HSN full form is Harmonised System of Nomenclature. It's a globally accepted uniform classification system that identifies and categorises goods for customs and GST. It helps freelancers and exporters receive payments from abroad without unnecessary delays.

HSN came into effect in 1988, developed by the <a href="https://www.wcoomd.org/">World Customs Organization (WCO)</a>, and is now used by over 200 countries, including India.&nbsp;

If you are not familiar with the term HSN and its meaning, let us break it down for you:&nbsp;&nbsp;

For Indian freelancers and exporters, HSN codes are used in GST filings, export invoices, and most importantly, t<a href="https://www.skydo.com/blog/importance-of-fira-for-freelancers">he documentation your client's bank needs to process your payment</a>.&nbsp;

HSN codes matter because they bring accuracy, consistency, and compliance to both taxation and trade. Here is what they do for your business:

Accurate taxation: HSN codes ensure the exact GST rate, or customs tariff, is applied to each product. By tying every item to a specific code, they automate and streamline tax calculations and remove the guesswork that leads to incorrect rates.

Global standardization: Maintained by the World Customs Organization, HSN codes let customs authorities and businesses across more than 200 countries speak the same language. This shared classification eliminates confusion and prevents delays during import and export.

Penalty and audit protection: Accurate classification keeps your business compliant with tax authorities and significantly reduces the risk of penalties, legal disputes, and audits that get triggered by incorrect reporting.

Streamlined compliance: HSN codes make filing returns far easier. Automated systems use them to map your sales, purchases, and input tax credits, so your GST returns are processed accurately and your ITC claims go through without friction.

Origin and History of the Harmonized System of Nomenclature&nbsp;

As global trade expanded rapidly after World War II, every country classified goods differently, which made customs procedures slow and inconsistent. To address this, the Customs Co-operation Council, now the World Customs Organization (WCO), was established in 1952. Its early standardization attempts, the <a href="https://www.wcoomd.org/en/topics/nomenclature/instrument-and-tools/hs_convention.aspx">Brussels Tariff Nomenclature and later the Customs Co-operation Council Nomenclature</a>, gave Europe and parts of the world a starting point but never achieved universal adoption.

The real shift began in 1970, when the WCO agreed that global trade needed a single, unified coding system. Preparatory work started in 1973 to merge the various existing classifications into one standard, a task that took 13 years of negotiation and drafting. The WCO Council formally adopted the HS Convention in June 1983, and the Harmonized System officially came into force on January 1, 1988, with 37 initial contracting parties.

Since then, the system has completely replaced older nomenclatures. Today it is used by over 200 countries and customs unions, covering more than 98% of all global merchandise trade. Its core structure has stayed consistent: a 6-digit code where the first two digits mark the chapter, the next two the heading, and the final two the subheading, with countries free to append additional digits for national or statistical needs. To keep pace with new technology and changing trade patterns, the WCO revises the system every five to six years, with the most recent major update in 2022 adding classifications for advanced technology, environmental monitoring, and health products.

Structure of an HSN Code: How to Read It?

In India, you need to use 8-digit HSN codes, where the first two digits represent the relevant HSN chapter, the next two are the heading, the following two are the subheading, and the last two digits are the customs tariffs.

Let us break down the digits of the HSN code 22021010&nbsp; for you:&nbsp;

The best part is that the HSN number speaks the same language everywhere, whether you're sending website designs to a startup in Berlin or software code to a company in New York. 

Your invoice looks professional, your payment gets processed without question in a systematic manner, and you avoid those dreaded "clarification needed" emails that delay your money.

HSN vs SAC Code: Which One Applies to You?

HSN codes apply if you export or trade physical goods, while SAC codes apply if you provide services. The simple test is what you are billing for: a product that ships gets an HSN code, a service that is delivered gets a SAC code.&nbsp;

A SAC (Services Accounting Code) is a unique 6-digit code used in India's GST system to classify services and apply the correct tax rate to them. It works exactly like an HSN code, but is strictly for services rather than physical goods. 

Every SAC code follows a standard 99XXXX format: the first two digits are always 99 to signal a service, the next two identify the broad service category, and the last two pinpoint the exact nature of the service. 

