With the global interconnectivity of businesses, freelancers, and exporters, it becomes imperative to get paid from clients worldwide. International payments bring with them new avenues but also create unique problems such as compliance, fees, and delays. In this blog, we will delve into how to receive international payments in India, outline key factors to consider, and point you toward the most efficient payment methods.

Best Means to Collect International Payments in India

The best way to get international payments is by using the right method, so that your process is smooth and cost-effective. The most common methods are listed below:

1. Banks

This is the traditional and safe option to collect international payments. It can be slow, however, and the fees incurred (SWIFT charges, forex markups) are pretty high.

2. International Virtual Bank Accounts

Virtual international accounts are faster settlements, low fees, and transparent exchange rates. They are ideal for freelancers and small businesses.

Selecting the Right Method:

Before making a decision, consider the following factors:

• Speed: How long do you need to wait for the payment?

• Fees: What costs are involved, and how will they affect your earnings?

• Compliance: Is the method compliant with Indian regulations?

Things to Know Before Receiving International Payments in India

International payments differ from domestic transfers. When handling international payments in India, there are a few things to note:

1. Timelines

International payments are usually slower than domestic transfers. For a country like India, accustomed to fast transfers via UPI or RTGS, this can take anywhere between 1 and 7 working days, depending on the means of transfer. Even as an example, the SWIFT bank transfer might take 5 working days, but that is where platforms such as PayPal would be able to process payment faster.

2. Compliance

India is heavily governed regarding international transactions to deal with money laundering and terror funding. Some of the compliances related aspects you have to be aware of includes;

3. Purpose Codes

There is the alphanumeric purpose code attached to each international transaction for defining the rationale for transferring. For example, when one receives service-rendering payments, an appropriate purpose code must be quoted. Lack of such would either lead to delays in or rejection of the payment.

Example

If you are a freelancer based in India and working with a client in the UK and you receive a payment for freelance services, you have to mention the correct purpose code that matches the nature of the transaction. A common code for freelance work is "SPL" (services rendered).

• FIRA (Foreign Inward Remittance Advice)

FIRA is a bank-issued document evidencing the fact that an international payment has been received by the bank. It can be important for tax reporting and compliance purposes. Freelancers and exporters must retain their FIRAs as proof of foreign earnings.

In case you receive a payment from a client abroad, you can request the FIRA document issued by your bank. This will help you comply with tax regulations and serve as evidence of income when filing taxes.

• BRC (Bank Realization Certificate)

BRC is a certificate that proves that the money you received is matched by the goods or services that you exported. It is more relevant to exporters but freelancers and businesses belonging to certain categories may require it as well. Freelancers generally don't require BRC unless they fall under the export of software or services.

3. Tax Implications

Tax implications need to be understood when you are receiving international payments. Here's a quick overview:

• GST

Exports are considered zero-rated under GST, which means there is no GST applicable over the goods or services being exported out of India. But in case GST gets wrongly deducted, you can always get it refunded with a copy of your FIRA document.

• Income Tax

Though earnings through exports are exempt under GST, income tax levies still apply. For Indian income tax slabs, foreign income is subject to taxation in India. Ensure you declare all such international earnings accurately.

Illustration:

If you’re a freelancer earning USD 5,000 from a US client, you need to report this amount in your income tax filing. While there’s no GST on this income, you’ll need to pay tax based on your applicable tax slab.

4. Charges

Understanding the fees associated with receiving international payments is critical to managing your business’s finances effectively. These charges include:

• Bank fees: Banks charge SWIFT fees, forex markups, and other service charges. These can quickly add up, reducing your payout.

• Payment gateway fees: Services like PayPal charge transaction fees, currency conversion fees, and fixed fees depending on the country and transaction type.

You need to evaluate the charges before choosing a payment method since the fees can really impact your earnings.

Comparison of Payment Methods

Let's get into a detailed comparison of the most common payment methods available for receiving international payments in India.

1. Banks

• Pros: Safe and compliant with Indian regulations.

• Cons: Slow processing times (up to 5 business days or more), high fees like SWIFT charges, forex markups, and additional service charges.

2. Virtual International Bank Accounts (Wise, Payoneer, and others)

• Pros: Faster settlement times, no SWIFT fees, live exchange rates, simple compliance (with automatic FIRA generation).

• Cons: Fees vary by platform, but generally lower than traditional banks. Some services might charge for issuing FIRA.

Choosing the Best Option for Your Business

The best payment method depends on your specific needs. Here’s a quick breakdown to help you decide:

• Banks: Best for export houses and large businesses; it caters to companies that handle large volumes, thus demanding the highest extent of compliance.

• Virtual Bank Account: Suitable for freelancers as well as small-to-medium companies that seek a cost-efficient, quick, and streamlined payment process.

Infinity Offers Easy International Payment Solution

Infinity is a simple solution for businesses and freelancing in India, which don't need to face an issue in receiving international payment transactions.

• Quick Setup: Set up an international account in minutes, so you can start receiving payments from across the globe without delays.

• No Hidden Fees: Enjoy live forex rates with no markup and transparent charges.

• Compliance Made Easy: Get automatic FIRA downloads for every transaction, ensuring that you stay compliant with Indian regulations.

• Dedicated Support: Infinity's customer support is also there to guide you step by step in the entire process so that your pay journey is smooth.

It is the best solution for a person who wants to avoid fees and streamline the payment process.

Conclusion

International payments to India do not have to be complicated. Choosing the right method, understanding compliance, and comparing the costs involved will allow you to make smoother and more profitable transactions. Whether freelancer or growing business, you must be aware of all factors—the timing, compliance, and fees—before choosing the best payment solution for your needs.