Unlocking the Importance of Foreign Inward Remittance Certificate (FIRC) in Cross-Border Transactions

If you're involved in exporting goods & services from India to other countries or an India-based freelancer providing services abroad, your work likely entails cross-border money transfers. These transfers include receiving payments from overseas, and as a result, you need a crucial document known as the Foreign Inward Remittance Certificate (FIRC). This document serves as undeniable proof of the international payments you receive.

Acquiring the FIRC involves a simple process. Once the beneficiary, who is the recipient of the foreign remittance, receives the transfer in their bank account, they apply for the FIRC. They clearly state the purpose of the remittance, and based on this information, the Authorised Dealer (AD) of the Reserve Bank of India (RBI), typically the bank through which the international payments are credited, issues the FIRC.

In this article, we'll delve into the significance of the FIRC and explore its types.

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Types of FIRC Authorised Dealers (ADs) issue two main kinds of FIRC:

1. Physical Foreign Inward Remittance Certificate (FIRC) If your business involves inward remittances related to Foreign Direct Investment (FDI) or Foreign Institutional Investment (FII), both of which adhere to RBI guidelines and involve international payments exclusively through banking channels, you will receive a physical FIRC.

2. Electronic Foreign Inward Remittance Certificate (e-FIRC) ADs report proof of all inward remittances to the Export and Data Monitoring Systems (EDPMS) before issuing the e-FIRC. This electronic version mirrors the physical FIRC. The beneficiary provides the bank with details of payment receipts, outstanding transfers, or advances related to exported goods or services. These details are uploaded to EDMPS, generating an Inward Remittance (IRM) number for issuance of the e-FIRC. The beneficiary receives the e-FIRC within one to two weeks from the foreign currency's cross-border transfer date.

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Foreign Inward Remittance Advice (FIRA) For foreign transfers not covered by the above categories, businesses can apply for Foreign Inward Remittance Advice (FIRA). This advice is legal proof of international payments from exporters or freelancers. 

To obtain a FIRA, the beneficiary requests the partner bank responsible for processing the cross-border transfer, providing essential details such as account number, transfer amount, purpose, and transaction date. After bank verification, the information is uploaded to EDMPS, generating an IRM number for the beneficiary to download the advice.

Information within the FIRC (Foreign Inward Remittance Certificate) contains the following details:

• Beneficiary/Exporter's Name
• Mode of Payment
• Payee's Name and Address
• Bank Authorising the Transaction
• Cheque/TT/DD Number
• Amount (in foreign currency)
• Equivalent Amount in Indian Rupees (numeric and written)
• Recipient's Name
• Prevailing Foreign Exchange Rate
• Purpose of Inward Remittance (e.g., share transfer, export)

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Significance of FIRC Now, let's delve into why the FIRC is so essential:

1. Legal Proof: FIRC serves as legal evidence of foreign exchange inward remittances, closely monitored by RBI. The certificate details transactions involving overseas payments, which ADs report through EDMPS, enhancing transparency in cross-border money transfers.
2. Tax Benefits: For exporters exempt from service tax as outlined in the export of services guidelines, the FIRC acts as crucial evidence for claiming tax benefits. By presenting the FIRC, you can avail relaxation in service tax for specific services, contributing to potential cost savings.
3. Share Transactions: FIRC is indispensable when shares are issued to or transferred from foreign entities or individuals. It provides proof of receipt of share application money and purchases consideration in share transfer cases.
4. Export Promotion: FIRC is essential for export promotion schemes like Export Promotion Capital Goods (EPCG) and advanced licensing requirements. It is crucial documentation submitted to the Director General of Foreign Trade (DGFT).

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In conclusion, the Foreign Inward Remittance Certificate holds immense importance in inward remittances from foreign banks. Exporters and freelancers should diligently obtain this certificate for each cross-border transaction. 

Inkle, for instance, offers a free FIRA for inter-company cross-border money transfers to Indian bank accounts in US Dollar which is downloadable from the TP Payments dashboard within 24 hours of settlement.

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FAQs

Which Bank Issues FIRC for Multiple Account Transfers? 

According to RBI and FEMA provisions, the first Indian bank receiving the foreign currency inward remittance is responsible for issuing the Foreign Inward Remittance Certificate. This is due to its possession of crucial details about the overseas bank that initiated the foreign exchange transfer.

BRC vs. FIRC 

Both the Bank Realisation Certificate (BRC) and the Foreign Inward Remittance Certificate (FIRC) are issued by Authorised Dealers (ADs). However, while FIRC is issued against receiving international payments, the BRC is based on specific documents encompassing a distinct purpose and scope.

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