For example, 998314 covers IT design and development services, where 99 marks it as a service, 83 the professional and technical category, and 14 the specific IT service, taxed at 18% GST.

Freelancers and SaaS companies could get confused on when to use an HSN or SAC code. Here's a simple breakdown:

But you'll use HSN codes instead if you're shipping physical products - handmade jewellery, organic spices, or textile products.

When and Where to Add HSN/SAC Codes in Export Invoices

You must mention the HSN or SAC code in your export invoice in the following cases:

You are registered under the GST framework: Under GST invoice rules and format, suppliers are required to mandatorily display the HSN or SAC code of the goods or services supplied on a tax invoice.

You are claiming GST refunds on exports: For zero-rated supplies, this is non-negotiable for refund processing.

You are filing e-invoices: E-invoice compliance is mandatory for export transactions. The e-invoice system allows the declaration of export invoices as well as zero-rated supplies.

Your turnover exceeds Rs. 5 crore: Taxpayers must provide a 6-digit digital HSN code during tax calculation for outward supplies where the annual aggregate turnover is more than Rs. 5 crore.

It is also required in your shipping bills for customs clearance, your bank compliance documents (especially when your bank processes FIRA, eFIRC, and eBRC), and your GSTR-1 filing, where HSN and SAC codes must be entered. The GST portal does not auto-fill any of this for you, and missing it means your refund application sits in pending clarification limbo.

For smaller freelancers under Rs. 1.5 crore turnover, there is an exemption: small taxpayers with an annual turnover below Rs. 1.5 crore are not required to mention the HSN code in their invoices and returns. But if you are exporting services and want GST refunds, you will likely need these codes anyway for your zero-rated supply claims.

On the penalty side, a penalty of Rs. 50,000 (Rs. 25,000 under CGST and Rs. 25,000 under SGST) can be levied for not mentioning HSN or SAC codes, or wrongly mentioning them, in GST returns and invoices used for taxation purposes. Missing or using an incorrect code can also cause rejections at customs, hold up your client's payment processing, and trigger those dreaded document discrepancy emails from banks.

Here is the practical placement guide that matters for getting your payments processed. Mention the code next to each line item in your invoice, which you can do by clicking the Plus sign at the line level. Include it in your shipping bills and customs declarations, where all eight digits of the HSN code are mandatory for exports and imports. Then ensure the same code is used across your GST returns (a dealer or service provider must provide an HSN or SAC-wise summary of sales in GSTR-1), your e-invoices where applicable (you can import HSN-wise details from e-invoices into GSTR-1), and your bank documents for foreign remittance documentation. A mismatch can result in refund hold-ups or compliance notices.

Here is a real-world example. Suppose you are billing a client for website development. In your export invoice, you will show:

Line 1: Website Development Services, SAC 998314, Rs. 1,00,000

This same SAC code, 998314, must appear in your GSTR-1 Table 12 (the HSN-wise summary), your shipping bill if it is a service export, any e-invoice you generate, and your bank documents when claiming the export refund. Taxpayers will see alert messages if there is a mismatch between the values reported in Table 12 and other tables of GSTR-1.

Beginning January 2025, the third phase of HSN validation became effective, further emphasising precise HSN code reporting for businesses. The system now auto-validates everything, so those minor inconsistencies that used to slip through? Not anymore.

How to Find the Right HSN or SAC Code for Your Business

Start by typing a simple description of what you're selling. The revamped Search HSN tool algorithm is based on Artificial Intelligence and Machine Learning linked with the e-invoice declaration database, so it learns from other taxpayers' use.

Here are some commonly used codes for Indian exporters that play a crucial role in your tax invoicing process:

Most freelancers fall under 998313 (IT consulting) or 998314 (software development). If you're doing social media management, SEO, or digital marketing campaigns, 998365 is your go-to for advertising services.

Don't try to fit everything under one SAC code; that's how you'll end up with GST notices asking for "clarification."

The GST portal's search is quite intelligent now. Type "web design" and it'll suggest 998314. Type "social media marketing" and you'll get 998365.&nbsp;

HSN Code and GST: Turnover-Based Requirements in India

Under GST, how many digits of the HSN code you must report on your GSTR-1 depends on your aggregate annual turnover (AATO). The larger your turnover, the more detailed your classification has to be. These codes are declared in Table 12 of the GSTR-1 return, which captures a summary of all the HSN codes used during the period.

