FEMA Export-Import Regulations 2026: Key Changes from 1 October

Summary: The Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, effective from 1 October 2026, consolidate the FEMA framework governing exports and imports of goods, services and software and substantially enlarge the operational role of Authorised Dealer banks. As amended by the September 2026 Amendment Regulations, export proceeds ordinarily have to be realised within nine months, with a 12-month period where exports are invoiced and/or settled in Indian Rupees. The framework introduces EDF reporting for services including software, contractual timelines for import payments, broader discretion for reduction or non-realisation of export proceeds, more flexible set-off and third-party settlement rules, revised advance-payment requirements and a six-month merchanting-trade period. It also permits AD banks to handle specified legacy transactions that previously required RBI approval. Exporters, importers and service providers should consequently review their documentation, contracts, EDPMS/IDPMS reconciliation, advance-payment controls and banking arrangements under the new regime.

New FEMA Export–Import Regulations, 2026: What Changes for Exporters and Importers from 1^st October 2026

The Reserve Bank of India has notified the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 (Notification No. FEMA 23(R)/2026-RB dated 13^th January 2026), which shall come into force from 1^st October 2026 and supersede the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015. The Regulations have since been amended, even before their commencement, by the Foreign Exchange Management (Export and Import of Goods and Services) (Amendment) Regulations, 2026 (Notification No. FEMA 23(R)/(1)/2026-RB dated 22^nd September 2026), which also come into force from 1^st October 2026. The changes made by the Amendment Regulations are incorporated at the relevant places in this article.

The new framework consolidates the regulatory provisions governing the export and import of goods, services and software under a single regulation, and confers greater operational authority on Authorised Dealer (AD) banks in matters such as extension of timelines, reduction in export value, set-off arrangements, third-party settlements and trade advances, subject to the conditions prescribed under the Regulations.

This article focuses on the changes taking effect from 1^st October 2026, and distinguishes them from certain relaxations introduced separately through RBI circulars issued in October 2025, which are already in force.

Existing Provisions Retained Under the New Regulations

• Closure of small-value EDPMS/IDPMS entries on declaration. With effect from 1^st October 2025, AD Category-I banks have been permitted, vide A.P. (DIR Series) Circular No. 12 dated 1^st October 2025, to close EDPMS/IDPMS entries of up to ₹10 lakh per bill or entry on the basis of the exporter’s or importer’s declaration, including cases involving reduction in value, with quarterly consolidated declarations also permitted. That circular itself stands superseded from 1^st October 2026, the relaxation being carried directly into the Regulations.
• Six-month period in merchanting trade. The permissible period for the foreign exchange outlay in merchanting trade was increased from four months to six months with effect from 1^st October 2025, vide A.P. (DIR Series) Circular No. 11 dated 1^st October 2025. That circular also stands superseded, and the 2026 Regulations retain six months as the maximum permissible gap between the two legs of the transaction.

What Changes from 1^st October 2026

1. One regulation for exports and imports

The 2026 Regulations cover export declarations, realisation of export proceeds, import payments, trade advances, set-off, third-party settlements, merchanting trade, EDPMS/IDPMS reporting and the internal policies of AD banks — for goods, services and software alike. Software is treated as a service.

2. Period for realisation of export proceeds

Under the Foreign Exchange Management (Export of Goods and Services) (First Amendment) Regulations, 2026 (Notification No. FEMA 23(R)/(8)/2026-RB dated 5^th June 2026), export proceeds must presently be realised within 9 months — for goods, software and services alike — subject to extension by the AD bank for sufficient and reasonable cause.

From 1^st October 2026, the 2026 Regulations, as amended by Notification No. FEMA 23(R)/(1)/2026-RB dated 22^nd September 2026, prescribe:

• 9 months from the date of shipment in the case of goods, and from the date of invoice in the case of services;
• 12 months where the export is invoiced and/or settled in Indian Rupees, invoicing and settlement in INR itself continuing to be governed by the extant framework;
• 9 months (12 months where invoiced and/or settled in Indian Rupees) from the date of sale of the goods in the case of goods exported to a warehouse outside India, instead of from the date of shipment;
• As per the payment terms of the contract, in the case of project exports. A project exporter may also deploy temporary cash surpluses generated outside India in instruments of one year or less residual maturity, subject to monitoring by the AD bank.

The 2026 Regulations, as originally notified on 13^th January 2026, had prescribed realisation periods of 15 months and 18 months. These stand substituted by 9 months and 12 months respectively by the Amendment Regulations dated 22^nd September 2026, with effect from 1^st October 2026 itself. The nine-month period presently in force under the 2015 Regulations therefore continues without interruption; what is new from 1^st October 2026 is the longer period of 12 months where the export is invoiced and/or settled in Indian Rupees.

The AD bank may extend the period on a request citing reasons for the delay, and is required to put in place systems to monitor realisation.

The applicable period is fixed by reference to the date of shipment (goods) or the date of invoice (services), and the 2026 Regulations save everything done before they take effect. The position may be summarised as follows, the dates being reckoned from publication of the respective amendment in the Official Gazette:

3. The Export Declaration Form (EDF) covers goods, services and software

Export declaration — goods

An exporter of goods is required to furnish an EDF to the specified authority, declaring the amount representing the full export value of the goods, at the time of export.

