New FEMA rules for foreign payments: what freelancers need to know
Freelancers, consultants and small businesses receiving payments from overseas clients have to follow a new reporting compliance procedure under the Reserve Bank of India's (RBI) foreign exchange rules. These rules, effective 1 October, apply to all professionals exporting services, such as content writers, digital marketers, designers, and any freelancers taking on gigs on global freelance marketplaces like Fiverr, Upwork, etc.
The Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 require service exporters to submit an export declaration form (EDF) to their authorised dealer bank. The form records details of services exported and payments due from overseas clients.
Earlier, such declarations largely applied to goods and software exports; they now also apply to services. The objective is to track export transactions and ensure that foreign exchange earnings are brought into India.
Vijaykumar Puri, partner at VPRP & Co LLP, chartered accountants, said the reporting mechanism could also help authorities identify suspicious transactions, including instances where services are falsely declared to move money across borders.
How and when is EDF filed?
Under the regulations, service exporters can submit one consolidated EDF covering invoices raised during a calendar month, within 30 days after that month ends. For example, invoices raised in October can be reported together by 30 November.
For services other than software, the regulations also permit EDF submission on or before the date payment is received, said Harshal Bhuta, partner at P.R. Bhuta & Co., Chartered Accountants. “Filing before receiving payment can make reconciliation easier. Otherwise, the bank may initially treat the receipt as an advance until it is matched with the relevant invoice later.”
The form should be submitted through the authorized dealer bank. Exporters can obtain the prescribed format from the regulations or ask their bank for its submission procedure.
Chartered accountants (CAs) said that since the requirement started just this month, most of the banks are currently accepting physical forms to be submitted in bank branches. "We expect banks to move to a digital process soon. For instance, Axis Bank has just today integrated EDP reporting in their digital platform," said Bhuta.
For cross-border payments intermediaries such as Paypal, Wise, Skydo, etc, the declaration goes to the bank where the exporter's final rupee settlement is credited. "For all non-individual service exporters who are registered as businesses, the EDF needs to be submitted to the bank where final settlement happens," said Rohan Sewani, head - operations & customer experience, Skydo.
Why this declaration matters
While the declaration is a mandatory reporting requirement, it can’t obstruct international payments if it hasn't been filed, according to experts. “Banks have not been given additional powers to withhold payments merely because of an EDF mismatch,” said Puri.
However, you should not skip filing it as banks will reconcile the invoices reported in the EDF with the payments received from overseas clients. This includes checking the invoice amount, nature of services provided and purpose of the payment. Sewani said mismatches between invoice descriptions, Services Accounting Codes (SAC) – a unique six-digit code used under the Goods and Services Tax (GST) framework to classify GST rate for a service–and RBI purpose codes, or differences between invoiced and received amounts, could create problems during reconciliation.
Bhuta said it is important that service professionals ensure that payments are correctly matched with invoices in RBI's Export Data Processing and Monitoring System (EDPMS). “Otherwise, an invoice could continue to show as outstanding even after the payment has been received. While delayed filing can be regularised, resolving old unmatched entries can become difficult”.
Exemptions and uncertainty
Bhuta said the regulations do not explicitly exempt any particular categories of service exporters. However, at a press conference on 7 October, RBI governor Sanjay Malhotra said individuals undertaking transactions of a personal nature, including tutoring and small software assignments for overseas clients, would be exempt from reporting.
Experts said this has only added to the confusion, as whether this exemption covers all freelancers working independently remains unclear. “We are waiting for a FAQ (frequently asked questions) from the RBI that can clarify what the governor meant by ‘individual payments’,” said Bhuta.
Puri said small freelancers with incomes below a certain threshold should be exempted from this extra compliance. “Much of the information asked in EDF is already available. Exporters registered under GST already report their export invoices in their returns. Banks also collect information, including RBI purpose codes, when overseas payments are received. So what is the need for this new thing that replicates information?" he said. “An exemption threshold, similar to the ₹20 lakh GST registration threshold applicable to many service providers, would reduce the compliance burden on smaller freelancers.”
Meanwhile, till further clarity emerges, freelancers should check the applicable requirements with their banks and maintain proper records of invoices and international payments.