This requirement was rolled out in stages rather than all at once. When HSN reporting first began in April 2022, smaller businesses only had to report 2-digit codes and larger ones 4-digit codes. Over the following phases, the required level of detail increased until the current thresholds came into effect.

A significant change arrived with the return period starting May 2025. Manual entry of HSN codes is no longer permitted. Instead, you must select the code from a dropdown list on the GST portal, after which the official description auto-populates and cannot be edited. This shift was designed to reduce classification errors and keep reporting consistent across all taxpayers.

Here are the mistakes that'll cost you time, money, and sleep:

Leaving the HSN/SAC field blank, especially in zero-rated export invoices&nbsp;

No, a GST bill will not be valid without an HSN code for the tax administration. This is non-negotiable for exports. <a href="https://www.skydo.com/blog/how-does-gst-affect-foreign-payments">Freelancers can lose weeks</a> chasing down stuck payments because they left this field empty.

Using incorrect codes based on guesswork or copying other businesses&nbsp;

Just because your friend uses SAC 998313 for "web development" doesn't mean it's right for your mobile app development work (which should be 998314). The GST rates portal now auto-validates everything, so guesswork gets caught instantly.

Using HSN when you're exporting services (should use SAC)&nbsp;

HSN codes are used to classify goods, whereas SAC codes are used to classify services. Using SAC codes to export IT services, digital marketing, or any other service. HSN is only for physical goods.

Not updating codes when your product/service offering changes&nbsp;

I started as a freelance writer (SAC 998319 - other professional services) but am now developing websites. Update to SAC 998314. The system tracks everything, and inconsistencies trigger compliance notices.

Simplify Export Payments with Skydo&nbsp;

Getting paid for your exports shouldn't cost you thousands in bank fees and poor exchange rates. Banks charge 1.2% hidden FX margins, <a href="https://www.skydo.com/blog/paypal-in-india-charges-review-alternatives">paypal</a> takes 8.7%, and getting FIRA certificates is a nightmare.

This is where you need a platform like Skydo.&nbsp;

On a $7,000 payment, you'll receive ₹5,96,680 vs ₹5,89,269 from banks. That's ₹7,400+ more in your pocket.

Whether you're freelancing, running an agency, or selling on Amazon Global, keep more of what you earn.

<a href="https://www.skydo.com/">Get started with Skydo</a>!

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As an Indian importer or international trader, you may have occasionally spotted the mysterious purpose code "1501" on your bank statement. Purpose code 1501 primarily deals with refunds and rebates associated with imports. In this blog post, we will discuss this purpose of code, explain its importance and look at a few common scenarios where code P1501 is used.

Before we dive into the details of purpose code 1501, here's a brief snapshot of Purpose Code 1501:

With the Reserve Bank of India (RBI) releasing its <a href="https://kpmg.com/us/en/taxnewsflash/news/2025/04/india-revised-draft-export-import-regulations.html">revised draft </a>of the 'Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2025' on April 4, it’s crucial for businesses to stay informed about these changes to ensure ongoing compliance and avoid surprises down the line."

Purpose Code 1501 in India specifically denotes transactions related to refunds or rebates received on account of imports. This code signifies that you've received money back from foreign entities associated with goods or services previously imported into India.&nbsp;For example, imagine you run a business in India that imports electronic components from China, assembles them locally, and sells the final product. If one of the components you imported turns out to be faulty and you file a complaint, the supplier may issue a refund for the defective part. This refund would need to be categorized under Purpose Code P1501.

Why is Understanding Purpose Code 1501 Important?

Note that the purpose code 1501 is used specifically for inward remittances (receiving refunds) related to imports. For <a href="https://www.skydo.com/blog/outward-remittance">outward remittance</a>, i.e for sending refund abroad, purpose code S1501 is used.

