Summary: From 1 October 2026, Indian importers and authorised dealer (AD) banks operate under the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, Notification FEMA 23(R)/2026-RB dated 13 January 2026, as amended on 22 September 2026. The consolidated regulations supersede the earlier export regulations subject to savings and bring import payments, trade advances, merchanting transactions and EDPMS/IDPMS monitoring within a common framework. The key change for importers is that Regulation 9 directs AD banks to monitor import payments against the period specified in the underlying contract, rather than mechanically applying an old six-month default. Regulation 4 permits declaration-based closure of qualifying IDPMS entries where a Bill of Entry for goods or an invoice for services does not exceed ₹10 lakh, including a quarterly consolidated declaration. Regulation 10 allows AD-bank scrutiny of import advances and permits bank-specific standby-letter-of-credit or guarantee thresholds; the same AD should ordinarily handle the advance and later import payments unless both banks are informed of a change. If the import fails, Regulation 12 requires repatriation of the advance, subject to prescribed handling of non-repatriable cases. These FEMA rules do not remove Customs, DGFT, GST, withholding-tax, trade-credit or financial-statement obligations. Importers should review contracts, Bill-of-Entry matching, service-import evidence, authorised-dealer SOPs, GST reverse charge where applicable, tax withholding on chargeable non-resident payments and AS 11/Ind AS 21 exchange-difference accounting. This article addresses the operative framework as at 15 October 2026, not historical master-direction thresholds presented as current law.
- The New FEMA Import Framework Effective 1 October 2026
- Which importer and transaction types are covered?
- Regulation 9: Import Payment Period Follows the Contract
- Contract extension and trade credit are not identical
- Regulation 4: IDPMS Closure Up to ₹10 Lakh
- IDPMS for services as well as goods
- Regulation 10: Advance Remittances and Bank Guarantees
- Regulation 12 when goods or services are not imported
- Third-Party Settlements, Set-Off and Merchanting Trade
- Customs, IGST, GST Reverse Charge and Input Tax Credit
- Physical goods: customs assessment and import IGST
- Imported services: place of supply and reverse charge
- Income Tax, Withholding, LRS and TCS Distinctions
- Foreign-Exchange Accounting: AS 11 and Ind AS 21
- Internal Checklist for October 2026 Import Transactions
- Frequently Asked Questions
- 1. Is every import payment due within six months in October 2026?
- 2. Can an importer close every IDPMS entry by declaration?
- 3. Can quarterly bulk declarations be used for eligible small imports?
- 4. Must an advance and final import payment use the same bank?
- 5. What if an advance is paid but the import never occurs?
- 6. Does a bank remittance settle GST and income-tax withholding?
- 7. Does the LRS TCS rate apply to company imports?
- 8. How is a USD import payable measured at year-end?
- Key Takeaways
The New FEMA Import Framework Effective 1 October 2026
RBI Notification FEMA 23(R)/2026-RB dated 13 January 2026, as amended through 22 September 2026, governs export and import of goods and services from 1 October 2026. The amended consolidated text is published on RBI’s official FEMA notifications portal. It covers declarations, receipts, payments, advances, import monitoring, set-off, third-party settlement and merchanting trade. The rules distinguish obligations placed directly on importers from monitoring and documentation duties placed on authorised dealer banks.
The prior Master Direction on Import of Goods and Services remains relevant to understand transactions and approvals arising before 1 October 2026, including matters saved or transferred by Regulation 20, but it should not be cited as the sole operative rule for a new October 2026 import. TaxGuru’s analysis of the 2026 FEMA import-export framework explains the transition. This article focuses on the import leg, payment controls and accounting consequences rather than repeating the entire export regime.
Which importer and transaction types are covered?
The framework is relevant to Indian businesses importing physical goods, capital equipment, software or services, and to qualifying merchanting trade transactions. The FEMA payment permission must be read alongside the Foreign Trade Policy, customs rules, sector-specific restrictions, sanctioned-counterparty checks and contractual evidence. A bank’s acceptance of a remittance request does not independently certify that goods are freely importable under DGFT rules or that the underlying transaction is compliant with GST and income tax.
Regulation 9: Import Payment Period Follows the Contract
Regulation 9 directs an AD to monitor IDPMS entries and follow up with the importer for payment within the period specified in the underlying import contract. On a reasoned request, the AD may allow an extension if satisfied of the reasons. Therefore, an invoice or purchase order should specify the payment period and any milestone schedule. An importer should not assume that the earlier six-month rule automatically controls every fresh import under the new regulations.
