RBI Export-Import Regulations 2026: FEMA Compliance for Cross-Border Trade

What Changed: India's Trade Compliance Framework Overhauled

On January 13, 2026, the Reserve Bank of India notified the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 under Notification No. FEMA 23(R)/2026-RB. The regulations were published in the Official Gazette, Extraordinary, Part III, Section 4, dated January 15, 2026, and announced on January 16, 2026 together with the Directions on Export and Import of Goods and Services, issued as A.P. (DIR Series) Circular No. 20 (RBI/2025-26/194). Both come into force on October 1, 2026. From that date the 2026 Regulations supersede the FEMA (Export of Goods & Services) Regulations, 2015, and the Directions supersede the Master Direction on Export of Goods and Services, the Master Direction on Import of Goods and Services, and the 167 A.P. (DIR Series) circulars listed in their Annex.

For foreign companies operating in India through subsidiaries, branch offices, or liaison offices, this overhaul directly impacts how cross-border trade transactions are documented, reported, and settled. The new framework consolidates export and import rules into a single regulation, introduces a unified Export Declaration Form, and creates simplified closure mechanisms for small transactions. It also resets the period within which export proceeds must be brought back to India. Nine months applies to exports made up to September 30, 2026; Regulation 5 of the 2026 Regulations moves the general period to fifteen months from October 1, 2026, and to eighteen months where the export is invoiced or settled in Indian Rupees.

This guide covers every compliance change that matters for foreign-owned businesses engaged in cross-border trade with or through India.

Unified Export Declaration Form: One Form to Replace Two

The Consolidation

The 2026 Regulations consolidate the declaration requirements for exports of goods, services, and software into a single Export Declaration Form (EDF). Previously, exporters needed an EDF for the export of goods and a separate SOFTEX form for software exports. This dual-form system created unnecessary complexity, particularly for IT companies and software exporters who had to coordinate with both Authorized Dealer (AD) banks and Software Technology Parks of India (STPI).

Filing Requirements by Export Type

AD Bank as Specified Authority for Software

A significant operational change: Regulation 2(1)(f)(iii) of the 2026 Regulations names an Authorized Dealer or Software Technology Parks of India as the specified authority for software exported from a Domestic Tariff Area. STPI is not abolished, but STPI certification stops being compulsory. Businesses engaged in software, IT, or ITeS can route software export declarations through their AD bank directly, eliminating a compliance step that often caused delays. In a Special Economic Zone the specified authority remains the Development Commissioner. Where the specified authority is not an Authorised Dealer, Regulation 3(3) requires it to forward the duly authenticated EDF to the exporter's AD bank. Regulation 3(2) sets the deadline for the service and software EDF at 30 days from the end of the month in which the invoice is raised, allows a single EDF covering every recipient billed in that month, and lets the AD bank extend the period on a reasoned request. The words SOFTEX and certification do not appear in the 2026 Regulations at all.

Export Realization Timelines

Exports Made Up to September 30, 2026: Nine Months

An exporter must realise and repatriate the full value of goods, software or services within nine months from the date of export. This is stated in paragraph A.2(i) of the RBI Master Direction on Export of Goods and Services and applies to every exporter, including units in Special Economic Zones, Status Holder Exporters, Export Oriented Units, and units in Electronic Hardware Technology Parks, Software Technology Parks and Bio-Technology Parks.

The period moved twice in recent years. It was raised from nine to fifteen months by Notification No. FEMA 23(R)(7)/2025-RB dated November 13, 2025, and restored to nine months by Notification No. FEMA 23(R)(8)/2026-RB dated June 5, 2026. Both notifications amended regulation 9 of the 2015 regulations, which stay in force until September 30, 2026. Exporters who set their internal tracking to fifteen months during that window should reset it to nine months for exports made up to that date.

