New FEMA Export & Import Regulations 2026: (October Update)

The Reserve Bank of India (RBI) has introduced the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, effective from October 1, 2026. These rules will replace the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015, along with all the Master Directions and circulars that have been causing confusion.

If your business imports raw materials or exports finished goods, your payment cycles, extension requests, and documentation rituals have been built around older FEMA rules that have barely changed in years. The bigger shift is in decision-making, and this has changed a lot. Many of the fixed timelines and monetary caps that RBI itself used to prescribe are now left to your Authorised Dealer (AD) Bank, the bank that handles your foreign exchange transactions, to decide, based on your underlying contract and the bona fide nature of the transaction. 

In this article, we explained to you what has changed on the import side and the export side, and what it practically means for how you run your trade transactions from 1st October 2026.

1. Enhanced Reporting for Export of Services

The reporting requirements for service exporters have finally been significantly simplified:

• Monthly EDF Filing: The Export Declaration Form (EDF) for services must be furnished within 30 days from the end of the month in which the invoice is raised.
• One EDF for multiple clients: You can now file just one EDF for all the services you've sold to multiple clients in a single month, which makes life easier for exporters who deal with lots of clients overseas.
• Relief for Genuine Delays: Authorised Dealer (AD) banks can extend EDF deadlines provided a reasonable explanation is provided by the exporter. Thus, reducing unnecessary penalties in genuine cases.

2. Realization of Export Proceeds

One of the biggest advantages for exporters is the extension of timelines to realize proceeds:

• Transactions in INR: If exports are invoiced or settled in Indian Rupees (INR), exporters will get 18 months from the date of shipment (or invoice for services) to realize and repatriate proceeds. This is significantly longer than earlier regulations.
• Warehouse Exports: Under the new regulations, for goods exported to a warehouse outside India, the 15-month realization period will be counted from the date of sale from the warehouse. Under the older directions, this was counted from the date of shipment of goods.
• Standard Exports: The general realization timeline remains 15 months from the date of shipment or invoice.

3. Consequences for Non-Performance

While compliance has been simplified under the new framework, the consequences for non-performance is stricter and more clearly defined.

• For Exporters: If export proceeds are not realised for more than one year beyond the due date, further exports will be allowed only against full advance payment or an irrevocable Letter of Credit.
• For Importers: If a payment is made in advance but the import does not materialize, the advance must be repatriated.Failure to do so means future advance imports will require: An unconditional, irrevocable standby Letter of Credit, or  |  An international bank guarantee.

4. Compliance simplified for small-value transactions

For small and mid-sized traders, the new Regulations reduce compliance friction by introducing a game-changing "ease of doing business" provision:

• Self-Declaration for Closure: For exports or imports (including services) transactions up to ₹10 lakh, traders can close entries in EDPMS/IDPMS through a simple self-declaration. No complex bank reconciliations are required to close these small-value transactions.
• Quarterly Bulk Closure: Traders can submit quarterly declarations to banks for bulk closure of small-value transactions, providing a confirmation about whether the payment has been realized or made.
• Value Reduction: Similarly, if the export value for a transaction up to ₹10 lakh, a simple declaration from the exporter is now sufficient to reduce the value.

5. Merchanting Trade Transaction (MTT):

• The time gap between the outward remittance and the inward remittance must not exceed six months in a merchanting trade transaction. However, an AD bank may grant an extension of this period if the trader provides reasonable grounds for the delay.
• Payments for these transactions must be made only to the overseas seller, and receipts must come only from the overseas buyer. Third-party receipts or payments may be allowed with reasonable justification and approval from the AD Bank.

What are the Key Changes in the Import Regulations Transactions:

• Relook at your import contracts. As settlement will now largely follow the underlying contract, make sure payment timelines are clearly and specifically stated — RBI's fixed 6-month cushion will no longer be the guiding factor.
• Initiate dialogues with your AD Bank early. Extensions, third-party payments, set-off, and interest on delayed payments are no longer governed by RBI's fixed limits — they will depend on your bank's internal policy, which can vary from bank to bank.
• Fixed advance payment caps are gone, but scrutiny isn't. Your AD Bank will still expect documentation showing the transaction is genuine, especially for high-value or unusual advance payments.
• Keep your IDPMS records current. The ₹10 lakh small-value closure process is unchanged, so this remains a straightforward way to keep your import records clean.

