What Are the FEMA Rules for Free of Cost Exports and Samples?
- Author:
- Manoj Sharma
- Verified by:
- Editorial team
- Published:
- Last modified:
Short answer
Free of cost exports and samples have no separate exemption under FEMA from 1 October 2026. The 2015 regulations exempted free trade samples, gifts up to five lakh rupees and replacement goods from the export declaration. The 2026 regulations list no such cases. Ask your AD bank how it treats a free shipment before you ship.
| Applies to | Governed by | Deadline | Penalty | Last verified |
|---|---|---|---|---|
| Exporters sending goods abroad with no payment due: trade and technical samples, gifts, promotional supplies by status holders, replacement goods, warranty spares and goods sent for repair, testing or exhibitions | Regulation 3 of the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 (FEMA 23(R)/2026-RB) from 1 October 2026, read with Foreign Trade Policy 2023 paras 1.29(h), 2.43, 2.44, 2.47 and 2.49 and Handbook of Procedures paras 2.60, 2.63, 2.65 and 2.70 | EDF for goods at the time of export, deemed filed with the shipping bill at an EDI port. The 2026 regulations set no separate timeline for free of cost shipments | No penalty specific to free of cost exports is set out in the 2026 regulations. An AD bank cannot charge a penalty for the exporter's regulatory delay or violation (Regulation 19(3)) | 8 Oct 2026 |
What are free of cost exports under FEMA?
Free of cost exports are goods sent out of India when the overseas party owes no payment, such as trade samples, gifts, promotional supplies and replacement goods. FEMA normally expects the full export value to be declared and realised, so these shipments relied on specific exemptions and waivers that changed on 1 October 2026.
- Declaration: From 1 October 2026, every exporter of goods must declare the full export value in the Export Declaration Form (EDF) at the time of export (FEMA 23(R)/2026-RB, Regulation 3(1)).
- Realisation: The full export value, or a value reduced under Regulation 6, must be realised and repatriated within nine months from the date of shipment for goods (Regulation 5(1)).
- Old exemptions: Up to 30 September 2026, Regulation 4 of the 2015 regulations let goods leave without a declaration in listed cases, including trade samples and publicity material supplied free of payment, gifts declared at not more than five lakh rupees, and replacement goods exported free of charge under the Foreign Trade Policy (FEMA 23(R)/2015-RB, Regulation 4).
- Old waiver: AD banks could also grant an EDF waiver to status holders exporting freely exportable items free of cost for export promotion, within an annual limit (Master Direction, para C.1).
- No forex: Under the old Master Direction, exports of goods not involving any foreign exchange transaction, directly or indirectly, needed an EDF waiver from the Reserve Bank (Master Direction, para C.1).
- Now: The 2026 regulations contain no list of exemptions. The only carve-out in Regulation 3 is that a traveller moving personal effects is not treated as an exporter (Regulation 3(1), second proviso).
The Master Direction on export and the circular on EDF waivers for free of cost goods stand superseded from 1 October 2026 (A.P. (DIR Series) Circular No. 20, para 4 and Annex). For the wider change, see new FEMA export and import regulations.
Which free of cost exports and samples were exempt from the export declaration, and what applies from October 2026?
Several free of cost exports and samples were exempt from the export declaration under the 2015 regulations, which applied to shipments up to 30 September 2026. From 1 October 2026, none of these exemptions appears in the 2026 regulations, so each case needs a check with Customs or your AD bank.
| Type of shipment | Up to 30 September 2026 | From 1 October 2026 | Best for |
|---|---|---|---|
| Trade samples and publicity material supplied free of payment | No declaration needed under 2015 Regulation 4(a) | No exemption listed in the 2026 regulations; check with your AD bank | Exporters sending samples to prospective buyers |
| Gift of goods | No declaration if the exporter declared a value of not more than five lakh rupees (2015 Regulation 4(d)) | No exemption listed in the 2026 regulations; check with your AD bank | Businesses and individuals sending gifts abroad |
| Replacement goods exported free of charge under the Foreign Trade Policy | No declaration needed under 2015 Regulation 4(h) | No exemption listed in the 2026 regulations; check with your AD bank | Exporters replacing defective goods for a buyer |
| Goods sent abroad for testing, or defective goods sent for repair, for re-import | No declaration under 2015 Regulation 4(i) and 4(j), with an AD bank certificate for repair cases | No exemption listed in the 2026 regulations; check with your AD bank | Manufacturers sending equipment for testing or repair |
| Free of cost supplies by status holders for export promotion | EDF waiver from the AD bank within an annual limit (Master Direction, para C.1) | Waiver superseded; the trade policy entitlement remains in FTP 2023 para 1.29(h) | Status holders running promotional campaigns |
| Traveller's personal effects | No declaration under 2015 Regulation 4(b) | Traveller is not treated as an exporter (2026 Regulation 3(1)) | People relocating abroad with belongings |
How do you send free of cost exports or samples from India from October 2026?