Claiming Import Duty Refund Using Purpose Code 1501

Imagine you're an importer in India and you've just received a shipment of goods from overseas. Let's say you paid some import duty on these items. Now, for some reason, maybe a few items were damaged, or you were overcharged, you're due a refund on that duty. Here's a simplified look at how that refund might come back to you and where Purpose Code P1501 plays a role:

So, in simple terms, if you get an import duty refund that comes from a company or entity outside of India, your bank will use Purpose Code P1501 to categorize this money coming into your account. It's like a special tag that helps everyone understand the reason for the transaction.

How to Select the Right Purpose Code for Your Transaction?

Choosing the correct purpose code is crucial to ensure smooth and compliant transactions, especially when dealing with international payments. If you're receiving funds from abroad related to imports, such as refunds, rebates, or adjustments, Purpose Code 1501 should be used.

Before finalizing any transaction, carefully review the nature of the payment to confirm it accurately reflects the purpose of the funds. For instance, if the payment is not related to an import-related refund or rebate (e.g., a personal remittance from abroad), a different purpose code would be applicable.

To avoid discrepancies or delays, ensure you have all the necessary documentation to support the use of Purpose Code 1501. This may include:

If you're uncertain about the appropriate purpose code for your transaction, consult your bank or a financial expert. Using the wrong code can lead to delays in processing, scrutiny from regulatory authorities, and even potential penalties.

By carefully selecting the correct purpose code, you can ensure smooth and compliant transactions while maintaining accurate financial records.

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Are you overwhelmed by the paperwork in your export or small business? If terms like proforma invoice leave you puzzled, you're not alone. Proforma invoices are one of those documents that can cause confusion, yet they play a crucial role in international trade and business transactions. In this conversational guide, we'll demystify the proforma invoice – explaining what it is, when to use it (especially in exports), how it differs from a regular invoice, and how to create one. We'll also sprinkle in tips and best practices so you can confidently use proforma invoices in your business. Let's dive in!

A proforma invoice is essentially a preliminary invoice or quote presented in the format of an invoice, issued before a sale is finalized.&nbsp;&nbsp;In other words, it's a document that outlines the details of a potential sale – the goods or services, quantities, prices, delivery terms, etc. – but is not an actual demand for payment. Think of it as a good-faith estimate or a "confirmed quote": it shows the buyer what the final sale would look like, so both sides can agree on the details before the real invoice and payment occur.&nbsp;

Importantly, a proforma invoice looks like a regular invoice and contains much of the same information, but it usually has "Proforma Invoice" clearly labeled on it. It is not legally binding and typically does not include an invoice number or payment due date like a final invoice would&nbsp;Because it’s not a final bill, the buyer is not obliged to pay upon receiving a proforma invoice – the actual commercial invoice will come later for payment.&nbsp;

So why issue a document that isn’t for payment? In many cases, buyers (especially in international transactions) require a proforma invoice to proceed with certain steps. For example, in export deals, the buyer might need a proforma invoice to apply for an import license, arrange a letter of credit with their bank, or organize pre-shipment inspections.&nbsp;&nbsp;Customs authorities may also use the proforma invoice to estimate duties and taxes before the final invoice is available.&nbsp;&nbsp;In short, a proforma invoice provides all key details of a sale in advance, ensuring everyone is on the same page about what’s being sold and on what terms.

Why and When Should You Use a Proforma Invoice?

You might be wondering: When do I actually need a proforma invoice? Here are some common scenarios and reasons when using a proforma invoice makes sense:

In summary, use a proforma invoice any time you need to document a sale in advance of the final transaction – whether to satisfy regulations, give the customer a comfort level, or just keep everyone informed. It’s a helpful step between a casual quote and the final billing.

Proforma Invoice vs. Commercial Invoice: What's the Difference?

It’s easy to confuse a proforma invoice with a regular invoice (often called a commercial invoice in export contexts). Both share a similar layout and information, but they serve very different purposes. Here are the key differences:

In short, the proforma invoice is for estimation and agreement, while the commercial invoice is for payment and official records. Both are important in export transactions: you use the proforma to get things rolling (and possibly meet import requirements), and the commercial invoice to close the sale and get paid.

(Fun fact: The term "pro forma" literally means "for form" or "as a formality" in Latin – which hints that a proforma invoice is more of a formality to get paperwork in order ahead of the real deal.)