Contract extension and trade credit are not identical
Extending a payment date under Regulation 9 is not necessarily the same as obtaining trade credit. Deferred-payment arrangements that qualify as trade credit must separately satisfy the applicable Foreign Exchange Management (Borrowing and Lending) Regulations and RBI directions, including any maturity, all-in-cost, lender or reporting restrictions. The bank should assess whether the payment terms create a financing arrangement. A long-dated invoice does not override a separate trade-credit restriction.
| Scenario | Regulatory question | Document/control |
|---|---|---|
| Import payable within contract term | Regulation 9 monitoring | Signed purchase order, invoice, due date, IDPMS reference |
| Late import payment | Reasoned AD extension | Delay note, amended agreement, bank approval |
| Deferred payment financing | Trade-credit rules in addition to Reg. 9 | Tenor, cost, lender, trade-credit reporting |
| Third-party payment | Regulation 8 bona fides | Commercial basis, parties, invoice and bank review |
| Offset against export receivable | Regulation 7 conditions | Counterparty linkage, settlement evidence, AD approval |
Regulation 4: IDPMS Closure Up to ₹10 Lakh
Import Data Processing and Monitoring System (IDPMS) links import documentation with outward remittances and tracks outstanding entries. Regulation 4(2) permits the AD to close an import entry on the importer’s declaration where the Bill of Entry for goods or invoice for services is up to ₹10 lakh, or its foreign-currency equivalent. The declaration must state that payment for the import has been made either in full or otherwise. The importer may also submit a quarterly consolidated declaration for bulk closure of qualifying entries.
This is a documentary simplification, not an exemption from FEMA, Customs or accounting controls. An invoice of ₹12 lakh does not qualify merely because ₹9 lakh remains outstanding; the relevant limit concerns the Bill of Entry/invoice value. The bank must be satisfied as to genuineness. Keep the invoice, Bill of Entry or service evidence, payment proof, credit notes and the exact entry reference so that a later RBI, tax or statutory audit can reconstruct the closure.
IDPMS for services as well as goods
Regulation 18 expressly requires AD banks to enter import-of-services details in IDPMS when the importer submits the relevant declaration and documents. For physical goods, the Bill of Entry is the key customs evidence; for services, a signed agreement, invoice, deliverable record, proof of consumption and remittance documents may be important. A service import cannot be treated as automatically exempt from IDPMS monitoring merely because there is no physical customs Bill of Entry.
Regulation 10: Advance Remittances and Bank Guarantees
Regulation 10(2) requires an importer to route the advance payment and later payments, if any, through the same AD. A change is permitted when the importer has informed both ADs. Regulation 10(3) authorises the AD to permit advance remittance after satisfying itself of the genuineness of the need for advance payment and permits the bank to specify thresholds beyond which a standby letter of credit or guarantee may be required.
The regulation is deliberately more bank-policy based than a universal list of older RBI dollar thresholds. A company should obtain its AD’s published internal policy and SOP under Regulation 19 before treating any guarantee threshold as applicable. A supplier’s pro-forma invoice alone may not satisfy a bank where the counterparty is new, the advance is large, the goods are sensitive or delivery risk is elevated. Payment terms should address inspection, delivery evidence, refund rights, bank guarantee and dispute resolution.
Regulation 12 when goods or services are not imported
If an importer cannot complete the import within the contractual or extended period, Regulation 12(1) requires repatriation of the advance. Under Regulation 12(2), if the advance is not repatriated in time or the relevant IDPMS entry remains unmarked-off as specified, future advance payments require an unconditional irrevocable standby letter of credit or prescribed guarantee. Regulation 18(1)(j) also permits AD closure in an exceptional non-import/non-repatriation situation after the bank is satisfied with reasons; such closure should not be mistaken for automatic extinguishment of the underlying contractual claim or tax consequences.
Third-Party Settlements, Set-Off and Merchanting Trade
Regulation 8 allows an AD to permit third-party receipts and payments if satisfied with the bona fides. The importer should establish why payment is made to a person other than the invoicing supplier, the commercial relationship and a complete audit trail. Regulation 7 allows eligible set-off of export receivables against import payables involving the same overseas buyer/supplier or qualifying overseas group/associate companies, within the permitted export-realisation period. A book journal alone is not proof that a FEMA-compliant set-off was authorised.