Exports Made From October 1, 2026: Fifteen Months, or Eighteen on Rupee Invoices

Regulation 5 of the 2026 Regulations replaces the nine-month rule when it takes effect. The full export value must then be realised and repatriated within fifteen months from the date of shipment for goods and from the date of invoice for services. Where the export is invoiced or settled in Indian Rupees, the period is eighteen months. Project exports run to the payment terms of the underlying contract. The AD bank may allow an extension on a request from the exporter citing reasons for the delay, and the 2026 Regulations set no ceiling on how long an extension may run.

Read the two regimes by the date of the export, not by the date the proceeds arrive. An export shipped in August 2026 keeps its nine-month clock; an export shipped in November 2026 gets fifteen months.

Realization Periods

For foreign companies with Indian subsidiaries that export goods or services, the nine-month clock runs from the date of export, and missing it is a FEMA contravention. Where a buyer pays late for reasons outside the exporter's control, the AD Category-I bank can extend the period by up to six months at a time, provided the transaction is not under investigation and the exporter declares that the proceeds will be realised in the extended period. From October 1, 2026 the base clock becomes fifteen months and the six-month cap on each extension falls away, leaving the length of an extension to the AD bank's judgement on the reasons cited.

Warehouse Exports: A Separate Clock

Goods exported to a warehouse established outside India run on their own clock. For exports made up to September 30, 2026, proceeds must be realised within fifteen months from the date of shipment of the goods, under paragraph A.2(iii) of the Master Direction. This is a long-standing rule and is unrelated to the general realisation period, which is nine months until that date. From October 1, 2026, Regulation 5(1)(b) of the 2026 Regulations keeps warehouse exports at fifteen months but starts the count from the date of sale of the goods from the warehouse rather than the date of shipment, which is the more generous measure for slow-moving stock. For goods exported to Bharat Mart specifically, A.P. (DIR Series) Circular No. 03 dated April 23, 2025 allows AD banks to let exporters realise and repatriate the full export value within nine months from the date of sale of the goods from the warehouse; that circular is not on the list of 167 circulars the 2026 Directions supersede.

Consequences of Non-Realization

If export proceeds remain unrealized beyond one year from the due date (or any extended period granted by the AD bank or RBI), the exporter faces a significant restriction: all future exports must be conducted against full advance payment or an irrevocable Letter of Credit. This penalty effectively locks the exporter into secured payment terms until the unrealized proceeds are recovered or the matter is resolved.

Under Section 13 of FEMA, penalties for non-repatriation of export proceeds can reach up to three times the amount involved. Additionally, continuing contraventions attract an additional penalty of INR 5,000 per day. The Enforcement Directorate can initiate adjudication proceedings, making timely realization a critical compliance priority.

Import Payment Regulations

Contract-Based Import Timelines

The 2026 framework introduces a significant change for import transactions: the timeline for import payments is now based on the underlying contract rather than a fixed statutory period. This revision provides greater flexibility to importers in managing their funds and operations, particularly for capital goods imports with extended delivery and commissioning schedules.

Advance Remittance Rules

Importers can make advance payments for imports, but specific conditions apply:

• General imports: Advance remittances are permitted through AD banks, subject to the import being completed within the contract period
• Gold and silver: Advance remittances for gold and silver imports are prohibited unless specifically permitted under FEMA or its subordinate regulations
• Non-completion penalty: If the importer fails to import goods within the contract period or extended period, the advance payment must be repatriated to India

Letter of Credit Requirement for Defaulting Importers

If an advance payment is not repatriated by the importer within the contract period, and the Import Data Processing and Monitoring System (IDPMS) entry has not been marked off, any future advance payment for imports by that importer requires an unconditional, irrevocable standby Letter of Credit or guarantee from an international bank of repute, or a guarantee from an AD bank in India backed by a counter-guarantee from an international bank.

EDPMS, IDPMS, and FETERS Compliance

How the Monitoring Systems Work

All cross-border trade transactions flow through three RBI-maintained monitoring systems:

• EDPMS (Export Data Processing and Monitoring System): Tracks all export transactions from declaration to realization of proceeds
• IDPMS (Import Data Processing and Monitoring System): Monitors import transactions from payment to receipt of goods
• FETERS (Foreign Exchange Transactions Electronic Reporting System): Records inward remittances tagged with purpose codes

AD banks enter transaction details into these systems, and any unreconciled entry creates a compliance red flag that regulators can trace directly to the business. For foreign-owned Indian subsidiaries engaged in trade, ensuring that EDPMS and IDPMS entries are promptly closed is critical to maintaining a clean compliance record.