How to Create a Proforma Invoice (Format &amp; Contents)

One question many businesses have is: What should a proforma invoice include? There is no strict, standardized format mandated by law for proforma invoices.&nbsp;&nbsp;but to serve its purpose well, it should contain essentially all the information that a normal invoice would – minus the invoice ID and payment due date (since it's not for immediate payment). Here’s a handy checklist of details you should include in your proforma invoice:

In summary, a proforma invoice should contain essentially all the information that a normal invoice would, so that the buyer (and any third parties like banks or customs) get a complete picture of the impending sale.&nbsp;&nbsp;The more complete and accurate your proforma invoice, the smoother the next steps will be. Missing or incorrect elements on your proforma invoice can cause delays – for example, at customs if they can't determine what’s in the shipment or its value.&nbsp;&nbsp;So, double-check all details before sending it off.

To bring it to life, imagine this scenario – You’re a freelance designer in India and have an overseas client interested in a project. The client wants to know the exact cost breakdown before confirming. You can issue a proforma invoice detailing the services you'll provide: e.g., "Design of 10 webpage layouts", the hours estimated, the rate per hour, any software licensing fees, and applicable taxes, all summed up to a total price. This proforma invoice goes to the client before you do the work, giving them a clear picture of the commitment. The client reviews it, maybe negotiates a tweak or two, and once they’re satisfied, they give you the go-ahead. Only after delivering the work will you send a final invoice for payment. In this example, the proforma invoice helped both you and the client agree on the project scope and cost upfront, without any money actually changing hands initially – a practical use case echoed by many professionals

Here are two sample proforma invoices to give you an idea about the presentation of the above details:

(The above image is a sample for illustration; proforma invoices can vary in design but should contain all the essential components listed.)

You can design your own proforma invoice in Word/Excel or use an export documentation software. What matters most is that all the necessary information is presented clearly and truthfully, as this document will set the expectations for the entire transaction. Remember, any changes after issuing the proforma invoice should be communicated and agreed upon; ideally, a revised proforma would be issued if significant terms change. Once the buyer agrees to the proforma invoice, you’re ready to move ahead – produce the goods, arrange shipment, and later issue the formal commercial invoice matching the agreed terms.

Best Practices for Using Proforma Invoices

To make the most of proforma invoices and avoid common pitfalls, keep these best practices in mind:

By following these practices, you'll use proforma invoices effectively as a tool to win customer confidence and streamline your sales – without tripping up on paperwork errors.

A proforma invoice can be your best friend in international business. It sets the stage for smooth transactions by clarifying all details upfront, allowing buyers and sellers to proceed with confidence. Whether you're an exporter sending machine parts overseas, a small business owner offering services, or an accountant ensuring everything is documented, mastering the proforma invoice means fewer surprises and smoother sales.

Finally, once you have your invoicing in order, it's wise to think about how you'll receive those international payments. High transfer fees and currency conversions can eat into your profits. This is where a platform like Skydo can help. Skydo offers Indian exporters and businesses a way to save on international transfers and manage global payments effortlessly – for example, with zero forex margins and the ability to receive payments from 150+ countries. It’s a subtle but powerful boost to your export process, ensuring that after all the paperwork (like proforma and commercial invoices) is done, your money arrives quickly and cost-effectively.

If you’re looking to streamline your export finances, consider giving Skydo a try (it might just save you time and money in the long run!).

Proforma Invoice: Meaning, Format And Template

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The W-8BEN is an IRS form that certifies you are not a US person and establishes your eligibility for tax treaty benefits. Without it, US law requires your payer to withhold 30% of every payment and remit it to the IRS.&nbsp;You can recover it by filing Form 1040-NR, but the process could take months.

By submitting the form, you claim benefits under the India-US <a href="https://www.skydo.com/blog/minimise-tds-foreign-payments">Double Taxation Avoidance Agreement (DTAA)</a>, which reduces the 30% withholding to 0% for most service income such as IT, design, consulting, and similar work.