Merchanting trade is different from importing goods into India. Regulation 16 requires the time between inward and outward remittance legs not to exceed six months, subject to AD extension on justified request, and ordinarily directs payments to the overseas seller and receipts from the overseas buyer. A merchanting transaction should be identified separately in bank reporting, GST analysis and financial accounts. Misclassifying it as a normal Bill-of-Entry import can create an incorrect IDPMS trail.
Customs, IGST, GST Reverse Charge and Input Tax Credit
Physical goods: customs assessment and import IGST
For imports of goods, customs valuation, classification, basic customs duty, social-welfare surcharge and import IGST, where applicable, arise under Customs and IGST law. A foreign-exchange remittance does not replace the Bill of Entry, customs clearance or evidence needed for input tax credit. Eligible import IGST credit depends on the recipient’s GST status, business use, documentary requirements, blocked-credit restrictions and other statutory conditions. Import duties capitalised into inventory or fixed assets must be separated from recoverable taxes under the accounting policy.
Imported services: place of supply and reverse charge
An Indian recipient of services from a supplier outside India should examine whether the transaction constitutes an import of services under the IGST Act and whether reverse-charge GST is payable. The place-of-supply rules, nature of service, consideration and relationship between supplier and recipient matter. Where reverse charge applies, the recipient may need to pay tax in cash before claiming eligible credit, subject to GST conditions. The fact that the invoice is settled through an AD bank does not determine GST liability.
Income Tax, Withholding, LRS and TCS Distinctions
A payment to a non-resident supplier must be tested for Indian income-tax chargeability under the Income-tax Act, 2025 and the applicable tax treaty. Section 393(2), including its table entry for chargeable non-salary sums to non-residents, is relevant to withholding analysis. A purchase price for imported goods is not automatically royalty or fees for technical services; conversely, a software licence, technical service or embedded intellectual-property right may require a more detailed treaty and domestic-law review. Maintain a written chargeability assessment, tax-residency documentation where relevant, and prescribed remittance forms.
The Liberalised Remittance Scheme (LRS) is a framework for eligible resident individuals and should not be confused with an Indian company’s commercial import remittance. TCS provisions for specified LRS remittances or overseas tour packages do not automatically apply to ordinary business import payments merely because they are cross-border. An importer should identify the legal remitter, payment purpose and the current TCS provision instead of assuming a single percentage for all foreign transfers.
Foreign-Exchange Accounting: AS 11 and Ind AS 21
Where an import creates a foreign-currency monetary payable, AS 11 or Ind AS 21 ordinarily requires initial recognition using the exchange rate at the transaction date and retranslation of the outstanding monetary balance at the reporting date, with exchange differences generally recognised in profit or loss unless a specific exception applies. An advance payment for inventory or a non-monetary asset may require different treatment from a trade payable, including the timing of initial recognition and the relevant interpretation for advance consideration. Entities applying Ind AS should also evaluate Ind AS 109 if they enter into foreign-exchange forward contracts or hedge-accounting arrangements.
Consider a USD 100,000 payable recorded when USD/INR is ₹84 and outstanding at a reporting date when USD/INR is ₹86. Ignoring hedges and special exceptions, the rupee liability rises from ₹84 lakh to ₹86 lakh, creating a ₹2 lakh exchange difference. The accounting entry is not a second import invoice and does not by itself change the customs value. The exchange-difference tax treatment must be tested under the income-tax provisions and applicable accounting method; do not assume the bank settlement gain/loss and book gain/loss always arise in the same period.
| Control area | Illustrative review evidence | Owner |
|---|---|---|
| FEMA payment permission | Import contract, remittance request, AD approval | Treasury |
| IDPMS matching | Bill of Entry/invoice, ORM, bank closure reference | Import operations |
| Advance risk | Refund clause, guarantee/standby LC, supplier confirmation | Procurement/Treasury |
| GST and Customs | BOE, customs assessment, RCM working, ITC register | Indirect tax |
| Non-resident withholding | Chargeability memo, treaty documents, tax challan if required | Direct tax |
| Exchange differences | Spot rate, closing rate, monetary-item reconciliation | Financial reporting |
Internal Checklist for October 2026 Import Transactions
Create a contract-level register with supplier identity, country, currency, invoice and Bill-of-Entry references, payment due date, advance balance, IDPMS status and bank relationship. Reconcile it monthly to accounts payable, bank remittances, customs records and GST registers. For the ₹10 lakh self-declaration route, retain the actual declaration submitted to the bank and the resulting closure acknowledgement. Where an advance remains open, identify the contract end date, extension request, recovery action and any future guarantee restriction.