Non-EDI Port Requirements

For goods exported through non-Electronic Data Interchange (EDI) ports, AD banks must input EDF details into EDPMS within five working days of receipt. This tightened timeline ensures that even exports through smaller, non-automated ports are captured in the monitoring system promptly.

Simplified Closure for Small Transactions

The 2026 Regulations introduce a simplified closure mechanism for small-value transactions. Under the provisos to Regulation 4(2), open EDPMS and IDPMS entries can be closed based on a self-declaration by the exporter or importer for transactions where the shipping bill, bill of entry or invoice does not exceed INR 10 lakh (approximately USD 12,000). The declaration can be filed per transaction or submitted quarterly for bulk closure of entries. The same INR 10 lakh threshold appears in the proviso to Regulation 6, which lets an AD bank accept a declaration in place of a case-by-case approval where an exporter under-realises or fails to realise the full export value. This is a significant operational relief for businesses with high volumes of small-value cross-border transactions, and the 2026 Regulations extend it to the import side for the first time.

AD Bank Obligations and Enhanced Role

The 2026 framework substantially expands the role and obligations of Authorized Dealer banks, making them the primary compliance gatekeepers for cross-border trade.

Key AD Bank Responsibilities

• Internal policies and SOPs: AD banks must establish comprehensive Standard Operating Procedures covering approvals, documentation, timelines, and grievance redressal for trade transactions
• Extension authority: AD banks are now authorized to grant extensions for both export and import timelines for goods and services, reducing the need for RBI-level approvals
• Routing flexibility: Export or import transactions should ideally be routed through the same AD bank, but the 2026 framework allows transactions through another AD bank provided both banks are duly informed
• No penalties for regulatory delays: Regulation 19(3) bars an AD bank from levying any charge or penalty on its constituent for that constituent's regulatory delay or violation, and requires its charges to be reasonable and proportional to the services rendered.

Impact on Foreign-Owned Businesses in India

Subsidiaries Engaged in Export

Foreign-owned private limited companies in India that export goods or services work to a nine-month realization period until September 30, 2026, a fifteen-month period after that, and the unified EDF. Key action items include updating internal trade documentation processes, training finance teams on the single EDF format, and ensuring AD bank coordination for EDPMS entry and closure.

IT and software services subsidiaries gain the most from STPI ceasing to be the compulsory route. Companies can furnish the software export declaration directly to their AD bank as specified authority, eliminating a step that often took 2-4 weeks.

Subsidiaries Engaged in Import

Indian subsidiaries that import raw materials, components, or capital goods from parent companies or group entities benefit from the contract-based import timeline. This is particularly relevant for manufacturing wholly-owned subsidiaries that import specialized equipment with long delivery cycles.

However, subsidiaries must ensure that import payments are completed within the contract period to avoid the Letter of Credit requirement for future advance payments. Intercompany trade between the parent and subsidiary should be structured with clear contractual timelines that align with FEMA requirements.

Branch Offices and Liaison Offices

Branch offices engaged in export activities must comply with EDF filing requirements. Liaison offices, which are generally restricted to liaison and market research activities, are not typically involved in trade transactions. However, if a liaison office is involved in facilitating trade (such as coordinating procurement), it should ensure that the actual trade entity complies with the 2026 regulations.