<a href="https://www.irs.gov/pub/irs-pdf/fw8ben.pdf">Download the latest W-8BEN Form here</a>

The W-8BEN-E is the entity equivalent of W-8BEN. If you receive US payments under a registered business entity rather than your personal name, this is the form you submit instead.&nbsp;Like W-8BEN, it certifies that your entity is not a US taxpayer and claims benefits under the India-US DTAA, reducing the 30% withholding to 0% for most cases.

<a href="https://www.irs.gov/pub/irs-pdf/fw8bene.pdf">Download the latest W-8BEN-E Form here</a>

The W-8BEN is for non-US individuals who earn income from a US source. If you are an Indian freelancer or consultant receiving payment from a US client, platform, or employer in your personal name, you need to fill this form.

It covers income types like fees for services, interest, dividends, royalties, and rents. In practice, for most Indian freelancers, the trigger is straightforward: if a US client or platform is paying you and asks you to fill out a tax form, this is the one.

The form does two things. It confirms to the US payer that you are not a US resident for tax purposes, and it lets you claim any benefits available under the tax treaty between India and the US, which can reduce the withholding tax applied to your payments.

W-8BEN vs. W-8BEN-E Form: Key Differences&nbsp;for Indian Freelancers and Businesses

Both forms do the same job, certifying your foreign status and claiming treaty benefits, but they are designed for different types of payees.

W-8BEN is for individuals. It is one page and covers freelancers, consultants, contractors, and anyone receiving US income in their own name. W-8BEN-E is for registered business entities such as Private Limited companies, LLPs, and partnerships. This is a longer form and is eight pages long.

The W-8BEN form serves three purposes: it certifies your foreign status to the IRS, it establishes your eligibility for treaty benefits, and it gives your client the basis to release your payment without deductions.&nbsp;

Reduces your tax deduction: Under the India-US DTAA, the 30% withholding reduces to 0% for most service income. Without the form, your client has no choice but to deduct at the full rate.

Prevents double taxation: Your income is already taxable in India. The W-8 form ensures the US does not also tax it.

Unblocks your payment: Most US clients and platforms will not release payment until a valid form is on file. Submitting it upfront prevents delays.

How to Fill W-8BEN Form in India: A Step-by-Step Guide

Step 1: Enter your personal details (Part I, Lines 1 to 5)

Line 1 and 2: Enter your full legal name and write India as your country of citizenship.

Line 3: Your permanent residential address in India.&nbsp;

Line 4: Fill this only if your mailing address is different from Line 3.

Line 5: Your US taxpayer identification number (SSN or ITIN). Leave blank if you do not have one. Most Indian freelancers will not have either.

Step 2: Enter your tax identification number (Part I, Line 6)

Line 6a: Your Indian PAN number. This is your Foreign Tax Identification Number and is mandatory if you are claiming treaty benefits.

Line 6b: Leave this unchecked. India issues PAN numbers, so the FTIN is legally required for Indian residents.

Line 8: Enter your DOB in DD/MM/YYYY format. This must match your official documents.

Step 3: Claim treaty benefits (Part II, Lines 9 and 10)

Line 9: Write India. This confirms you are a tax resident of India and are claiming benefits under the India-US DTAA.

Line 10: Cite Article 15(1) of the India-US DTAA. Write: "Claiming benefits under Article 15(1) of the India-US tax treaty. Rate of withholding: 0%. Income from independent personal services." This applies if you are providing IT, design, consulting, or similar services and do not have a fixed base or office in the US.

Read the certification statement. Sign, print your name, add the date in MM-DD-YYYY format, and write Individual as your capacity.

To illustrate the benefit: Priya is a freelance graphic designer in Mumbai earning $50,000 (about ₹40 lakh) from U.S. clients annually. Without a treaty, $15,000 would be withheld as tax (30%). By submitting W-8BEN citing Article 15, Priya’s U.S. clients withhold 0%. She thus saves ₹12 lakh in taxes each year, only paying applicable taxes in India. This shows how crucial the form is for your bottom line!

How to Fill W-8BEN-E Form:&nbsp;A Step-by-Step Guide for Indian Businesses

Step 1: Enter your entity details (Part I, Lines 1 to 9)

Line 1: Full legal name of your company exactly as it appears on your registration documents.

Line 2: Country where your company is registered. For Indian companies, this is India.

Line 3: Fill only if the payment is received by a subsidiary or disregarded entity. Most companies leave this blank.