The amended RBI notification is the controlling source for the new October framework. TaxGuru has reproduced the principal 2026 export-import regulations and the September 2026 amendment. The earlier RBI ₹10 lakh IDPMS/EDPMS relaxation provides useful historical context, but the operative October 2026 authority is Regulation 4. Banks and importers should not mechanically copy superseded instructions into new SOPs.
Frequently Asked Questions
1. Is every import payment due within six months in October 2026?
No universal six-month default should be assumed for fresh transactions. Regulation 9 links monitoring to the contractual period, subject to AD extension and separate trade-credit rules.
2. Can an importer close every IDPMS entry by declaration?
No. Regulation 4 specifies a ₹10 lakh Bill-of-Entry/invoice-value threshold for the simplified route, subject to bank verification.
3. Can quarterly bulk declarations be used for eligible small imports?
Yes. Regulation 4 permits quarterly consolidated declarations for eligible IDPMS closures.
4. Must an advance and final import payment use the same bank?
Ordinarily yes under Regulation 10(2); a change is possible after both ADs are informed.
5. What if an advance is paid but the import never occurs?
Regulation 12 generally requires repatriation within the contract or extended period; further advances may require specified guarantees if unresolved.
6. Does a bank remittance settle GST and income-tax withholding?
No. Customs, import IGST, service-import reverse charge and non-resident income-tax withholding are separate questions.
7. Does the LRS TCS rate apply to company imports?
Not merely because the payment is cross-border. LRS is for eligible resident individuals and must be distinguished from commercial import payments.
8. How is a USD import payable measured at year-end?
Outstanding monetary payables are generally retranslated under AS 11 or Ind AS 21; advances and hedge instruments may have different accounting treatment.
Key Takeaways
- RBI’s 2026 consolidated export-import regulations apply from 1 October 2026.
- Import-payment monitoring follows the underlying contract under Regulation 9, with AD extension possible.
- Eligible IDPMS entries up to ₹10 lakh may be closed on importer declaration, including quarterly bulk declarations.
- Advance payments require genuine underlying transactions and bank review; Regulation 12 addresses failed imports.
- Commercial imports must still satisfy DGFT, Customs, GST, income-tax and accounting requirements.
- LRS/TCS should not be mechanically imposed on a company’s ordinary import remittance.
- Foreign-currency monetary payables and advances require distinct AS 11/Ind AS 21 analysis.
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Disclaimer: This article is a general educational explanation of RBI/FEMA, import payment, tax and accounting rules as at 15 October 2026 and is not legal, foreign-exchange, banking, trade-finance, tax, GST, customs, audit or accounting advice. It is not a recommendation to use any remittance provider, bank, platform, currency, hedge or transaction structure. Regulatory treatment depends on the importer’s residence and status, goods or services, contract, date of transaction, authorised-dealer policy, customs classification, GST facts, tax treaty, supporting evidence and subsequent RBI notifications or amendments. Illustrations are simplified and do not establish eligibility for any remittance, tax credit or accounting treatment. Readers should verify the amended RBI FEMA 23(R)/2026-RB text, AD-bank SOPs, DGFT and customs rules, the Income-tax Act, 2025, GST law and relevant accounting standards with qualified advisers. TaxGuru accepts no responsibility or liability for any foreign-exchange loss, delay, tax, duty, interest, penalty, regulatory proceeding, accounting misstatement, damage, decision or action arising from reliance on this article; its authors, editors, owners, management, employees and associates likewise disclaim liability to the fullest lawful extent.
Source verification note (15 October 2026): RBI official consolidated Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 (Notification FEMA 23(R)/2026-RB, 13 January 2026, amended up to 22 September 2026; effective 1 October 2026), especially Regulations 4, 7–12, 16, 18–20; Income-tax Act, 2025 section 393; IGST/Customs and AS 11/Ind AS 21 framework. TaxGuru links point to verified exact articles/notifications.
