FEMA & RBI Guidelines for Import-Export in India
FEMA( Foreign Exchange Management Act) & RBI Guidelines for import-export in India are regulated for foreign exchange flows and complying with trade transactions, shipping invoices and foreign remittances . It is most commonly referred to as India’s Foreign Exchange Management Act, 1999, a law which regulates foreign exchange to facilitate trading and maintain market stability, replacing the stricter FERA. Its main purpose is to simplify rules for foreign currency transactions, promote external trade, and ensure orderly growth and development of India’s foreign exchange market. It has replaced FERA (Foreign Exchange Regulation Act), which was comparatively strict, stringent and had criminalised violations. This act simplifies rules for cross-border transactions, foreign investments, and remittances, which has made India’s economy more global, transparent, far-reaching and investor-friendly. These rules and regulations ensure legal compliance, proper payment mechanisms, and foreign exchange management when businesses import and export goods.
The government regulates FEMA (Foreign Exchange Management Act) and RBI guidelines for import-export in India to manage foreign exchange flows and ensure compliance with trade transactions, shipping invoices, and foreign remittances.People most commonly refer to it as India’s Foreign Exchange Management Act, 1999, a law that regulates foreign exchange to facilitate trading and maintain market stability, replacing the stricter FERA. Its main purpose is to simplify rules for foreign currency transactions, promote external trade, and ensure orderly growth and development of India’s foreign exchange market. It has replaced FERA (Foreign Exchange Regulation Act), which was comparatively strict, stringent and had criminalised violations. This act simplifies rules for cross-border transactions, foreign investments, and remittances, which has made India’s economy more global, transparent, far-reaching and investor-friendly. These rules and regulations ensure legal compliance, proper payment mechanisms, and foreign exchange management when businesses import and export goods.
Key Rules & Regulations for FEMA & RBI Compliance:
- Export Proceeds Realisation: The exporters must realise and repatriate foreign exchange within a stipulated time of 15 months.
- Declaration By FEMA: Exporters submit a declaration to the customs, and the customs register it with the RBI, ensuring that all material information about the export is precise and accurate.
- Purpose Code: For identifying the transaction for the RBI, Purpose Code P0102 is used for the export of goods and also for inward remittances.
- Currency Flexibility: Although buyers generally realise payments in a freely convertible currency, exporters can denominate export contracts and invoices in Indian Rupees.
FEMA & RBI Compliance for Imports
- Authorized Dealer Bank Usage AD -1: All exotic and foreign remittances for imports must pass through Authorized Dealer (AD Category-I) banks, which verify the legitimacy and authenticity of the transaction.
- Documentation: Importers must be maintaining proper documentation, including invoices, packing lists, certificates of origin, Bill of Lading/Airway Bill, and GATT declarations.
- Evidence Of Import: The AD Banks must ensure that they receive the evidence of import (e.g., Exchange Control Copy of Bill of Entry) to confirm that the goods have entered India.
- LICENCES ARE ALWAYS FOR CIF VALUE: The value as indicated on import licences is always for the CIF value of goods authorised to be imported which includes incentives/commission. FEMA Guidelines govern remittances for goods covered by an import licence. As per the present FEMA Guidelines, authorities debit the Exchange Control copy of the licence with the total cost of the goods, which includes the CIF value of goods, commission paid to local and foreign agents, and interest paid on import bills.
Foreign Exchange Acquisition & Permit:
Section 10(b) of the Foreign Exchange Management Act, 1999 permits any person acquiring foreign exchange to use it either for the purpose they declare to an authorised dealer under Section 10(5) of the Act, or for any other purpose for which the Act, or the Rules or Regulations framed thereunder, allow the acquisition of foreign exchange.
- Where Indian foreign exchange remittance acquired has been utilised for import of goods into India the authorised dealer should ensure that importer furnishes evidence of import to his satisfaction.
- The importer could also make payment for import by crediting the non-resident account of the overseas exporter or by crediting the resident account of a non-resident bank. In such cases, the authorised dealer must ensure compliance.
Importer Documentation for Submission
In case of imports, when the value of foreign exchange remitted/paid for import into India exceeds USD 100,000 or its equivalent, authorised dealers through whom the relative remittance is made must ensure that the importer submits:-
- An Exchange Control copy of the Bill of Entry for home consumption.
- In case of 100% Export Oriented Units the exchange control copy of the Bill of Entry for warehousing.
- The importer declares the Customs Assessment Certificate or Postal Appraisal Form to the customs authorities, when the import has been made by post, as evidence that they have actually imported the goods for which the payment was made into India.
