New FEMA Rules Explained: What Freelancers, Creators, And SaaS Startups Need To Know

RBI governor Sanjay Malhotra yesterday eased concerns over the new foreign exchange reporting framework, clarifying that individuals undertaking transactions of a personal nature would not have to report them. He also cited earnings from overseas tutoring and small software assignments among the transactions that would not require reporting.

The clarification follows concerns among freelancers, creators, and small service exporters about additional paperwork under the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026. The rules, which took effect on October 1, bring goods and services trade under a unified framework.

Malhotra said banks and authorised dealers would handle reporting to the RBI, while exporters could use self-declaration for bills of up to ₹10 Lakh — a threshold that applies per bill, not to annual earnings. For established SaaS startups already reporting software exports, industry participants expect mainly procedural changes.

What Has The RBI Clarified?

Malhotra said individuals’ transactions of a personal nature do not require reporting, irrespective of the amount. Examples include subscriptions to apps, television channels, journals, and newspapers.

His clarification also covered individuals receiving payments for overseas tutoring and small software assignments, extending the reassurance beyond personal spending.

Deputy governor Rohit Jain said the framework aims to simplify trade processes and give authorised dealers greater flexibility. Acknowledging confusion over reporting obligations, he said the RBI would issue FAQs to clarify the requirements.

These FAQs are expected to explain how the clarification applies across different freelance and creator business arrangements. 

What Changes For SaaS Startups And Banks?

Software exporters previously used SOFTEX, while goods exports followed a separate declaration process. Other service exports did not necessarily require equivalent declarations, although obligations to realise and repatriate overseas earnings still applied.

The regulations prescribe an Export Declaration Form (EDF) for services, including software, and permit a single declaration covering a month’s service exports. 

According to CA Abhinarayan Mishra, a cross-border tax and FEMA expert, the broader use of “services” expands the reporting architecture. However, established SaaS companies already have reporting systems, so their changes could largely involve forms and procedures.

Naganand Doraswamy, founder and managing partner at Ideaspring Capital, similarly expects limited changes for startups already filing SOFTEX forms.

“From a founder’s perspective, there’s not a whole lot of change… what was being filed in SOFTEX, they’ll go by and file it in EDF and the banks have to match,” Doraswamy said.

He expects some transitional disruption but said processes should become smoother once the system settles. Banks would undertake more work matching invoices with remittances.

Manav Garg, cofounder and managing partner at Together Fund, said consolidating export reporting through authorised banks could simplify compliance for software and AI startups.

Mishra also expects banks to play a larger role in reconciliation and compliance, making their implementation of the revised processes important for startups.

What Does The ₹10 Lakh Route Allow?

The ₹10 Lakh threshold applies per export bill, not to total annual export earnings. Annual earnings exceeding ₹10 Lakh would therefore not, by themselves, rule out the simplified route for eligible individual bills.

Banks may close export-monitoring entries for bills up to ₹10 Lakh based on an exporter’s declaration that payment has been realised in full or otherwise. Exporters can also submit these declarations quarterly to their authorised dealer for bulk closure of eligible entries in the export-monitoring system.

This simplifies smaller transactions but does not remove every obligation to supply information to banks or constitute a blanket FEMA exemption.

What Reconciliation Issues Could Arise?

Mishra flagged reconciliation challenges where platform charges or deductions leave service providers receiving less than they invoiced, including through platforms such as PayPal.

Similar questions arise for YouTube creators and influencers earning from overseas platforms. Larger creators may have agencies or accountants handling documentation, while smaller creators often maintain their own records.

For service providers covered by the framework, these differences make it important to reconcile invoices, platform deductions, and actual receipts.

What About The Nine-Month Deadline?

Service export proceeds generally must be realised and repatriated within nine months of the invoice date. A 12-month period applies where exports are invoiced or settled in rupees, and authorised dealers may grant extensions on satisfactory grounds. 

It is pertinent to mention that nine months is not a fresh reduction introduced on October 1. The RBI restored this deadline in June after a temporary extension to 15 months. Through an amendment in September, the central bank aligned the incoming regulations with it.

Mishra said larger companies may find it easier to structure contracts around deadlines, while smaller providers could struggle with delayed or disputed payments.

A $1,000 invoice settled for $900, for example, leaves $100 requiring reconciliation. The regulations allow authorised dealers to approve reduced realisation on satisfactory grounds for bills up to ₹10 Lakh. This may be based on self-declaration.

For cases where proceeds remain unrealised beyond one year after the applicable due date or extension, further exports require full advance payment or an irrevocable letter of credit. A disputed payment therefore does not automatically trigger an export ban when nine months expire. 

Why Is RBI Expanding Services Reporting?

Malhotra said the framework would improve services trade data, bringing reporting closer to merchandise trade. Customers already provide information such as purpose codes, while the revised framework seeks additional details.

Mishra said more comprehensive reporting could give policymakers a clearer picture of emerging service exports, including the creator economy, and more timely information on overseas service earnings.

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