Payments from foreign clients are where three regimes meet: FEMA, which cares that the money arrives and is documented; GST, which treats the service as an export if the conditions are met; and income tax, which taxes the profit and gives credit for tax withheld abroad. Each is manageable. The confusion usually comes from applying rules for outward remittances to inward ones, and from platforms that move money without the paperwork the regulators expect.
Quick answer
- Realise funds within nine months: An export receipt must come through an authorised dealer bank in convertible foreign currency, be realised within nine months, and be evidenced by a FIRC or equivalent advice.
- Zero-rated GST under LUT: Services to a client outside India can be a zero-rated export; file the Letter of Undertaking every April, invoice without tax and claim input tax credit refunds through RFD-01.
- Stop foreign withholding early: A US client may withhold tax unless the Indian supplier provides Form W-8BEN-E or W-8BEN, which documents foreign status and any India–US treaty claim, so ask each new client about withholding before invoicing.
- 15CA/15CB not for inflows: Form 15CA and 15CB apply when a resident pays a non-resident; an inward receipt needs the invoice, the contract and the FIRC.
1. The money and its evidence
An export receipt must come into an Indian bank account through an authorised dealer bank in convertible foreign currency (or in rupees from a permitted vostro arrangement), and must be realised within nine months of the invoice or export. For each receipt the bank issues a Foreign Inward Remittance Certificate or, for larger exporters, an eFIRC or Foreign Inward Remittance Advice, and reports the receipt against the export in the EDPMS system for goods and, for services, against the invoice. Payments through PayPal, Wise, Payoneer or Stripe are acceptable provided the partner bank issues the advice for each transaction; download and file them — a bank statement line saying "PayPal" is not evidence. Money left in a foreign wallet or foreign account and never brought to India does not satisfy the realisation requirement and is not an export for GST.
2. Invoicing
Invoice in the currency of the contract, state the place of supply as outside India, quote your GSTIN and LUT number, use the correct SAC code, and keep the contract or purchase order. For software exports through an STPI or SEZ unit, Softex forms are filed; for everyone else, the invoice and FIRC are the record.
3. GST: zero-rated with an LUT
Services to a client outside India are an export of services, zero-rated, if the supplier is in India, the recipient is outside India, the place of supply is outside India, payment is received in foreign exchange and the two are not establishments of the same person. File the Letter of Undertaking every April; invoice without tax; claim a refund of the input tax credit on your costs through RFD-01, quarterly or monthly, supported by the FIRCs. Intermediaries — people who arrange a supply between the foreign client and a third party — were taxed at 18% until 30 March 2026, when the Finance Act, 2026 removed their special place-of-supply rule; they now follow the client's location like other services. One exception remains: services where the place of supply is the location of performance in India (events, training delivered in India, work on goods in India) are not exports even if the client is abroad.
4. Stopping withholding at source
Many foreign clients withhold tax on payments to non-residents unless given the right documents. A US client may withhold tax unless the Indian supplier provides Form W-8BEN-E (for an entity) or W-8BEN (for an individual), which documents foreign status and claims the India–US treaty, under which business profits without a US permanent establishment are not taxed in the US at all; fees for work performed in India are generally not US-source income in any case. UK, EU and Gulf clients generally do not withhold on service fees; clients in some countries (Saudi Arabia, for example) withhold on services performed there and on technical services, at rates the treaty may reduce. Ask every new client what their withholding position is before the first invoice.
5. If tax was withheld abroad: Form 67
Foreign tax withheld on income that India also taxes can be credited against the Indian tax on the same income under the relevant treaty (or section 160 (91 of the 1961 Act) where there is no treaty). The claim is made in Form 67, filed online before the end of the assessment year, with the withholding certificate. Credit is limited to the Indian tax on that income; excess foreign tax is a cost. Without Form 67 the credit is denied and the withholding becomes a permanent loss.
6. Form 15CA/15CB — not for money coming in
Form 15CA and the chartered accountant's certificate in Form 15CB are required when a resident makes a payment to a non-resident — they are the mechanism by which the payer confirms the correct Indian tax was withheld. They have nothing to do with receiving money from abroad. A bank asking for a 15CB on an inward remittance has confused the direction; a foreign client asking for one has confused the countries. The documents an inward receipt needs are the invoice, the contract and the FIRC.
7. Income tax on the profit
Export income is ordinary business or professional income, taxed at slab or company rates, eligible for section 58 (44ADA of the 1961 Act) presumptive treatment where receipts are within ₹50 lakh (₹75 lakh with under 5% cash) for the notified professions. Exchange gains and losses on receivables are business income and expense. The old export incentives under sections 10A/10AA have expired for new units; there is no income tax exemption for service exports, only the GST zero-rating.
Questions we are asked
Are payments from foreign clients through PayPal, Wise or Payoneer acceptable as export receipts in India? Yes, provided the partner bank issues the advice for each transaction. A bank statement line saying PayPal is not evidence, and money left in a foreign wallet is not an export for GST.
Is GST charged on intermediary services provided to a foreign client? Not since 30 March 2026, if the export conditions are met. The Finance Act, 2026 removed the special intermediary rule, so the place of supply is now the foreign client's location and the service can be a zero-rated export; earlier supplies were taxed at 18%.
How do I claim credit in India for tax withheld by a foreign client? File Form 67 online before the end of the assessment year, with the withholding certificate. The credit is limited to the Indian tax on that income, and without Form 67 the department will normally deny the credit.
Is there an income tax exemption for service exports from India? No. The old export incentives under sections 10A/10AA have expired for new units, so service export income is taxed as ordinary business or professional income; the only relief is GST zero-rating.
Set up once, run monthly
We register for GST, file the LUT, claim the ITC refunds, prepare the W-8BEN-E and treaty forms for your clients, file Form 67 where tax was withheld, and reconcile FIRCs to invoices for the FEMA record. GST services or contact us.
Disclaimer
This note is for general information and knowledge purposes only. It describes the position as at 6 November 2026 and is not legal, tax or professional advice. Tax law changes frequently; please confirm the current position with us before acting.
Tax, GST and business setup advisors — Mumbai and Thane. Contact us to discuss your situation.
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