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Importance of FIRA for Freelancers

Importance of FIRA for Freelancers
sukanya
Sukanya17 February 2024

If you're serving clients abroad, chances are you have heard of Foreign Inward Remittance Advice (FIRA) or Foreign Inward Remittance Certificate (FIRC). 

This blog will help you understand everything about Foreign Inward Remittance Advice (FIRA) and why it is one of the most important compliance documents for freelancers receiving foreign funds.

What Is a FIRC Certificate/FIRA? 

A Foreign Inward Remittance Advice (FIRA), also called the Foreign Inward Remittance Certificate (FIRC), is a document issued by Indian banks to Indian beneficiaries who receive foreign remittances into their bank accounts. It serves as evidence that the beneficiary has received foreign funds

Importance of FIRA and documents needed for FIRA

The FIRA document contains details such as the name and address of the beneficiary, the remitter's details, the amount remitted, the purpose of remittance, the currency in which the remittance was made, the date of remittance, and the name of the bank through which the remittance was received.

Why FIRA Matters

1. To Ensure Compliance

Failure to obtain a FIRA can lead to monetary loss as you will have to pay GST on the export income received in India. However, you may face penalties for non-compliance with foreign exchange regulations at the time of audits if proper documentation, such as FIRA, is not maintained. 

2. Acts as proof of income

Suppose you are looking for a loan from a financial institution. In that case, the institution asks for proof of income that serves as the reference point for the institution to either accept or reject the loan application. Here, you can submit FIRA as proof of income. 

Furthermore, FIRA can also be used for VISA applications or anywhere as proof of income. 

Juhi Shah, a seasoned Chartered Accounting professional states, “FIRA plays a crucial role in establishing financial credibility and stability, particularly in cross-border transactions. These certificates serve as verifiable proof of income from international sources, bolstering confidence among lenders, investors, and immigration authorities”

3. Simplified Tax Reporting.

By providing FIRCs as supporting documentation, taxpayers demonstrate their commitment to compliance and reduce the risk of penalties or legal consequences for underreporting income.

Additionally, you can claim tax benefits or exemptions under the Double Taxation Avoidance Agreements (DTAA).

Ravi Mamodiya, a tax advisor highlighted the potential financial and legal implications of ignoring FIRAs, “Ignoring FIRCs may result in inaccurate tax reporting, leading to penalties, fines, and potential legal actions by tax authorities. Additionally, non-compliance with tax laws erodes trust with regulatory agencies and may tarnish your reputation as a taxpayer. Hence, it is important to maintain FIRAs.” 

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