FEMA Export and Import Regulations: A Complete Overview

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.

Exporters and importers have faced difficulties in navigating different rules/regulations for goods and services, overlapping timelines, and inconsistent bank practises. The new Regulations bring exports and imports of goods and services under one consolidated, streamlined framework. This not only provides more clarity and flexibility but also a clear message that non-compliance will no longer be tolerated. The key changes in the revised regulations include:

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.

Conclusion:

The Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 has introduced a more transparent, consolidated, and trader-friendly framework. For compliant businesses, the new framework offers longer timelines, simplified reporting, and reduced burden of compliance.

Although the regulations provide clarity, the compliance conditions are stricter. Restrictions on future trade, proceeds not realized, and stricter monitoring mean that even small compliance gaps can cause a huge impact on the operations of a trader. 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 .