Where goods are exported through an Electronic Data Interchange (EDI) port, the EDF is deemed to be submitted as part of the shipping bill, and no separate EDF filing is required. An EDI port is a customs port at which export and import documentation is processed electronically through the Customs EDI system rather than through the earlier manual, paper-based process.

Where the export is made through a non-EDI port, or where the specified authority is not the AD bank, the duly authenticated EDF is required to be forwarded by the specified authority to the respective AD bank.

A traveller moving personal effects from India, whether accompanied or unaccompanied, is not to be treated as an exporter for the purpose of the Regulations.

Export declaration — services and software

An exporter of services is required to furnish an EDF declaring the amount representing the full export value of the services, within 30 days from the end of the month in which the invoice is raised. An exporter who has provided services to one or more recipients during a month may submit a single EDF covering all such exports for that month.

For services other than software, the exporter may submit the EDF on or before the date of receipt of payment. No corresponding option is available for software exports.

The AD bank may extend the time for submission of the EDF where the exporter cites reasons for the delay, if satisfied about the reasonableness of the request.

Software exports are covered within the services framework, and the EDF is accordingly the prescribed declaration for export of services including software. It may be noted that software is defined as information on a medium other than a physical medium; software supplied on a physical medium therefore falls to be treated as goods.

Where the EDF is to be filed — the specified authority

STPI certification is therefore no longer the only route for software exports; the AD bank is recognised as a specified authority on par with STPI.

Exports without consideration — nil value in place of the EDF waiver

The export value may be indicated as nil where goods are sent without any consideration. A.P. (DIR Series) Circular No. 53 dated 3^rd March 2016 on grant of EDF waiver for export of goods free of cost is among the circulars superseded with effect from 1^st October 2026. The requirement of obtaining a separate EDF (formerly GR) waiver from the AD bank for trade samples, free replacements, exhibition goods and similar free-of-cost shipments accordingly stands replaced by the filing of a nil-value EDF. Exporters who presently route waiver applications through their AD bank should reflect this in their documentation process.

Reporting and reconciliation

• Details of an EDF of service are to be entered in EDPMS by the AD bank within five working days of receipt of the EDF from the exporter, and the entry is marked off after ensuring that the export value has been realised.
• Service exporters will need a monthly EDF cycle — invoice-wise data with SAC codes, currency, service recipient and country — reconciled to EDPMS.

4. Imports — reporting through the AD bank

The Regulations do not cast on the importer a separate declaration obligation corresponding to the EDF, and the concept of a specified authority is confined to exports. Import reporting operates through the AD bank:

• Details of imports received from a non-EDI port are entered in IDPMS within five working days of receipt of documents.
• Details of import of services are entered in IDPMS as declared and submitted by the importer, within five working days of receipt of documents.
• The entry is marked off after ensuring that payment for the import has been made.
• The AD bank may, on the importer’s request citing reasons, close the entry where the import transaction has been settled at a reduced value, or where an advance was paid, no import took place and repatriation of the advance is not possible.

5. Import payments — the contract period replaces the fixed timeline

The Regulations prescribe no fixed period for import payments. The AD bank monitors its IDPMS entries and follows up with the importer for payment within the period specified in the underlying contract, and may allow extension on a request citing reasons for the delay. This replaces the six-month norm of the Master Direction on Imports. Contracts and purchase orders should accordingly state payment terms clearly, and any renegotiation should be documented.

6. Reduction and write-off of export proceeds — no percentage caps

• The AD bank may allow a reduction in realisation of export value, including non-realisation of the full export value, on a request from the exporter citing reasons, if satisfied of the reasons cited. The erstwhile framework permitted reduction only up to 25 per cent, with the percentage ceiling relaxed for exporters meeting prescribed track record conditions and board ratification required beyond that limit. The 2026 Regulations adopt a discretion-based approach, without a percentage ceiling, without linkage to earlier years’ realisations and without RBI approval.
• Where the export value is up to ₹10 lakh per shipping bill (for goods) or invoice (for services), the reduction may be permitted on the basis of a declaration from the exporter alone.
• Every AD bank is required to frame an internal policy covering adjustment of export proceeds on account of under-realisation, over-realisation and non-realisation. Operational parameters will therefore now be set at the bank level and may differ across banks.
• The Regulations are silent on surrender of export incentives on unrealised proceeds, which will continue to be governed by the Foreign Trade Policy, and by Customs and GST law.

7. Set-off of export receivables against import payables

The AD bank may allow set-off of export receivables against import payables from or to the same overseas buyer or supplier, or their overseas group or associate companies, within the stipulated period for realisation of export proceeds or any extended period allowed by the AD bank.

Under the erstwhile position, set-off was subject to several restrictions. The export and import transactions were generally required to fall within the same calendar year, and set-off was not permitted between transactions of a different nature — export receivables for goods, for instance, could not be set off against import payables for services, and vice versa.

