you need a platform that complies with RBI guidelines to ensure you receive payouts smoothly. Skydo is one such platform that facilitates international payments while staying true to all RBI regulations. Here’s how it works.

How Skydo Ensures Seamless RBI Compliance? 

Skydo ensures effective compliance through the following features and policies.

Skydo ensures effective compliance with industry regulations as it follows guidelines set by the Reserve Bank of India (RBI) under the OPGSP framework. RBI has set <a href="https://www.skydo.com/blog/pacb-circular-and-opgsp-update">guidelines</a> related to Online Payment Gateway Service Providers (OPGSPs) and their arrangements with Authorised Dealer (Category I) Banks.&nbsp;

Skydo constantly monitors the RBI framework to regulate its operations and ensure it follows the RBI’s OPGSP guidelines.&nbsp;

A <a href="https://www.skydo.com/blog/importance-of-fira-for-freelancers?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Foreign Inward Remittance Advice (FIRA)</a> is a document issued by Indian banks to Indian beneficiaries who receive foreign remittances into their bank accounts. Skydo offers Automated Digital FIRA, where the document is automatically generated immediately when you receive foreign funds in your virtual Skydo account. This saves time and ensures you are GST-compliant with every completed transaction.&nbsp;

Furthermore, when you execute an international transaction on Skydo, your <a href="https://www.skydo.com/blog/what-is-purpose-code-and-why-is-it-required?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">purpose codes</a> are automatically saved and seamlessly integrated into your invoices. This allows effective regulatory compliance, risk management, and transaction transparency.&nbsp;

For financial platforms and institutions, adequate KYC (Know Your Customers) and KYB (Know Your Business) processes are vital as penalties for flouting such processes by RBI are the most common.&nbsp;

<a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Skydo</a> has created detailed yet quick KYC and KYB processes to prevent money laundering, terrorist financing, and other illicit activities.

Skydo monitors every transaction you execute through your virtual currency account and ensures there are no unusual activities, to maintain a safe and trustworthy environment.&nbsp;

Creating an account and executing transactions leave a data trail about the sender and the receiver. Skydo ensures the safety of your money, data, and client/business information through top-grade encryption.&nbsp;

<a href="https://www.skydo.com/blog/why-skydo-is-your-trusted-international-payment-partner?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Skydo</a> keeps your data in a virtual safe, with an extra layer of security access. Furthermore, <a href="https://www.skydo.com/">Skydo</a> follows processes aligned with the new Data Protection Act to ensure your data is handled with the utmost care and in compliance with evolving regulations.

Financial Intelligence Unit - India (FIU-IND) is a national agency that receives, processes, analyses, and disseminates information relating to suspicious financial transactions. Skydo has registered with FIU-IND to report suspicious activity.

RBI has set guidelines and frameworks to protect customer data and money, and it should be the foremost priority of platforms and institutes to ensure their operations and processes comply with RBI guidelines.&nbsp;

For businesses, compliance helps in identifying and mitigating risks related to financial, operational, and reputational matters, safeguarding against potential losses and liabilities. It is crucial for fintechs or any other financial entities to adopt the best compliance practices to avoid regulatory scrutiny.&nbsp;

Hence, Skydo has prioritised developing policies and processes to ensure individuals and businesses onboard Skydo do not have to worry about any lapses in compliance for cross-border transactions.&nbsp;

When you sign up with Skydo, it handles your personal information carefully, strictly following its extensive Privacy Policy. Access to your data is limited to authorised personnel, ensuring its security. If you want a smoother and more compliant payment platform, visit <a href="https://www.skydo.com/">Skydo</a> today.&nbsp;

Addressing the Paytm Issue with RBI: Ensuring Compliance at Skydo th

large_Addressing the Paytm Issue with RBI: Ensuring Compliance at Skydo th

medium_Addressing the Paytm Issue with RBI: Ensuring Compliance at Skydo th

small_Addressing the Paytm Issue with RBI: Ensuring Compliance at Skydo th

thumbnail_Addressing the Paytm Issue with RBI: Ensuring Compliance at Skydo th

An RBI purpose code is a standardised, alphanumeric label that classifies the reason for a foreign inward remittance (e.g., P1401 salary, P0102 export realisation, P0802 software services). AD banks must capture and report it to the RBI for every incoming transfer under FEMA reporting.

Why the right RBI purpose code is critical (inward remittance)

Picking the correct RBI purpose code for inward remittance isn’t a formality; it directly affects compliance, speed of credit, and your documentation trail.