- Consequently, upon implementing the EDI system, the Customs Authorities introduced a revised procedure for issuing the Bill of Entry for ex-bond clearance of goods. Under the revised procedure, Customs Authorities no longer issue the Exchange Control copy of the Bill of Entry for home consumption and generate only two copies of the ‘Ex-Bond Bill of Entry’; the importer must submit one copy for clearance of goods from the warehouse, and Customs Authorities give the other copy to the importer.
Hence, where customs have implemented the EDI system and the importer receives only one copy of the ‘ex-Bond Bill of Entry’ from customs, branches may advise the importer to submit a photocopy of the ‘ex-Bond Bill of Entry’ for home consumption after clearance of the goods from the warehouse/bond. The branches may duly verify and accept this copy as final evidence of import. iii. Where importers make imports in non-physical form, i.e., software or data through internet/datacom channels.
It is the Foreign Exchange Management Act, 1999 (FEMA) which empowers the Reserve Bank to frame regulations to prohibit, restrict or regulate the acquisition or transfer of immovable property in India by certain persons/residents outside of India.
FEMA compliance for importing goods
Authorized dealer (AD) banks manage foreign exchange and ensure FEMA compliance for importing goods into India. They adhere to RBI guidelines for payments, usually within 6 months of shipment.They submit essential evidence, such as Bills of Entry or Postal Appraisal Forms.This evidence proves that they have received goods equivalent to the payment.They also follow the rules of the Foreign Trade Policy (FTP). Newer, more stringent rules and regulations will come into effect from October 2026. The key aspects include ensuring legitimate transactions, on-time payment, and proper documentation for customs and banking records.
Key FEMA Principles for Imports:
- Facilitation of Trade: FEMA aims to simplify and ease foreign and exotic trade by governing of foreign exchange, and promoting orderly development of forex markets.
- Authorized Dealers (ADs): AD Category-I banks handle the foreign exchange aspects, opening the Letters of Credit (LCs) and processing of remittances for imports.
- Timelines for Payment: The payments generally must be made within six months from the date of shipment, although extensions up to three years are possible for specific cases like those of disputes.
- Evidence of Import: It is necessary that all importers must provide a proof that goods worth the remitted amount have arrived (e.g., Bills of Entry, Postal Appraisal Forms etc).
- Filing for Obligations: Importers need to ensure that all import remittances are reported and outstanding amounts are updated in the Import Data Processing Module (IDPMS).
Steps & Compliance Checklist:
- Identifying Your AD Bank: It is mandatory to use an Authorized Dealer bank for all foreign exchange transactions.
- Verification of Importability: Check the Foreign Trade Policy (FTP) for restricted or negative list of items which require special licenses.
- Open LCs & Making of Remittances: AD banks facilitate these based on the license copy and adherence to all FTP conditions.
- Ensure Legitimate Transaction: Transactions must be meant for authentic and genuine import cargo customs clearance procedures documentation, with KYC checks by relevant banks.
- Submit Evidence: After the arrival of goods, submit the essential documents (like Bill of Entry) to the bank.
- Tracking of Remittances: Ensure that all payments are uploaded in the IDPMS system.
Recent & Upcoming Changes:
- New Regulations (Effective from Oct 1, 2026): The Reserve Bank of India (RBI) has notified new, comprehensive “Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026,” effective from October 1, 2026, superseding the old rules and regulations.
- Focus Areas: These new rules cover payment- related timelines, third-party payments, advance payments, and management of unrealized payments. FEMA mainly ensures seamless and smooth international business transactions and payments for imports and exports. Moreover it includes a wide range of regulations and enhances measures against money laundering and terrorist financing.
- These regulations and guidelines aim to balance facilitating trade with monitoring foreign exchange flows, thereby, making the process more predictable and system-driven.
- According to the new regulations, which will be effective from October 1, 2026, aim at promoting ease of doing business, particularly for small exporters and importers, and to enabling authorised dealers to provide faster and more efficient services. The authorities direct authorised dealers to ensure stringent compliance with FEMA-related rules and regulations and the prevailing Foreign Trade Policy while they handle export, import, and merchandising transactions.
- Furthermore, importers can settle and complete the invoices in case of normal imports within 6 months from the date of shipment. In addition, authorities can permit a remittance without any time limit, subject to compliance with provisions for payment of interest. Moreover, several reasons can justify time limit extensions. One of the main reasons is a dispute over the quantity or quality of goods sent. Another reason could be the importer’s non-fulfilment of the terms of the contract. Financial difficulties faced by the sender of the shipment may also justify extending the time limit. In some cases, courts allow an extension of the time limit when the importer files a suit against the foreign seller.
Conclusion:
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