Compliance Checklist for October 1, 2026 Transition

Foreign companies operating in India should prepare for the October 1, 2026 effective date by completing the following steps:

1. Audit current trade processes: Review all existing export and import processes, documentation, and AD bank relationships
2. Transition to unified EDF: Update internal forms and processes to use the single EDF format. Train relevant staff on the new declaration requirements
3. Review realization tracking: Confirm internal monitoring is set to the nine-month realization period restored on June 5, 2026 for exports made up to September 30, 2026, and build a second rule for exports made from October 1, 2026, which run to fifteen months, or eighteen months on Rupee invoices. Flag warehouse exports separately, since those run to fifteen months from the date of shipment now and from the date of sale from the warehouse after the changeover
4. Update AD bank SOPs: Coordinate with your AD bank to understand their updated internal policies and ensure alignment with the new regulatory framework
5. Review import contracts: Ensure all import contracts include clear delivery and payment timelines that can be demonstrated to AD banks and regulators
6. Implement small-transaction closure: Identify transactions below INR 10 lakh that can benefit from the simplified self-declaration closure mechanism
7. Update EDPMS/IDPMS reconciliation: Establish a monthly process to reconcile EDPMS and IDPMS entries and close completed transactions promptly
8. Brief management: Ensure CFOs and compliance officers understand the penalty provisions, including the advance payment/LC restriction for non-realization and the Section 13 FEMA penalties

Transfer Pricing and Intercompany Trade Considerations

Arm's Length Pricing for Related-Party Trade

Foreign companies trading with their Indian subsidiaries face heightened transfer pricing scrutiny on intercompany export and import transactions. The Indian transfer pricing authorities actively benchmark the pricing of goods and services traded between related parties, and any deviation from arm's length pricing can result in income adjustments, penalties, and prolonged litigation.

Under the 2026 framework, the FEMA compliance requirements for trade documentation operate independently of transfer pricing obligations. However, the two regimes interact in critical ways. The pricing declared in the EDF must be consistent with the transfer pricing documentation maintained by the Indian subsidiary. Any discrepancy between the customs declared value, the EDF value, and the transfer pricing benchmarked value can trigger investigations by both customs authorities and the transfer pricing officer.

Customs Valuation and FEMA Alignment

For imports from a foreign parent company, the customs valuation rules under the Customs Valuation (Determination of Value of Imported Goods) Rules apply in addition to FEMA requirements. Related-party imports are subject to enhanced scrutiny by customs authorities to ensure that the declared value is not artificially reduced to minimize customs duty.

Similarly, for exports to related parties, the transfer pricing officer may examine whether the export price is artificially suppressed to shift profits outside India. The FEMA requirement to realize full export proceeds within the stipulated timeline creates an additional enforcement mechanism, as unrealized proceeds are flagged in EDPMS and can prompt regulatory inquiries.

Withholding Tax on Service Exports

Indian subsidiaries providing services to foreign parent companies must ensure proper invoicing and documentation under both FEMA and the Income Tax Act. Service exports are generally zero-rated for GST purposes, but the Indian subsidiary must maintain evidence that the services were consumed outside India. Additionally, the payment received from the foreign parent for services must be realised within the nine-month period set by paragraph A.2(i) of the Master Direction, or within fifteen months under Regulation 5(1)(a) of the 2026 Regulations for services invoiced from October 1, 2026.

Penalties and Enforcement Framework

FEMA Penalty Structure

The penalty provisions under Section 13 of FEMA apply to both export and import contraventions under the 2026 framework. The key penalties include:

Compounding of Offences

Under Section 15 of FEMA, exporters and importers can apply for compounding of offences with the RBI or the Enforcement Directorate. Compounding allows the entity to settle the contravention by paying a compounding fee, avoiding prolonged adjudication proceedings and potential prosecution. The compounding fee is determined based on the nature and gravity of the contravention, the period of delay, and the cooperation of the applicant.

For foreign companies, compounding is often the pragmatic route when export proceeds remain unrealized due to customer default or when EDF filing deadlines are missed due to operational transitions. The 2026 framework does not change the compounding mechanism under FEMA, but the expanded AD bank extension authority may reduce the number of contraventions that require compounding.

Import Export Code and Related Requirements

Foreign-owned companies engaged in cross-border trade must hold a valid Import Export Code (IEC) issued by the Directorate General of Foreign Trade (DGFT). The IEC remains a prerequisite for initiating any export or import transaction. Under the 2026 framework, the IEC must be linked to the AD bank's systems for seamless EDPMS and IDPMS reporting.