Line 4: Your entity classification for US tax purposes. For most Indian companies, select Corporation.

Line 5: Your FATCA classification. Most Indian service companies should select Active NFFE (Non-Financial Foreign Entity).

Line 6: Your company's registered business address. P.O. boxes are not accepted.

Line 7: Fill only if your mailing address differs from Line 6.

Line 8: Your US taxpayer identification number. Leave blank unless your company has a US EIN.

Line 9a: GIIN (Global Intermediary Identification Number). Applies to financial institutions only. Leave blank.

Line 9b: Your company's Indian PAN number. This is your Foreign Tax Identification Number.

Line 9c: Leave unchecked. India issues PAN numbers, so the FTIN is legally required for Indian companies.

Step II: Disregarded Entity or Branch Receiving Payment

This part is usually skipped by Indian businesses that are simply paid directly. It’s only relevant if the payment is going to a branch that isn’t the main entity. Most can ignore Part II entirely

This is crucial for reducing withholding under the treaty as per the<a href="https://www.irs.gov/pub/irs-trty/india.pdf"> India-US tax convention</a>, akin to Part II on the individual form.

First, in the line just above 14, it asks “Is the entity a resident for tax purposes in any country?” – You will enter “Yes – India” typically in the line that asks for country of residence (exact form layouts vary). Some versions have a checkbox and a blank to write the country. Ensure you indicate India clearly as your country of tax residence.

Line 14: Eligible for treaty benefits? – There’s usually a checkbox to certify that yes, the entity is a resident of the country (India) and eligible for the benefits of the treaty. Check that. You might have to write “India” in a space provided as well.

Line 15: This is where you identify the tax treaty and article. You will state something like: “India – U.S. Income Tax Treaty, Article 7, Business Profits – 0% withholding rate.”.Let’s break that down: Article 7 (Business Profits) of the India-U.S. treaty is the relevant one for most companies providing services. It says that business profits of an Indian enterprise are only taxable in India unless the enterprise has a permanent establishment (PE) in the U.S. If you have no PE (no office or branch in the U.S.), the U.S. shouldn’t tax your business profits. So you claim exemption from withholding under Article 7.You can write on line 15 something like: “The entity is claiming the benefits of the India-U.S. tax treaty, Article 7(1), to claim a 0% rate of withholding on business profits. The entity has no permanent establishment in the U.S.” This makes it clear.

Line 16: Some forms have a line 16 for “Specific conditions” – you could use that to add info like “Our company is an Active NFFE service provider, and per Article 7 income is taxable only in India.” But it’s optional if you’ve explained in line 15.

These are various certifications for different entity types (financial institutions, governments, nonprofits, etc.). The good news is that if you are a standard business entity (exporting services, software, etc.), you often can skip a lot of these parts. The W-8BEN-E form is designed to cover everything from banks to tax-exempt orgs. For a typical private limited/LLP providing services:

(Note: On the form, the certification is usually the last section, sometimes labelled Part XXX or simply the signature block at the end.)

That’s it. While the W-8BEN-E looks long, most Indian businesses only fill 2-3 pages of it; the rest can be left blank or marked not applicable. Always double-check the instructions if in doubt – but the above covers the usual case for Indian entities.

ABC Web Solutions Pvt Ltd in Bangalore earns $100,000 (₹83 lakh) from U.S. clients. Without a W-8BEN-E, each client would withhold $30,000 total (30%). By claiming treaty benefits with W-8BEN-E under Article 7, 0% is withheld in the U.S. ABC only pays tax in India on that income. This saves them roughly ₹25 lakh in taxes annually that would otherwise have been stuck in the U.S.

When and Where to Submit W-8BEN &amp; W-8BEN-E Form

You do not send either W-8BEN or W-8BEN-E to the IRS. You submit it directly to your US client or the platform paying you, this is called the withholding agent. This could be a direct client, or a platform like Upwork, PayPal, or Payoneer.

For example, on Upwork, go to Manage Finances, then Tax Information, and complete the form digitally. You do not need to upload a PDF, Upwork handles it within the platform.

