FIRC Full Form: Understanding Meaning and RBI Guidelines
As an Indian exporter, navigating the complexities of international transactions and compliance can feel like solving a complex puzzle. Today, we'll explore a crucial piece of that puzzle: FIRC
FIRC full form is Foreign Inward Remittance Certificate. It is a document issued by banks as proof of receiving international payments. Over the years, regulations around FIRC have changed significantly, creating confusion and mystery around this important document. Let's clear the air and decode the what, who, and why of FIRC.
What is FIRC?
FIRC or Foreign Inward Remittance Certificate serves as a proof of foreign money transfer for exporters in India. Until 2016, AD (Authorised Dealer) Category I Banks were authorised to issue FIRCs to exporters for receiving payments from foreign sources. This document was essential for exporters to obtain after each cross-border payment. It served not only as proof of payment receipt but also as a crucial document for claiming export-related incentives, such as tax exemptions on foreign currency payments received in India.
What is FIRC Full Form?
As we've covered, the full form of FIRC is Foreign Inward Remittance Certificate and for a long time it served as proof of export income from abroad. However, with changing regulations, the function of FIRC has also changed significantly. Let's take a look:
FIRC RBI Guidelines: From FIRC to FIRA
- In 2016, the RBI introduced the Export Data Processing Management System (EDPMS) to digitally record all export-related data.
- With the introduction of EDPMS, the Reserve Bank of India issued guidelines for banks to stop issuing FIRCs for payments received against export of goods. Banks now issue FIRAs (Foreign Inward Remittance Advice) instead of FIRCs for export collections.
FIRA is also interchangeably called FIRS (Foreign Inward Remittance Statement), Bank Inward Remittance Certificate (BIRC) by banks. FIRA/FIRS/BIRC serve the same purpose. As we have seen, along with proof of receiving international payment, it is also essential for claiming export-related benefits and GST refunds. - As per RBI regulations, FIRCs are now issued only for specific financial transactions like receiving inward remittances from FDI and FII. Both FDI and FII indicate investment in foreign countries or projects. The key difference is that FDI involves long-term investments in physical assets, while FII represents short-term investments in financial markets. So, you would need a FIRC from banks if you are receiving returns from foreign investments.
FIRA is often still referred to by its old name, FIRC. While both documents serve the same purpose, FIRC is technically only issued for returns on Foreign Direct Investment (FDI )or Foreign Institutional Investment (FII). For all other export collections, FIRA/BIRC is what you need.
For clarity, we'll use the term FIRC moving forward, but it refers to FIRA throughout.
Who needs an FIRC?
Anyone receiving foreign payments needs FIRC. Beyond goods and service exporters engaging in international trade, many individuals and entities may receive international payments without realising it.
Overall, the following typically require a FIRC:
- Indian exporters receiving international payments.
- Companies in India providing services to overseas companies and receiving payment in foreign currency.
- Salaried individuals working remotely as contractors for international companies, and receiving compensation in foreign currency.
- Freelancers serving international clients and receiving compensation in foreign currency.
- Freelancers service international clients via marketplaces such as Upwork and TopTal.
Why do Exporters Need FIRC?
Beyond compliance, here’s why FIRC is crucial for exporters:
- Goods or services exported are classified as zero-rated supplies, exempt from GST. However, to claim a GST refund for input tax credit, exporters must furnish their FIRC.
- Exporters require FIRC to claim export-related incentives, including exemptions on foreign currency payments received in India.
Who will provide FIRC?
FIRCs are issued by AD Category I banks. You can contact your bank to get your FIRC after receiving your foreign payment. Alternatively, you can also use platforms like Skydo to get your FIRC instantly after every payment.
Who Needs FIRC and Why It’s Important for Exporters?
FIRC (Foreign Inward Remittance Certificate) is essential for anyone receiving foreign payments, including:
- Indian exporters receiving international payments.
- Companies in India providing services to overseas companies and receiving payment in foreign currency.
- Salaried individuals working remotely as contractors for international companies, and receiving compensation in foreign currency.
- Freelancers serving international clients and receiving compensation in foreign currency.
- Freelancers service international clients via marketplaces such as Upwork and TopTal.
Exporters, in particular, rely on FIRC for two key reasons:
- GST Refunds: Since exports are classified as zero-rated supplies, businesses must provide an FIRC to claim a refund on the IGST paid during the export process.
- Export Incentives: Many government schemes offer exemptions and benefits on foreign currency payments, which require an FIRC as proof of remittance.
FIRC is issued by Authorized Dealer (AD) Category I banks, and businesses can obtain it directly from their bank. However, it is usually a cumbersome process requiring multiple follow-ups and most banks charge around INR 500 to issue each FIRC. In contrast, platforms like Skydo offer a fast, hassle-free solution, providing an instant FIRC for free after every foreign payment—no manual requests, no extra costs.
FIRC Certificate Format
This is a sample FIRC document. All crucial remittance details have been masked for security purposes. Now let’s break the content of a FIRC down:
- Name and details of the sender/remitter bank i.e. your client’s bank
- Name and address of the sender, i.e., your client’s details
- Name of the person/org receiving the payment i.e your details
- Transaction number
- The Foreign exchange rate applied to your transaction
- Amount paid in foreign currency
- The amount received in INR/ Indian rupees
- Purpose code of the remittance (e.g., P0802 if your business is a Software Consulting service)
How to get FIRC?