1) It’s a regulatory must-have (FEMA/RBI).
Authorised Dealer (AD) banks must capture and report every foreign inward transaction to RBI with a valid receipt (“P”) purpose code under FETERS. If the code is missing/wrong, banks can’t file accurate returns, triggering holds or rework.&nbsp;

2) It keeps your paperwork clean (FIRC/evidence).
The purpose you declare flows into your compliance evidence (e.g., FIRC details and audit trails). Declaring the accurate code up front helps your bank issue the right certificate without back-and-forth.&nbsp;

3) It prevents delays, manual reviews, and returns.
A vague or incorrect purpose (e.g., tagging a service payment as goods realisation) often triggers manual checks, queries, or even a return to sender until corrected.&nbsp;

4) It improves accounting clarity and BoP classification.
Purpose codes classify inflows (e.g., P01 goods exports, P08 computer &amp; information services, P10 other business services, P13 transfers, P14 income), allowing clean bookkeeping and accurate national statistics—another reason banks insist on precise coding.

5) It reduces compliance risk later.
If you repeatedly misclassify remittances, you create inconsistencies between invoices/contracts and RBI filings—raising the odds of additional questions or penalties under FEMA. Industry guidance stresses getting the code right at the remitter setup stage (sender’s bank/platform usually captures it) to avoid re-papering.&nbsp;

How to pick the correct code (step-by-step)

Find the right purpose code for inward remittance with Skydo

Our purpose code finder is your shortcut to identifying the correct purpose code for inward remittance and explaining when to use it. You can either search for the activity to find the relevant purpose code or directly look up the specific purpose code for a simple explanation of when to use it.&nbsp;

Please note that this tool doesn't contain the exhaustive purpose code list for inward remittance.&nbsp; For complete compliance and accuracy, it's always advisable to get in touch with your financial advisor for professional advice.

Personal vs. Business: Quick Selector for the Right Purpose Code

Personal / family inflows (individuals):

Business / freelance inflows (exporters, agencies, SaaS, consultants):

Common RBI Purpose Codes for Inward Remittance for Freelancers, Businesses, and Agencies

While there are over 150 RBI purpose codes for inward remittance, we break down below some of the commonly used ones especially for freelancers, businesses and agencies:

RBI Category:&nbsp;Computer &amp; Information Services

RBI Description:&nbsp;Software implementation/consultancy  (other than those covered in SOFTEX form)

When to use:&nbsp;This code signifies a foreign payment in exchange for software consultancy or implementation service, provided to a foreign client. It's important to note that P0802 applies specifically to software consultancy or implementation services that are not reported under the <a href="https://vjmglobal.com/fema/fema-fema/introduction-to-software-export-declaration-softex-form/?no_follow=true">SOFTEX form.</a> If your services fall under SOFTEX, a different code might be used.

RBI Description:&nbsp;Realisation of export bills (in respect of goods) sent on collection (full invoice value)

When to use:&nbsp;This code is used when an Indian company exports goods and receives payment for the full invoice value. Note that this purpose code is applicable only when the foreign client has received the shipment.

RBI Description:&nbsp;Advance receipts against export contracts (export of goods only)

When to Use:&nbsp;This is used when businesses receive advance payment against the contract of the goods to be exported. In other words, here the company receives payment for goods before they are shipped.

RBI category:&nbsp;Other Business services

RBI Description:&nbsp;Business and management consultancy and public relations services

When to Use:&nbsp;This code is applicable when an exporter receives payment against providing a combination of business expertise and/or public image management services to a foreign client.

RBI Category:&nbsp;Other Business services

RBI Description:&nbsp;Advertising, trade fair, market research and public opinion polling services

When to Use:&nbsp;This code is used when exporters receive a payment from a foreign client for providing  advertising, trade fair, market research or public opinion polling services.

RBI Description:&nbsp;Value of export bills negotiated/purchased/discounted etc. (covered under GR/PP/SOFTEX/EC copy of shipping bills etc.)

When to Use:&nbsp;P0101 is used when an Indian company exports goods and receives a foreign payment that is usually backed up by official export documentation like GR, PP, SOFTEX, or EC copy of shipping bills.

RBI Description:&nbsp;Goods sold under merchanting / Receipt against export leg of merchanting trade*

When to Use:&nbsp;This purpose code for inward remittance applies to situations where an Indian company acts as a middleman in an international trade transaction, but the goods themselves never physically enter India.

RBI category:&nbsp;Computer &amp; Information Services

RBI Description:&nbsp;Hardware consultancy

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

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

RBI Description:&nbsp;Off-site Software Exports

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

How and Where to Declare the RBI Purpose Code

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