Additionally, companies must ensure GST registration is in place, as GST compliance is integrated with customs and trade documentation. Exports are zero-rated under GST, but proper documentation through shipping bills and EDF is required to claim input tax credit refunds on exported goods and services.

Common Mistakes Foreign Companies Make

• Misalignment between transfer pricing and EDF values: Ensure the pricing declared in the Export Declaration Form matches the arm's length price documented in transfer pricing reports. Discrepancies invite scrutiny from both customs and tax authorities.
• Ignoring EDPMS/IDPMS closure: Open entries in the monitoring systems create automatic red flags. Establish a monthly reconciliation process to close completed transactions promptly.
• Running one realization period across the changeover: The fifteen-month period applied between November 13, 2025 and June 4, 2026, Notification No. FEMA 23(R)(8)/2026-RB restored nine months from June 5, 2026, and Regulation 5 of the 2026 Regulations returns the general period to fifteen months for exports made from October 1, 2026. Tracking sheets need the rule keyed to the date of export rather than a single global setting.
• Failing to obtain IEC before first export: The Import Export Code must be obtained before initiating any trade transaction. Operating without an IEC is a regulatory violation under both FEMA and the Foreign Trade Policy.
• Not coordinating AD bank changes: When switching Authorized Dealer banks, ensure both the old and new AD banks are informed and all open EDPMS/IDPMS entries are properly transferred.

Sector-Specific Implications

IT and Software Services Companies

Indian IT subsidiaries of foreign companies benefit significantly from the unified EDF and the end of compulsory STPI routing. Under the previous framework, software exports required separate SOFTEX forms filed with STPI, adding two to four weeks to the compliance cycle. The 2026 Regulations make the AD bank an equally valid specified authority, so STPI routing becomes optional rather than compulsory. Realization timing still needs attention: the nine-month period runs from the date of export until September 30, 2026, which can be tight for large enterprise contracts where payment milestones are tied to project deliverables rather than fixed calendar dates. An AD bank extension of up to six months at a time is the route where a milestone slips. Services invoiced from October 1, 2026 get fifteen months from the date of invoice, which removes much of that pressure.

Manufacturing and Trading Companies

Manufacturing subsidiaries that both import raw materials and export finished goods face a dual compliance obligation under the 2026 framework. These companies must ensure IDPMS entries for raw material imports are closed within the contract period while simultaneously tracking EDPMS entries for finished goods exports within the nine-month realization window, or the fifteen-month window for goods shipped from October 1, 2026. Companies engaged in foreign direct investment in India's manufacturing sector should establish integrated trade compliance dashboards that track both import and export monitoring system entries.

E-Commerce and Digital Services

Digital services companies exporting from India face unique challenges under the 2026 framework. SaaS subscriptions, digital advertising, and platform services often involve thousands of micro-transactions across dozens of countries. The simplified closure mechanism for transactions below INR 10 lakh provides significant relief for these businesses, but companies must still ensure that aggregate exports are properly declared through the unified EDF and that proceeds are realized within the stipulated timeline.

Key Takeaways

• Notification No. FEMA 23(R)/2026-RB of January 13, 2026 consolidates India's export and import trade compliance framework into a single regulation, effective October 1, 2026, with the accompanying Directions superseding both Master Directions and 167 circulars
• Export proceeds must be realised within nine months of the date of export for exports made up to September 30, 2026, and within fifteen months under Regulation 5 of the 2026 Regulations for exports made after that, or eighteen months where the export is invoiced or settled in Indian Rupees
• A unified Export Declaration Form replaces the separate EDF and SOFTEX forms, with AD banks named alongside STPI as a specified authority for software exported from the Domestic Tariff Area
• Small transactions below INR 10 lakh benefit from simplified self-declaration closure in EDPMS and IDPMS
• Non-realization penalties remain severe: future exports restricted to advance payment or LC, plus FEMA penalties up to three times the amount involved
• Transfer pricing alignment between EDF values and arm's length documentation is essential for intercompany trade to avoid dual regulatory scrutiny