New FEMA trade rules effective 1 October caused confusion for freelancers and small exporters. The RBI clarified that personal transactions do not need reporting. Governor Sanjay Malhotra said, “Reporting is to be undertaken by banks and authorised dealers.” Small exporters can use self-declaration for bills up to ₹10 lakh instead.
New FEMA trade rules that came into effect from 1 October have triggered concerns among freelancers, content creators and small service exporters over whether they now need to file additional export declarations for payments received from overseas.
The Reserve Bank of India (RBI) has now clarified that individuals undertaking transactions of a personal nature are not covered by these reporting requirements.
RBI Governor Sanjay Malhotra and Deputy Governor Rohit Jain made the clarification at the October monetary policy press conference. The RBI also said small exporters with transactions of up to ₹10 lakh per bill can use a self-declaration and invoice, while banks and authorised dealers, rather than individual exporters and importers, will handle reporting on the IEDPMS portal.
Are individuals required to report their personal imports and exports?
Rohit Jain, Deputy Governor, RBI, said the new trade regulations are intended to liberalise the handling of trade matters by authorised dealers, simplify processes and promote ease of doing business.
Services exports and imports have now been included for reporting purposes. However, individuals are not required to comply with reporting requirements for contracts of a personal nature, Jain clarified.
Jain said there appeared to be some misunderstanding about the reporting obligations and that the RBI would clarify the requirements through an FAQ.
Governor Sanjay Malhotra further clarified that individuals, whether undertaking imports or exports, are not required to report such transactions irrespective of the amount when they are of a personal nature.
This can include subscribing to a TV channel, an app, journals or newspapers. It can also cover individuals providing services abroad, such as tutoring or small software services, and receiving payments for those services, Malhotra said.
What about small exporters?
The RBI also clarified the process for small exporters.
For exports of up to ₹10 lakh per bill, a self-declaration along with an invoice will suffice, Malhotra said. The ₹10 lakh limit applies per bill and not annually. He clarified that this is an alternative to the more detailed reporting process rather than an exemption from providing information.
This means small exporters with individual bills within the ₹10 lakh threshold can use the self-declaration route along with the invoice.
Do freelancers and exporters have to report directly?
Another key clarification concerns the reporting mechanism.
Malhotra said reporting on the IEDPMS portal is to be undertaken by banks and authorised dealers rather than individual exporters and importers.
“Reporting is to be done by the banks and the ADs, by the intermediaries, and not by the individual exporters and importers,” Malhotra said.
Exporters and importers therefore need to provide the required information to their banks or authorised dealers, which will undertake the reporting.
Malhotra said some of this information was already being provided by customers when making payments, including a purpose code and other details. The new framework requires some additional information, which the RBI said would improve data reporting and the availability of data on services exports.
Why has RBI brought in the new trade rules?
Jain said the new trade regulations were issued in January, sufficiently ahead of their 1 October implementation, with the broader objective of simplifying trade processes.
The RBI said the regulations are intended to liberalise the handling of trade matters by authorised dealers, simplify processes and promote ease of doing business. Services exports and imports have been brought into the reporting framework, with the RBI seeking to bring services more in line with merchandise trade.
Malhotra said merchandise trade already follows such reporting requirements and that bringing services into a similar framework would improve the RBI’s data on services exports.
The central bank maintained that the new framework is intended to simplify trade-related processes and reduce the burden on authorised dealers, exporters and importers.