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 has received the in-principle Payment Aggregator – Cross Border (PA-CB) approval from the Reserve Bank of India. This approval indicates that Skydo meets the regulatory requirements set by the RBI to operate as a payment aggregator for cross-border transactions. It covers key aspects such as transaction security, fund flow management, data protection, and user grievance redressal. For users, this means that Skydo’s processes align with RBI’s standards for safety, transparency, and compliance in handling international payments.

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

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

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

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

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

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

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

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

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

Find the right purpose code for inward remittance with Skydo

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

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

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

Personal / family inflows (individuals):

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

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

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

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

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

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

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

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

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

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

RBI category:&nbsp;Other Business services

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

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

RBI Category:&nbsp;Other Business services

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

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

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

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

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

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

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

RBI Description:&nbsp;Hardware consultancy

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

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

RBI Description:&nbsp;Off-site Software Exports

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

How and Where to Declare the RBI Purpose Code

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

Most international transfers require the sender to enter a purpose when initiating the payment.

(Example: HDFC Bank’s wire transfer form from the US specifically asks for the purpose of remittance and provides a dropdown of RBI-approved codes.)

2. If the bank asks you (as the recipient) later

Sometimes, the bank receiving the funds will seek additional confirmation from you. In this case:

Banks may ask for basic proof to ensure your RBI purpose code for inward remittance matches the transaction. Here’s what’s typically needed:

Tip: Make sure your invoice or declaration clearly matches the selected purpose code, as it reduces bank queries and speeds up credit.

What Happens If You Use the Wrong RBI Purpose Code?

Using the wrong RBI purpose code for inward remittance can create more problems than most exporters, freelancers, or individuals expect. Because banks are required to match the declared purpose with supporting documents and report it to RBI under FEMA, any mismatch immediately slows things down.

Likely outcomes of an incorrect purpose code

Always share the correct purpose code with your payer before the transfer starts. Many international platforms ask the sender to select the code at setup, so confirming it upfront avoids mismatches and saves you from unnecessary compliance hassles.

Decoding RBI Purpose Code: Essential Guide

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Picture this: you're running a successful export business, orders are flowing in, and everything seems smooth until you realise your invoice management system is no longer compliant.&nbsp;

India's GST framework now mandates e-invoicing for businesses above certain turnover thresholds - and if your annual aggregate turnover exceeds ₹5 crore, you must generate e-invoices for all B2B transactions and exports. Not generating valid e-invoices can lead to non-compliance, penalties, and delayed input credits.&nbsp;

This guide explains how e-invoicing applies to exporters, outlines the necessary steps, and provides guidance on automating the entire process.&nbsp;

E-Invoicing involves uploading your invoice details to a government portal, which provides you with a unique ID number and a QR code to verify the authenticity of your invoice.

You create invoices the same way you always have, using your accounting software or billing system. The difference is that now you need to send the invoice data to the <a href="https://einvoice5.gst.gov.in/index">Invoice Registration Portal (IRP)</a> for verification.&nbsp;

Any GST-registered business with an annual turnover above ₹5 crore must generate e-invoices for B2B transactions. This includes all export transactions, whether you're selling goods or services to customers outside India.

All business-to-business invoices for both goods and services. If you're exporting anything from software to steel, from consulting services to consumer products, electronic invoicing applies.