These restrictions do not find place in the 2026 Regulations. An export receivable for goods may accordingly be set off against an import payable for services within the stipulated or extended period, and the transactions need not necessarily fall within the same calendar year. Both the export and the import transaction continue to require reporting and closure through EDPMS and IDPMS respectively.

8. Third-party receipts and payments

The AD bank may permit third-party receipts and payments for export and import transactions, provided it is satisfied with the bonafides of the transaction. A.P. (DIR Series) Circular No. 70 dated 8^th November 2013 and A.P. (DIR Series) Circular No. 100 dated 4^th February 2014, which prescribed conditions such as a tripartite agreement and the naming of the third party in the invoice, stand superseded, and those conditions do not appear in the Regulations. The EDF captures the third party’s name and address and the relationship between the exporter and the third party.

9. Advance receipts and advance payments

• Routing. Advance receipts for exports and advance payments for imports, together with the related realisation or subsequent payments, are to be routed through the same AD bank. A change of AD bank is permitted provided both banks are intimated.
• Import advances. Permitted once the AD bank is satisfied of the genuineness of the requirement for advance remittance. The AD bank may consider specifying thresholds beyond which the payment may require a standby letter of credit or a guarantee. The fixed USD 200,000 threshold prescribed under the Master Direction is not carried forward, and is replaced by such limit as the AD bank may determine.
• Interest. Interest payable on an advance payment received for export, or on a delayed payment for imports, shall not exceed the all-in-cost ceiling of trade credit under the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018.
• Gold and silver. No advance remittance is permitted for the import of gold or silver, notwithstanding anything else in the Regulations.
• Export advances. No time limit is prescribed for shipment against an advance received (the 2015 Regulations, as amended in November 2025, allow three years). Where no export has been made and refund of the advance is not possible, the AD bank may close the EDPMS entry on the exporter’s request.
• Import not materialised. The advance must be repatriated within the contract period or extended period. If it is not, or if the IDPMS entry has not been marked off, every future advance payment for imports by that importer must be backed by an unconditional, irrevocable standby letter of credit or a guarantee from an international bank of repute, or a guarantee of an AD bank in India issued against a counter-guarantee of such a bank.

10. Consequence of prolonged non-realisation

Where export proceeds remain unrealised for a period beyond one year from the due date of realisation or any extended period allowed by the AD bank, the exporter may undertake further exports only against receipt of full advance or an irrevocable letter of credit. The restriction is expressed in terms of the exporter, and not merely of exports to the defaulting buyer. The due date will depend on when the export was made, as set out in the table under point 2 above.

By way of transition, exporters appearing in the Caution List as on 30^th September 2026, as per orders issued by the Reserve Bank under Regulation 16 of the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015, shall continue to be governed by those orders till such time as the exporter is removed from the Caution List [proviso to Regulation 13, inserted by the Amendment Regulations dated 22^nd September 2026]. The 2026 Regulations do not otherwise provide for caution-listing of exporters; for defaults arising on or after 1^st October 2026, the only prescribed consequence is the full-advance/irrevocable letter of credit restriction set out above.

11. Merchanting trade transactions

• In a merchanting trade transaction, goods are purchased from one foreign country and sold to another foreign country without the goods entering the Domestic Tariff Area. The transaction is required to be undertaken in accordance with the Foreign Trade Policy.
• The only prescribed timing condition is that the period between the outward remittance and the inward remittance, or vice versa, should not exceed six months, subject to extension by the AD bank on a request citing reasons for delay. A.P. (DIR Series) Circular No. 20 dated 23^rd January 2020, containing the revised merchanting trade guidelines including the separate nine-month completion period, stands superseded, and that period is no longer applicable.
• Outward remittances are to be sent only to the overseas seller and inward remittances received only from the overseas buyer. The AD bank may, however, on a request from the customer citing reasons, allow receipt from and/or payment to any third party, if satisfied of the reasons cited. This is a relaxation from the existing position, under which third-party payments and receipts are not permitted for merchanting trade.
• Documents evidencing the transaction are to be provided to the AD bank to establish genuineness. The AD bank credits or debits the customer’s account after satisfying itself of genuineness, closes or updates the entries in EDPMS and IDPMS after making the receipt and payment for both legs, and monitors completion of both legs.
• The Regulations do not expressly require both legs of the transaction to be routed through the same AD bank.

12. Legacy cases hitherto requiring RBI approval — powers conferred on AD banks

Under Regulation 20, inserted by the Amendment Regulations dated 22^nd September 2026, Authorised Dealers shall handle transactions relating to the export and import of goods and services, as well as merchanting trade, undertaken prior to 1^st October 2026, which hitherto required the approval of the Reserve Bank of India under the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015, the Master Direction – Export of Goods and Services (FED Master Direction No. 16/2015-16 dated 1^st January 2016, as updated till 17^th July 2026) and the Master Direction – Import of Goods and Services (FED Master Direction No. 17/2016-17 dated 1^st January 2016, as updated till 12^th January 2026). Legacy cases pending with, or which would earlier have been referred to, the Reserve Bank will accordingly be disposed of by the AD bank itself under its internal policy.

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Author: CA Dhanush D Bolar | Partner | Nitin J Shetty & Co, Chartered Accountants