Receiving your export payment directly through your bank can make obtaining an FIRC a lengthy process. You need to submit a request to the bank, and the bank typically takes 7-15 days to provide the FIRC. You may also need to follow up multiple times, and banks often charge at least INR 400 to issue the FIRC, depending on the institution.
Enter yours truly!
Get your FIRC from Skydo Instantly
Getting a FIRC might sound like a hassle, but with Skydo, it's a breeze. Our fully automated payment system along with built-in partnerships with banks, ensures effortless compliance with RBI guidelines, without needing any manual intervention.
When you receive an export payment through Skydo, we automatically generate the required FIRC for you at no extra cost. Just log into our user-friendly dashboard, and you'll find your FIRC ready to download, complete with all the details you need.
What is an eFIRC?
In conversations around FIRC, there are a few more terms that get frequently mentioned, one of them being eFIRC. So what exactly is eFIRC?
- Firstly, it's important to clarify that eFIRC isn't a document or certificate; rather, it's a unique number, issued on EPDMS.
- The eFIRC is typically relevant for exporters of goods or software, where a shipping bill or Softex is recorded on the EDPMS at the time of shipment of the goods or software delivery.
- The exporters of such goods or software must submit their export details and documents to update their EDPMS records and receive the e-BRC (bank realisation certificate). For other types of exporters, this process is not necessary.
- In this situation, an eFIRC is typically needed when an export payment/ foreign exchange transaction is received by a bank different from the exporter’s main bank (the one where the exporter submits their documents).
Imagine you export pottery overseas and have accounts with two banks in India - Bank A (your main bank) and Bank B (secondary bank). You use your main bank, Bank A to handle your export paperwork. However, you receive the foreign remittance/export payment in your secondary account in Bank B. Bank A has proof you exported something, but no record of the money coming back in. An eFIRC is like a messenger in this situation. Bank B, which received your money, will issue an eFIRC for Bank A to close the Shipping Bill (for goods) or SOFTEX (for other transactions) on EDPMS. Bank A can view the eFIRC number on the EDPMS platform and close the EDPMS record.
- eFIRC essentially connects the dots between the paperwork and the money, even if they go through different banks to ensure regulatory compliance.
What is the difference between eBRC and FIRC?
- Exporters, particularly those dealing in physical goods, are quite familiar with the electronic Bank Realisation Certificate (eBRC). This essential document is proof that you, an exporter, have received foreign funds from the overseas buyer/client for the goods or services sold abroad.
- While the Foreign Inward Remittance Certificate (FIRA) validates and confirms export payments, the BRC serves as the second step by confirming that the payment received corresponds to the goods exported.
- Once exporters obtain their FIRC, they can submit it to the bank. The bank then verifies the payment details, matches them with the exported goods, and upon successful validation, issues the BRC.
- e-BRC is often needed in case of goods and software exports where the Shipping bill or SOFTEX is registered on EDPMS i.e the government export portal, and for claiming benefits offered by the Indian government under the Foreign Trade Policy (FTP).
Generally speaking, e-BRC applies mostly to goods and software exporters (under STPI). If you are one of them, you can use this simple decision tree to understand which documents you will need:
Is FIRC mandatory for GST Refund?
Exporting goods and services is considered Zero-Rated Supply, meaning it is subject to 0% GST. However, to claim a GST refund for the input tax credit, exporters must provide the required documents including FIRC. These documents authenticate that the business is claiming a refund because it exported services and couldn't offset its input tax credit as it would in normal domestic business. Without FIRC, claiming a GST refund may not be possible
How to claim GST refund with FIRC?
- To claim your GST refund, the payment received must be in foreign currency. This will be authenticated with the help of FIRC.
- Along with your FIRC, you'll also need the export invoice and a copy of the shipping bill (in case of goods) filed with customs authorities
- You must submit your GST refund application on the GST portal along with all supporting documents, including FIRC. The information in your application must match the details in the FIRC.
- Once the claim has been filed, authorities will verify the FIRC and supporting documents. Authorities may also seek further clarification if required.
- If the application is in order, the refund will be processed and credited to the bank account linked to the GST registration.
Conclusion
As we surge in cross-border transactions, ensuring compliance and safeguarding against illicit activities has become a pressing concern. However, at Skydo, we believe your focus should be on advancing your business, not on grappling with compliance challenges.
With Skydo, enjoy seamless international payments, delivered promptly and without any hidden fees. But that's just the beginning! Every time you receive a cross-border payment, an auto-generated FIRC is readily available for you to download, relieving you of compliance burdens so you can devote your energy to what truly matters: driving your business forward.
What is FIRC?
FIRC or Foreign Inward Remittance Certificate, is a document issued by banks as proof of receiving international payments. Until 2016, AD Category I Banks were authorised to issue FIRCs to exporters for receiving international payments. With the introduction of EDPMS, RBI issued guidelines for banks to stop issuing FIRCs for export collections. Banks now issue FIRAs (Foreign Inward Remittance Advice) instead of FIRCs for export collections.
What does FIRC stand for?
How to get FIRC from bank?
What is FIRC and BRC
Which bank will issue FIRC?
How to get FIRC from HDFC bank?
Can we download FIRC online?
