<\/span><\/h2>\n\n\n\nEvery foreign exchange transaction under FEMA falls into one of two buckets, and the compliance burden is completely different depending on which one applies.<\/p>\n\n\n\n
A current account transaction<\/strong> is a payment made in the ordinary course of business, trade, or personal life, and it does not create or extinguish an asset or liability outside India. Paying for imported machinery, sending money for a child’s tuition abroad, or receiving a client’s payment for services rendered are all current account transactions.<\/p>\n\n\n\nA capital account transaction<\/strong> changes what someone owns or owes across borders. Buying shares in a foreign company, taking a loan from an overseas lender, or purchasing property abroad falls here.<\/p>\n\n\n\nThe default rule for each category runs in opposite directions, and this single point causes more confusion than anything else in FEMA.<\/p>\n\n\n\nAspect<\/strong><\/td>Current Account Transactions<\/strong><\/td>Capital Account Transactions<\/strong><\/td><\/tr>Default position<\/td> Freely permitted unless specifically restricted<\/td> Restricted unless specifically permitted<\/td><\/tr> Governing rules<\/td> Foreign Exchange Management (Current Account Transactions) Rules, 2000<\/td> Non-Debt Instruments Rules, 2019 (Central Government) and Debt Instruments Regulations (RBI), split since October 2019<\/td><\/tr> Examples<\/td> Import and export payments, travel, education, medical treatment, remittances for services<\/td> FDI, ODI, ECB, purchase or sale of property abroad, opening a foreign bank account<\/td><\/tr> Who decides restrictions<\/td> Central Government, in consultation with RBI<\/td> RBI and Central Government jointly, depending on the instrument<\/td><\/tr> Common trigger<\/td> Everyday trade and personal remittances<\/td> Investment, borrowing, and asset ownership across borders<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\nCurrent account transactions sit in three schedules under the 2000 Rules. Schedule I lists transactions where drawing foreign exchange is prohibited outright, such as remittances for lottery winnings or for banned magazines. Schedule II and Schedule III list transactions that need government or RBI approval beyond certain limits, such as large gifts or donations. Anything not mentioned in these schedules is generally free to go through an Authorised Dealer bank without special permission.<\/p>\n\n\n\n
<\/span>What Are the New FEMA Export-Import Regulations Effective From 1 October 2026?<\/span><\/h2>\n\n\n\nThe Reserve Bank of India (RBI) has introduced the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026<\/strong>, which will come into force from 1 October 2026<\/strong>. The new regulations supersede the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 and establish a consolidated framework for exports and imports of goods and services, including software.<\/p>\n\n\n\nThe framework was originally notified on 13 January 2026. However, RBI subsequently amended Regulation 5 through Notification No. FEMA 23(R)\/(1)\/2026-RB dated 22 September 2026<\/strong>. The amendment reduces the export realisation period from 15 months to 9 months and the special period under the first proviso from 18 months to 12 months, with the changes effective from 1 October 2026.<\/p>\n\n\n\n<\/span>Key Changes Under the New FEMA Export-Import Regulations<\/span><\/h3>\n\n\n\n<\/span>1. A Unified Export Declaration Form (EDF)<\/span><\/h4>\n\n\n\nThe 2026 regulations introduce the Export Declaration Form (EDF)<\/strong> as the common export declaration framework for goods and services, with software included within services for the purposes of the regulations. For service exports, the EDF is to be furnished within 30 days from the end of the month in which the invoice is issued. A single EDF can cover multiple service export invoices for the month.<\/p>\n\n\n\nThe new framework replaces the separate SOFTEX-based declaration mechanism for software exports from 1 October 2026. Exporters should therefore review their existing software-export reporting process and coordinate with their Authorised Dealer (AD) bank before the new framework takes effect.<\/p>\n\n\n\n
For goods exported through EDI ports, the shipping bill is treated as the export declaration. The regulations also specify the authorities and procedures applicable to exports from non-EDI ports and exports of services.<\/p>\n\n\n\n
