India’s New FEMA Trade Regulations: Key Changes for Businesses

Key highlights

Set out below are the key changes and their practical implications for businesses.

One unified form replaces multiple export filings

Under the earlier framework, exporters were required to deal with separate forms such as EDF for goods and SOFTEX for software and services, often resulting in multiple compliance requirements and reporting authorities.

The new regulations introduce a single unified Export Declaration Form (EDF) for goods, services, and software, thereby eliminating the need for separate SOFTEX filings. For goods exported through EDI ports, EDF will be deemed to be filed as part of the Shipping Bill itself. For services, EDF must be filed within 30 days from the end of the month in which the invoice is raised.

Longer timelines for export realization

Previously, export proceeds were generally required to be realized within 9 months from the date of export, subject to RBI relaxations issued from time to time. This timeline has now been relaxed significantly. Export proceeds must be realized within 15 months from the date of shipment of goods, 15 months from the date of invoice for services, and 15 months from the date of sale in case of warehouse exports. For exports settled in Indian Rupees, the period has been further extended to 18 months.

The regulations also empower AD Banks to grant extensions in genuine cases, providing exporters with greater operational flexibility.

Import payment timelines now linked to contractual terms

Under the erstwhile regime, import payments generally had to be completed within 6 months unless a specific extension was obtained.

The new framework removes this fixed timeline. Import payments are now required to be made in line with the contractual terms agreed between the parties. AD Banks have also been authorised to permit extensions beyond the agreed due dates. This marks an important practical shift and gives businesses greater freedom to structure commercial arrangements more efficiently.

Relaxation in set-off timelines and a softer approach to third-party settlements

Earlier, set off export receivables against import payables, whether with the same counterparty or with overseas group or associate entities, generally had to be completed within the same calendar year.

The new regulations allow such set-off within the 15-month export realization period, or such extended period as may be permitted by the AD Bank. This provides additional flexibility for businesses managing cross-border trade and intercompany flows.

Third-party settlements continue to remain permissible. However, the new framework does not specifically refer to the requirement of a tripartite agreement, which was a feature of the earlier regime. This appears to indicate a more liberal approach, although practical guidance from RBI or AD Banks on the documentation front is still awaited.

Simpler closure of low-value EDPMS and IDPMS entries

The new regulations introduce a simplified closure mechanism for small-value transactions. For exports and imports where the shipping bill for goods or the invoice for services does not exceed INR 1 million, open EDPMS and IDPMS entries may now be closed based on a self-declaration confirming receipt or payment.

The framework also permits quarterly bulk declarations to AD Banks, which should reduce administrative effort for businesses dealing with a high volume of smaller transactions.

Easier reduction of invoice value for small, unrealized exports

For unrealized export transactions involving shipping bills or service invoices up to INR 1 million, AD Banks may now allow reduction in invoice value of up to 100 percent based on self-declaration.

This is a significant compliance simplification when compared with the earlier documentation-heavy approach. For invoices above INR 1 million, reduction may still be permitted, subject to the AD Bank being satisfied with the facts and supporting justification.

Clearer framework for Merchant Trade Transactions

Merchant Trade Transactions were governed largely through RBI circulars, with limited consolidated clarity on timelines and documentation.

The new regulations now provide a clearer framework. The gap between outward and inward remittances must not exceed 6 months. In addition, remittances must be made only to, and received only from, the overseas supplier. Supporting documents must also be maintained and submitted to establish the genuineness of the transaction. This brings welcome regulatory clarity for businesses undertaking such transactions.

Tighter consequences for delayed imports and unrealized exports

While the new regulations are liberal in several areas, they are more stringent where imports remain incomplete or export proceeds remain unrealized.

• If imports are not completed within the prescribed or extended timeline, any advance remitted must be repatriated to India. Failing this, future import advances may be permitted only if backed by an irrevocable Standby Letter of Credit or Bank Guarantee.
• Similarly, when export proceeds remain unrealized beyond one year from the due date, or the extended due date, future exports may need to be undertaken only against full advance payment or backed by an irrevocable Standby Letter of Credit.

Businesses should therefore not view the relaxed framework as reducing the need for monitoring. In many cases, delays may directly affect future transaction flexibility and cash flow planning.

Greater dependence on AD Bank policies

A key shift under the new framework is the enhanced role of AD Banks. Banks are now expected to frame their own internal policies and standard operating procedures for operational matters such as extension of timelines, documentation requirements, and conditions linked to import advances or export delays.

In practice, this means implementation may vary from bank to bank. Businesses will therefore need to engage more closely with their AD Banks and understand institution-specific requirements instead of relying only on the broad regulatory text.

Next steps for businesses?

• Proactively engage with their AD Banks to understand internal SOPs, documentation expectations, and approval thresholds that may govern implementation in practice
• Reassess import and export contracts, particularly payment and realization clauses, to ensure alignment with the revised regulatory framework and bank requirements
• Review open EDPMS and IDPMS entries, especially those up to INR 1 million, to evaluate whether they can be closed under the simplified self-declaration mechanism
• Assess whether reduction in invoice value may be availed for unrealized export proceeds, particularly in case of shipping bills or invoices up to INR 1 million
• Revisit existing set-off arrangements for import and export receivables and payables considering the extended timelines and revised documentation position
• Strengthen internal monitoring of receivables, import advances, and transaction timelines, as delays could trigger stricter conditions such as SBLC or BG-backed transactions

How can we assist you?

Our teams at Roedl India can support businesses in operationalising the new regulations by helping them align compliance processes, documentation, contracts, and internal workflows with AD Bank requirements. This includes assistance with closure of eligible open EDPMS and IDPMS entries, applications for invoice value reduction in cases of unrealised exports, review of set-off arrangements, and development of a practical approach for a smooth transition under the revised framework.

Overall, the New Regulation is a welcome step towards a more streamlined and practical foreign trade framework. However, its real impact will depend on how businesses adapt their processes and how individual AD Banks operationalise the new regime in practice.