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Glossary

Key terms and definitions for international payments, banking, and tax compliance in India.

A

ACH Payment

Automated Clearing House — a US electronic payment network used for domestic bank transfers. A low-cost way for US clients to pay Indian freelancers.

C

Correspondent Bank

An intermediary bank that processes international wire transfers between the sender's and receiver's banks. Often adds fees to cross-border payments.

E

EDPMS (Export Data Processing and Monitoring System)

RBI's online system for monitoring export transactions and foreign remittances in India. Banks report all inward remittances here.

F

FEMA (Foreign Exchange Management Act)

India's primary legislation governing foreign exchange transactions. All international payments received by Indian freelancers must comply with FEMA.

FIRA (Foreign Inward Remittance Advice)

A bank-issued document confirming receipt of foreign currency in India. Essential for ITR filing and GST compliance for freelancers.

FIRC (Foreign Inward Remittance Certificate)

The legacy bank certificate for foreign remittances in India, now replaced by FIRA. Still commonly referenced by freelancers and CAs.

FX Markup

The hidden fee banks and payment platforms add on top of the real exchange rate when converting currencies. Typically 1.5-4% for Indian freelancers.

I

Interbank Rate

The exchange rate at which banks trade currencies with each other. Essentially the same as the mid-market rate — the fairest rate available.

L

LUT (Letter of Undertaking)

A declaration filed with GST authorities to export services without paying IGST. Essential for GST-registered Indian freelancers.

M

Mid-Market Rate

The real exchange rate between two currencies, calculated as the midpoint between buy and sell prices. Also called the interbank rate.

P

Purpose Code

An RBI-mandated classification code used in foreign remittances to India. Identifies the nature of the transaction for regulatory reporting.

R

RBI Authorized Dealer (AD Bank)

A bank authorized by the Reserve Bank of India to deal in foreign exchange. All legitimate international payments to India must flow through AD banks.

S

SWIFT Transfer

An international wire transfer sent through the SWIFT network. The most common method for cross-border payments to Indian bank accounts.

W

Wire Transfer

A direct bank-to-bank electronic transfer of funds. The traditional method for sending international payments, often with high fees.

Z

Zero-Rated Supply

A GST classification for exports where the tax rate is 0%. Indian freelancers exporting services can claim zero-rated status with an LUT.