What are the Key Changes in the Export Regulations Transactions:

• You now have more room to realise proceeds, 15 months generally, 18 months if invoiced or settled in INR. Track it carefully anyway: if proceeds remain unrealised beyond the period without an extension, future exports may be permitted only against advance payment or an irrevocable Letter of Credit.
• If you export services, the EDF filing is new, not just relaxed. Where service exporters previously had no declaration to file, you will now need to submit an EDF within 30 days of the invoice month-end.
• For factoring, SEZ warehousing, project exports, or lease/hire exports, RBI is stepping back from case-by-case approval and leaving this to your AD Bank's own SOP. It's worth understanding your bank's policy in advance, rather than finding out mid-transaction.
• If you relied on EDF waivers as a status holder or EOU, check with your AD Bank, the earlier waiver categories are not carried forward automatically.

Conclusion:

The shift from 1 October 2026 is towards a more AD Bank-driven framework. Businesses will have greater flexibility on timelines, extensions, third-party transactions, factoring and more, but the actual outcome in each case will depend on your underlying contract, the bona fide nature of the transaction, and your AD Bank's own internal policy.

In effect, RBI is stepping back from prescribing fixed numbers and stepping into a monitoring role, while your bank becomes the first point of judgment on extensions, write-offs and third-party payments. That places a premium on two things: a clear underlying contract, and a working relationship with your AD Bank where they understand your business well enough to exercise that judgment in your favour. At KDP Accountants, we assist exporters and importers with FEMA expert advisory services and end-to-end compliance support. For any queries, reach out to us at enquire@kdpaccountants.com.

FAQs:

What is AD bank under FEMA?

AD Bank stands for Authorised Dealer Bank, basically this helps on buy, sell, and managing foreign transactions under the Foreign Exchange Management Act (FEMA).

Do I need to inform my bank about these changes, or do they apply automatically?

The new Regulations apply automatically from 1 October 2026. That said, since AD Banks now have discretion on several fronts — extensions, write-offs, third-party payments, it is worth checking with your bank ahead of time to understand how they intend to apply their internal policy.

What happens to import or export transactions already in progress on 30 September 2026?

The new framework is designed to apply prospectively, and actions already taken or approved under the old regulations are expected to continue to hold good. If you have a transaction spanning the transition, it is worth confirming the treatment with your AD Bank rather than assuming either way.

Is the ₹10 lakh small-value closure threshold changing?

No. The ₹10 lakh threshold for closing small-value IDPMS and EDPMS entries based on a simple declaration continues unchanged under the new framework.

 

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Ms. Isheeta is a CA Final student with hands-on experience in the domains of Direct Taxation and the Foreign Exchange Management Act (FEMA). She has been actively involved in advising clients on setting up subsidiaries outside India, providing end-to-end support on structuring, regulatory approvals, and ongoing compliances. Her experience also includes handling Foreign Direct Investment (FDI) compliances and advising on cross-border transactions in accordance with RBI regulations. She has extensive practical exposure in preparing and filing Income Tax Returns (ITRs) for individuals and businesses, as well as drafting and handling responses to various income-tax notices, including scrutiny, reassessment, and compliance-related communications, ensuring timely and accurate representation before tax authorities.
Additionally, she has assisted in litigation matters before the Reserve Bank of India (RBI) and the Income Tax Appellate Tribunal (ITAT), gaining valuable exposure to regulatory proceedings and appellate practice. Driven by a strong learning mindset, she aims to build deep technical proficiency while contributing effectively to complex advisory, compliance, and litigation engagements.


Ms. Krisha Mehta is a CMA Intermediate aspirant currently gaining hands-on experience at Kamdar Desai and Patel LLP, where she works in the domain of Foreign Exchange Management Act, 1999 (FEMA). She has developed a strong interest in cross-border financial transactions and has been exposed to key areas such as foreign investments, Overseas Direct Investment (ODI), External Commercial Borrowings (ECB), and regulatory reporting under the Reserve Bank of India (RBI) framework through her practical training.
Keen to build deeper expertise in FEMA compliance, foreign investment regulations, and cross-border advisory. With a proactive learning approach and attention to detail, she aims to provide thoughtful insights and grow as a professional in the field of global finance.