Foreign Inward Remittance Certificate (FIRC) is an important certificate for the exporter merchants in India. This blog explains what Foreign Inward Remittance Certificate is, its importance for the international sellers in India, its process, and also, get an understanding of the related terms.
What is Foreign Inward Remittance Certificate (FIRC)?
The document that is used as the evidence or testimonial for the payment transfers made from the foreign countries to India is the Foreign Inward Remittance Certificate, also known as FIRC.
This certificate can be submitted as proof before various authorities for the receipt of the payment in the foreign currency by the businesses or individuals.
When they receive the payments from abroad, the amount is credited to their account via an Authorised Dealer (AD) (explained further). They need to have a bank account in the authorized bank to accept the foreign payment.
As per the RBI and FEDAI (Foreign Exchange Dealers Association in India) guidelines, only the AD Category I can issue FIRC.
Types of FIRC
As per the RBI Regulations in 2016, AD Category I can issue the below 2 types of FIRC documents as proof of the foreign payments in India:
Physical FIRC was received before the new guidelines issued in 2016. It was issued for the foreign receipts for FDI (Foreign Direct Investment) and/or FII (Foreign Institutional Investment)
In 2016, physical FIRC was stopped. As per the RBI, all the payment transfers to Inda are to be reported to EDPMS by the AD Category I Banks. When the exporter requests, the banks issue electronic FIRC to EDPMS for these types of transfers including the advances as well as outstanding payments. Thus, e-FIRC and FIRC terms are now used interchangeably.
Bank Realization Certificate (BRC) vs Foreign Inward Remittance Certificate (FIRC)
The AD issues both the BRC (Bank Realization Certificate) and FIRC (Foreign Inward Remittance Certificate) with regard to the receipt of the foreign funds.
However, in terms of any foreign receipt, the FIRC is issued; such as the receipts of the advance payments for the export incomes, ocean or airfreight, salary/wages for consultancy charges, etc.
Whereas, the export businesses get the BRC issued on each shipment of the proceeds of the exports.
Incentives, import duty exemptions, other financial assurances are given to the export businesses for the purpose of export promotion. For these benefits, the agencies need to check the proof of the export. These documents act as such proof.
Before we proceed further with FIRC, let us first understand a few related terms:
Export Promotion Capital Goods (EPCG) Scheme
This scheme facilitates the import of capital goods to be used before, during, and after production, to produce quality goods. This is at zero customs duty. The purpose is to raise the competitiveness of manufacturing in India.
Export Data Processing and Monitoring System (EDPMS)
Reserve Bank of India introduced an online software for all the banks in 2014. It was for the transactions of the bank with the exporters and to bring them online. It is known as The Export Data Processing and Monitoring System (EDPMS). This introduced the Foreign Inward Remittance Statement (FIRS).
Inward Remittance (IRM)
When the beneficiary bank receives the statement from the remitter bank and is satisfied with the documents, it generates Inward Remittance (IRM) on EDPMS. IRM is uploaded after the payment is credited to the exporter’s bank account.
Authorized Dealer (AD)
RBI provides the license to the Authorised dealers (AD) for the buy and sell of the foreign currencies. An AD code is to be submitted by the exporter with the Indian customs when shipping the products to foreign countries.
Import – Export Code (IEC)
IEC is an important ID for the businesses to carry out the import and exports. The import or export activities cannot be carried out without the Import – Export Code provided by the Directorate General of Foreign Trade (DGFT).
As per the regulations in India, the purpose code is added with the cross-border transactions to provide the reason for the payment. Thus to determine the type of transaction to the foreign country the purpose code is used.
Now, let us continue with our topic Foreign Inward Remittance Certificate (FIRC).
Importance of Foreign Inward Remittance Certificate (FIRC)
FIRC traces the transfer of funds from the start point to the endpoint. It is a testimonial towards the foreign payment transfer. Below are some of the purposes when the FIRC plays an important role:
- When the person or the company is outside of the country (NRI or foreign) to whom you have issued the shares, the FIRC would act as the proof of the receipt of the share purchase consideration.
- It is proof of the safeguard of the fund movement for money laundering and legal issues in case any of your payments are doubted as suspicious
- FIRC is to be submitted to the DGFC for various purposes such as EPCG and Advance License.
- FIRC is the proof for the export of the services and the money received for the same. The GST is not levied on the services exported, and thus FIRC acts as the proof in the GST exemptions. Similarly, it is required for service tax refunds, exemptions on the Customs Duty, etc.
The process to request the FIRC
How to get the FIRC or advice? Here’s the explanation and the guide for the same.
You can get an e-FIRC if your transaction is eligible to be reported in EDPMS. The regulations from the RBI and the bank of the receipt of the remittance need to be followed.
FIRS certificate will be needed by the beneficiary, once the payment is credited. The other terms for this are Foreign Inward Remittance Advice (FIRA) or Advice. The request for the FIRS needs to be sent to the bank that first processed the foreign transaction.
Further, send a letter with the transfer amount, transfer date, account number, UTR number, purpose code, and recipient name; to get the Foreign Inward Remittance Certificate (FIRC). FIRC/advice will be sent to the recipient physically or electronically after he pays for its issuance. After this, the IRM is generated.
Details in the Format of FIRC
The format of the e-FIRS format includes the details of the beneficiary such as name, account, bank and address, name and address of the first beneficiary bank handling the foreign transaction, remitter’s name and address, the purpose of the transaction, the amount in the foreign currency, INR and the rate of exchange, etc.
Who needs FIRC?
FIRC is required by the person or the business that receives the funds from abroad. It can be a freelancer, an eCommerce business, an employee, etc.
PayKun Banking Partners issues the e-FIRS against the transactions processed through PayKun. After reading this blog, we hope that the importance of the FIRC can be clearly understood. It is a vital document of proof for the individuals, merchants, businesses, or freelancers who process and receive the foreign proceeds in India.