If you are an exporter or freelancer based in India, then you will receive payments in the form of foreign currency. In such a situation, a Foreign Inward Remittance Certificate (FIRC) is an important document you must hold. Read to find out more about FIRC Certificate, its types and its importance.
What is FIRC Certificate?
A Foreign Inward Remittance Certificate or FIRC Certificate is a document that acts as proof of inward remittance to India. In other words, if you are an exporter and receive payment in the form of foreign currency, this document will act as proof of that transfer.
Obtaining the FIRC is a long process and can take over six months. The person receiving the payment is called a beneficiary. When the beneficiary receives money from outside India, it will get credited to the account through an authorized dealer (AD) of the Reserve Bank of India (RBI).
Once the money is credited to the account, the beneficiary must apply for the FIRC Certificate stating the purpose clearly. Based on the information provided, the AD (typically a bank) will provide the FIRC. The bank will charge a fee from the beneficiary to issue the foreign remittance certificate.
The FIRC request form contains the following information:
- Exporter or beneficiary’s name
- Mode of payment: Cash or account transfer
- Name and address of the payee
- Name and address of the first bank in the transaction
- Cheque number, telegraphic transfer (TT), or demand draft (DD) number
- Amount in foreign currency
- Amount in Indian rupees in words and numbers
- Recipients’ name
- Foreign exchange rate
- Purpose of remittance, for example, export or issue of shares
Once the above details are entered in an application and submitted to the bank, the signed physical copy of the FIRC certificate is sent to the beneficiary's address. The original copy must be retained safely, as the authorized dealers (AD) will not issue a duplicate.
Importance of Foreign Inward Remittance Certificate
For the RBI
FIRC is a very important document for the RBI. It is legal proof of inward remittance of foreign currency in India. Since the RBI monitors all remittances from abroad, all ADs are supposed to report foreign transactions to RBI's Export Data Processing and Monitoring System or EDPMS. EDPMS is an online application that allows all Indian-authorized banks to report foreign currency remittances to RBI. This increases transparency in foreign currency transactions to and from India.
For an exporter or recipient of foreign currency, the FIRC certificate holds a lot of value. It not only acts as proof of foreign currency remittance but also helps receive tax benefits. Exporters are entitled to tax relaxations on service tax on certain services. While filing income tax, exporters can show the FIRC as proof to receive the tax benefits. Without the FIRC, there will be no tax benefits.
Physical Foreign Inward Remittance Certificate (FIRC Certificate)
Banks and authorized dealers issue physical FIRCs against every foreign currency transaction. However, since 2016, the government has discontinued issuing physical FIRCs. A physical FIRC is only issued against foreign direct investment (FDI) and foreign institutional investment (FII). Apart from these two transactions, for all other transactions, authorized dealers issue e-FIRC.
Electronic Foreign Inward Remittance Certificate (e-FIRC)
An electronic Foreign Inward Remittance Certificate or e-FIRC is the electronic version of a physical FIRC. The banks issue it after uploading the payment receipt on Export Data Processing and Monitoring System (EDPMS).
The beneficiary must request the bank to upload the receipt of payment on EDPMS. Upon the beneficiary's request, the bank will upload the payment receipt on EDPMS and generates an inward remittance (IRM) number. This IRM number will be further referred to as an e-FIRC number.
The e-FIRC will come to your account within 7-15 days of receiving the foreign currency payment. The banks don't charge any fee for issuing an e-FIRC; it is ready to be downloaded if all the details submitted by the beneficiary are correct.
Foreign Inward Remittance Advice (FIRA)
Foreign Inward Remittance Advice (FIRA), or simply Advice, is another name for FIRC. It is legal proof of foreign currency receipt for exporters and freelancers. To get the FIRA or Advice, the beneficiary must first request the bank that processed the foreign currency transaction. While requesting, the beneficiary must include the account number, the transfer amount in foreign and Indian currency, and the date and purpose of the transfer. Upon submitting the request, the bank will verify the details and upload payment details upon the credit of the amount on EDPMS. It will then generate the IRM number or e-FIRC number on the portal. The beneficiary can download the e-FIRC or Advice from the portal using this number.
A FIRC holds great importance to exporters and freelancers. It is legal proof of the payment received from abroad in foreign currency. Hence, as an exporter, you must follow up with the banks to get a FIRC for every inward remittance you get from abroad. It is also important to ensure that you submit all the details correctly, especially the purpose of remittance. You might not get your FIRC certificate from the banks if that goes wrong.
Frequently Asked Questions
What is the full form of FIRC Certificate?
FIRC stands for Foreign Inward Remittance Certificate. It is legal proof of inward remittance of foreign currency in India.
Which is the best method to transfer money internationally?
The best method to transfer money internationally is through wire transfer. It is faster than a money order or demand draft and cheaper than an online transfer.
How to transfer money internationally?
You can transfer money internationally using demand drafts, money orders, online or wire transfers. Each of them has pros and cons concerning safety, speed, and the charges involved.
What is e-FIRC?
An electronic Foreign Inward Remittance Certificate or e-FIRC is the electronic version of a physical FIRC Certificate. E-FIRC is a faster and cheaper way to obtain proof for the inward remittance of foreign currency. In 2016, the government stopped issuing physical FIRCs except for FDI and FIIs.
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