Once the form is submitted, it is valid for three calendar years after the year it was signed. You must submit a new form if any of your details change, such as your address or business structure.

What are the Common Mistakes to Avoid while filling W-8Ben Form

Using the wrong form: Individuals must use W-8BEN and registered entities must use W-8BEN-E. Using the wrong one creates a mismatch and your form will be rejected.

Leaving PAN blank: Without a Foreign Tax Identification Number, your treaty benefit claim may be rejected. Enter your PAN on Line 6a for W-8BEN or Line 9b for W-8BEN-E.

Skipping Part II or Part III: Filling out Part I alone only certifies your foreign status. Without the treaty claim in Part II, the 30% withholding still applies. Always complete the treaty section with the correct article and rate.

Unsigned or undated form: An unsigned form is invalid and your payer cannot rely on it. Sign, date, and fill in the capacity field before submitting.

Outdated form version: Payers reject old versions. Always download the latest version from irs.gov before each submission.

Submitting to the IRS: The IRS is not the recipient. Submit the form to your client, platform, or employer directly.

What If Tax Has Already Been Withheld Before Submitting W-8BEN?

If your US payer withheld 30% before you submitted your W-8BEN, the money is not lost. You can recover it by filing Form 1040-NR (US Nonresident Alien Income Tax Return) with the IRS for the year it was withheld. To file, you need an ITIN (Individual Taxpayer Identification Number). If you do not have one, apply using Form W-7, which you can submit alongside your 1040-NR.

The process requires some paperwork. Get the 1042-S form from your payer, which is the document they use to report how much they withheld on your behalf. Then file Form 1040-NR reporting your US-source income and claiming the applicable treaty benefit. The IRS will calculate the refund and return the difference between what was withheld and what was actually owed.

The filing deadline is April 15 if your income had US tax withholding, or June 15 otherwise.&nbsp;

<a href="https://www.irs.gov/pub/irs-pdf/f1040nr.pdf">Download the 1040-NR form here</a>

Filing your W-8BEN correctly means your US clients no longer withhold tax. But getting that money into India compliantly is a separate challenge: bank fees, forex markups, and compliance paperwork like <a href="https://www.skydo.com/blog/importance-of-fira-for-freelancers">e-FIRA</a> and <a href="https://www.skydo.com/blog/rbi_purpose_code_for_inward_remittance">purpose codes</a> all add friction.

Skydo gives Indian freelancers and exporters a <a href="https://www.skydo.com/blog/virtual-account-numbers">virtual USD account </a>to receive US payments at live forex rates with zero hidden charges. Your e-FIRA is generated automatically, purpose codes are handled, and your payment lands in INR without any of the back-and-forth with your bank.

For a full&nbsp;guide on receiving <a href="https://www.skydo.com/blog/how-to-receive-international-payments-in-india">US payments compliantly into India,</a> see our blog on how to receive money from USA to India.

How to Fill W-8BEN and W-8BEN-E Forms: A Guide for Indian Freelancers & Businesses

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When was the last time you couldn’t buy something just because you forgot your wallet at home? Or had to rush to the bank first thing in the morning to send money home? Those days are quickly fading with digital payments in India, which reached<a href="https://pib.gov.in/PressReleasePage.aspx?PRID=2110405"> 18,000</a> crores in transaction volume in January 2025. With so much money moving digitally, tracking each transaction becomes crucial. That’s where UTR numbers come in.

These unique codes are like digital fingerprints of your transactions. It helps you and your bank to trace every rupee you send or receive. In this blog post, we’ll understand the meaning of UTR numbers, their format in NEFT, RTGS, and GPay, and why they matter for anyone using digital payments in India.

The full form of UTR Number is Unique Transaction Reference Number. It is a special code for every digital money transfer in the Indian financial system. Think of it as a tracking number for your transaction, similar to a courier package tracking to know its location during transit. You can find the UTR Number for a specific transaction in your bank statement, banking, and UPI app. More on this later.

The main purpose of a UTR number is to help banks and you keep track of your transactions. If you ever need to check the status of a payment or resolve an issue, a UTR number is what you’ll need.

UTR numbers are used in several payment systems in India, including NEFT, RTGS, and UPI. We will cover the UTR format in each of these systems in a while

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