<\/span>2. Export Realisation Period Changes From 1 October 2026<\/span><\/h4>\n\n\n\nThe export realisation period under the 2026 regulations was originally set at 15 months. RBI’s September 2026 amendment has now reduced this period to 9 months<\/strong>.<\/p>\n\n\n\nFrom 1 October 2026<\/strong>, the export value must generally be realised and repatriated within:<\/p>\n\n\n\n\n9 months<\/strong> from the date of shipment for goods, except goods exported to a warehouse outside India.<\/li>\n\n\n\n9 months<\/strong> from the date of invoice for services.<\/li>\n\n\n\n9 months<\/strong> from the date of sale of goods from an overseas warehouse.<\/li>\n<\/ul>\n\n\n\nFor exports invoiced and\/or settled in Indian rupees, the applicable period under the first proviso is 12 months<\/strong>.<\/p>\n\n\n\nAn AD bank may allow an extension beyond the specified period when the exporter requests it and the bank is satisfied with the reasons for the delay.<\/p>\n\n\n\n
Important:<\/strong> The earlier figures of 15 months and 18 months should not be used for the post-1 October 2026 position because RBI amended these periods on 22 September 2026.<\/p>\n\n\n\n<\/span>3. Simplified Closure of Small-Value EDPMS and IDPMS Entries<\/span><\/h4>\n\n\n\nThe new regulations introduce a simplified mechanism for small-value export and import transactions.<\/p>\n\n\n\n
For an export where the shipping bill or service invoice is up to \u20b910 lakh, or its equivalent in foreign currency<\/strong>, an EDPMS entry may be closed based on a declaration from the exporter stating that the payment has been realised, either in full or otherwise.<\/p>\n\n\n\nThe exporter may also submit this declaration to the AD bank quarterly for bulk closure<\/strong> of eligible EDPMS entries.<\/p>\n\n\n\nA similar provision applies to imports. Where the Bill of Entry or service invoice is up to \u20b910 lakh, or its equivalent in foreign currency<\/strong>, the IDPMS entry may be closed based on a declaration from the importer that the import payment has been made. Importers can also submit a quarterly declaration for bulk closure of eligible entries.<\/p>\n\n\n\nThis mechanism can reduce administrative work for eligible low-value transactions, but the declaration must accurately reflect the status of the underlying payment.<\/p>\n\n\n\n
<\/span>4. Greater Role for Authorised Dealer Banks<\/span><\/h4>\n\n\n\nThe 2026 framework gives Authorised Dealer banks a greater operational role in handling export and import transactions.<\/p>\n\n\n\n
AD banks are responsible for monitoring EDPMS and IDPMS entries, following up on outstanding transactions, and handling specified extensions, reductions and closures where the regulations permit them. The bank must also satisfy itself about the genuineness of the transaction before processing the relevant receipt or payment.<\/p>\n\n\n\n
The September 2026 amendment goes further for certain older transactions. From 1 October 2026, AD banks will handle export, import and merchanting trade transactions undertaken before 1 October 2026 that previously required RBI approval under the earlier framework, subject to the scope of the new Regulation 20.<\/p>\n\n\n\n
<\/span>5. Set-Off of Export Receivables Against Import Payables<\/span><\/h4>\n\n\n\nThe new regulations allow an AD bank to permit set-off of export receivables against import payables<\/strong> involving the same overseas buyer or supplier.<\/p>\n\n\n\nThe set-off can also involve the overseas group or associate companies of the buyer or supplier, subject to the conditions under the regulations and the applicable period for realisation of export proceeds or any extension allowed by the AD bank.<\/p>\n\n\n\n
This means that, where the prescribed conditions are met, eligible export receivables and import payables can be adjusted rather than requiring separate settlement of each amount.<\/p>\n\n\n\n
<\/span>6. Third-Party Receipts and Payments<\/span><\/h4>\n\n\n\nThe 2026 regulations permit third-party receipts and payments<\/strong> for export and import transactions.<\/p>\n\n\n\nAn AD bank may permit a receipt or payment involving a third party, rather than the direct exporter\/importer and overseas buyer\/supplier, when the bank is satisfied about the bona fides of the transaction.<\/p>\n\n\n\n
Businesses using third-party arrangements should therefore maintain documentation explaining the parties involved and the commercial basis of the transaction so that the AD bank can establish the genuineness of the arrangement.<\/p>\n\n\n\n
<\/span>7. Restrictions When Export Proceeds Remain Unrealised<\/span><\/h4>\n\n\n\nThe regulations introduce a compliance consequence for exporters whose export proceeds remain unrealised for an extended period.<\/p>\n\n\n\n
Where export proceeds remain unrealised beyond one year from the due date for realisation<\/strong>, or beyond an extended period allowed by the AD bank or RBI, future exports by the exporter may be permitted only against:<\/p>\n\n\n\n