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FEMA & Cross-Border Transactions

FEMA Export Proceeds Write-Off

Export Write-Off

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Overview

Export proceeds write-off is the formal regularisation of export receivables that will never be realised — the exporter's written acknowledgment that a particular invoice will not be paid. Under the Foreign Exchange Management (Export of Goods and Services) Regulations 2015, an AD bank may permit the write-off of unrealised export proceeds within the limits prescribed — up to 5% of the export proceeds realised in the previous financial year, per Regulation 9 of the Regulations (VERIFY: Regulation 9 and the current write-off limits and conditions), with amounts beyond the limit requiring the RBI's prior approval.

The write-off is the lawful exit for a dead receivable. Without it, the unrealised invoice remains a FEMA contravention on the exporter's record — an export whose proceeds were never realised and never regularised. The write-off converts the default into a permitted outcome, subject to the conditions the framework prescribes: the genuine business reason, the documentary evidence, and the AD bank's (or RBI's) approval.

The cost of leaving dead receivables un-write-offed is that they accumulate into a FEMA exposure: at the audit, the exporter's FEMA compliance shows the unrealised proceeds; at the compounding stage, the amount involved is larger; and the exporter carries the tax question too — a receivable written off may interact with the income computation under the Income Tax Act 1961 (VERIFY: the tax treatment of export receivable write-offs).

This service is for exporters with unrealised export receivables that need write-off. We assess each receivable against the write-off conditions under the Export Regulations 2015, prepare the application with the evidence, obtain the AD bank's permission within the prescribed limit or the RBI's approval beyond it, and manage the records and the tax position of the write-off.

How It Works

  1. 1

    Receivable Assessment

    We review the unrealised receivables and their eligibility for write-off.

    Harun Raaj & Associates does this2-3 days
  2. 2

    Limit & Route Determination

    We determine whether the write-off falls within the AD bank limit or needs RBI approval.

    Harun Raaj & Associates does this1-2 days
  3. 3

    Application & Evidence

    We prepare the write-off application with the documentary evidence of the dead receivable.

    Harun Raaj & Associates does this1 week
  4. 4

    Approval & Execution

    We obtain the AD bank or RBI approval and execute the write-off.

    Harun Raaj & Associates does this1-4 weeks
  5. 5

    Records & Tax Position

    We update the records and advise on the tax treatment of the write-off.

    Harun Raaj & Associates does this1 week

Frequently Asked Questions

Under what circumstances can an Indian exporter write off unrealised export proceeds without RBI approval?
Authorised Dealer (AD) banks are empowered to permit write-off of unrealised export bills under the Foreign Exchange Management (Export of Goods and Services) Regulations 2015 read with RBI's Master Direction on Export of Goods and Services, without reference to RBI, if the write-off does not exceed 5% of the export proceeds realised in the previous calendar year. Additional conditions include: the exporter must be a genuine exporter with a satisfactory track record, the GR/SDF/SOFTEX form must have been submitted, and the aggregate write-off including that allowed by the AD bank in earlier years must remain within the 5% threshold. Situations where write-off is permitted without this limit include cases where the buyer is adjudicated bankrupt by a competent court or where the amount is below USD 10,000 per bill.
What is the maximum period within which export proceeds must be repatriated, and when does a write-off become necessary?
Under the Foreign Exchange Management (Export of Goods and Services) Regulations 2015 and the RBI Master Direction on Export of Goods and Services, export proceeds must be realised and repatriated to India within 9 months from the date of export for goods, and within 15 months for software and services. For exports to and from warehouses outside India, a period of 15 months is allowed. If the exporter is unable to realise proceeds within the stipulated period, the AD bank may grant extension on a case-by-case basis with proper documentary justification. When realisation is genuinely impossible — due to buyer insolvency, protracted disputes, or country-level sanctions — a write-off application is the correct FEMA remedy to regularise the outstanding Export Outstanding Statement (XOS) balance.
What documents are required to support an export write-off application?
An export write-off application submitted to the AD bank (or RBI, if AD approval is not sufficient) must include: copies of the shipping bill and invoice evidencing the original export; correspondence with the overseas buyer including demand notices, delivery confirmations, and dispute communications; documentary proof of the buyer's inability to pay (such as bankruptcy proceedings, credit agency reports, or country-specific sanctions notifications); a certificate from the Export Credit Guarantee Corporation (ECGC) where ECGC cover was obtained; and an indemnity from the exporter confirming the amount has been irrecoverably lost. The GR/SDF form number must be cited so the AD bank can update the Export Outstanding Statement maintained under the Regulations. In cases above the AD bank's compounding authority, the application goes to the relevant RBI regional office.
Does writing off export proceeds have any income tax implication for the Indian exporter?
Yes. An export write-off that is approved under FEMA does not automatically create an income tax deduction. The bad debt write-off is allowable as a deduction under Section 36(1)(vii) of the Income Tax Act 1961 only if the corresponding amount was previously offered to tax as income — typically as accrued export income in an earlier year. If the export proceeds were never recognised as income (for example, because the company follows a cash method or conservative accrual), no deduction arises on write-off. For Assessment Year 2026-27 and earlier, the provisions of the Income Tax Act 1961 apply; for Tax Year 2026-27 onwards (Assessment Year 2027-28), the corresponding provision under the Income Tax Act 2025 applies. Additionally, any GST implications on the zero-rated export supply should be reviewed — if a Letter of Undertaking (LUT) was used, no GST is payable, but if IGST was paid and a refund not yet claimed, the refund entitlement under Section 54 of the CGST Act 2017 must be preserved.
Can an exporter write off ECGC-insured export proceeds, and how does insurance recovery affect the write-off calculation?
Where the export credit is covered under an ECGC (Export Credit Guarantee Corporation) policy, the exporter must first exhaust the insurance claim process before the AD bank or RBI will entertain a write-off application, as ECGC cover is a recovery mechanism that may extinguish part or all of the loss. ECGC typically covers 60–90% of the insured amount depending on the policy type (e.g., Standard Policy, Small Exporters Policy), and any claim settlement received reduces the net unrealised amount eligible for write-off. The RBI Master Direction on Export of Goods and Services specifically requires confirmation from ECGC regarding claim admissibility where insurance exists. After ECGC settlement, the residual unrecovered balance — the self-retention portion — can be presented for write-off through the AD bank if it falls within the 5% threshold, or to RBI if it requires specific approval.

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