You send free of cost exports or samples from October 2026 by checking the trade policy limit first, filing the shipping bill, which counts as the EDF at an EDI port, and agreeing with your AD bank how the shipment will be closed in EDPMS. The 2026 regulations give no ready-made exemption for free shipments.
- Check that the item is freely exportable. Trade and technical samples of freely exportable items can be exported without any limit, while restricted samples need an application to DGFT in ANF-2Q (HBP para 2.63).
- For gifts, stay within the Foreign Trade Policy limit of Rs 5,00,000 in a licensing year (FTP para 2.44). Above that ceiling, or beyond the ceiling or period set for spares and replacement goods, apply to DGFT in ANF 2Q (HBP para 2.65).
- Before shipping, tell your AD bank that no payment is expected and ask which documents its policy needs. Every AD bank must list documents, timelines and charges for each process in its internal policy and SOP (Regulation 19(1)(a)).
- File the shipping bill. At an EDI port the EDF is deemed submitted as part of the shipping bill; at a non-EDI port the specified authority forwards the authenticated EDF to your AD bank (Regulation 3(1) and 3(3)).
- If an EDPMS entry is created for a shipment that will not be paid for, ask your AD bank about a reduction in export value. Where the value is up to ₹10 lakh per shipping bill, the AD bank may permit reduction or non-realisation on your declaration (Regulation 6, proviso).
- Keep the invoice, the shipping bill and any DGFT permission on file, so you can explain the free supply if the AD bank follows up on an open entry.
How did the EDF waiver for free of cost exports by status holders work before October 2026?
Before October 2026, AD banks could grant status holders an EDF waiver for freely exportable items sent free of cost for export promotion, within an annual limit (Master Direction, para C.1). The waiver dates back to an RBI circular of 2003 on export of goods on promotional grounds.
- A 2016 circular let AD banks consider waivers at Rs 10 lakh or 2% of average annual export realisation over the preceding three licensing years, whichever was lower (A.P. (DIR Series) Circular No. 53, para 2).
- The last version of the Master Direction set 2% of average annual export realisation for most exporters, Rupees One Crore or 2%, whichever was lower, for gems and jewellery and articles of gold and precious metals, and up to 8% for pharmaceutical supplies to health programmes of international agencies (Master Direction, para C.1).
- Circular No. 94 of 26 April 2003 and Circular No. 53 of 3 March 2016 are both in the list of circulars superseded from 1 October 2026 (Circular No. 20, Annex A, items 21 and 86).
How does the Foreign Trade Policy 2023 treat free of cost supplies by status holders?
The Foreign Trade Policy 2023 still entitles status holders to export freely exportable items free of cost for export promotion, within an annual limit. Such supplies get no Duty Drawback or other export incentive (FTP para 1.29(h)). This is a trade policy entitlement and is separate from the FEMA declaration.
- FTP para 1.29(h) excludes gems and jewellery and articles of gold and precious metals, and sets the limit at Rupees One Crore or 2% of average annual export realisation during the preceding three licensing years, whichever is lower (FTP Chapter 1).
- HBP para 2.70 states the limit as Rs.10 lakh or 2% of average annual export realisation, whichever is lower (HBP Chapter 2). The two texts differ, so confirm the figure with your DGFT regional authority.
- For pharma exports both texts set 2%, and for supplies of vaccines and lifesaving drugs to health programmes of international agencies such as UN and WHO-PAHO, up to 8%.
- For how status is granted, see DGFT status holder certification.
How are exhibits, repair shipments and warranty spares handled when no payment is due?
Exhibits for fairs abroad can be exported for six months on a re-export or re-import basis against a bond, security or ATA Carnet with Customs (HBP para 2.60). The old RBI rules on EDF approval for exhibitions and re-imports were in the Master Direction, which no longer applies.
- Until 30 September 2026, AD banks could approve the EDF for goods exported for re-import after repairs, maintenance or testing, with the Bill of Entry produced within one month of re-import (Master Direction, para C.4).
- The same Master Direction allowed exhibitors to gift unsold goods up to USD 5000 per exporter, per exhibition or trade fair (Master Direction, para C.3).
- Warranty spares may be exported with the main equipment or later within the contracted warranty period, and FTP para 2.49 still says this is subject to approval of RBI (FTP Chapter 2). Ask your AD bank how it handles this under the 2026 framework.
- For goods that come back unsold or rejected, see goods returned by the foreign buyer.
What limits and documents apply to free of cost exports, samples and gifts?
Free of cost exports, samples and gifts are limited mainly by the Foreign Trade Policy, while FEMA decides the declaration and bank reporting. Samples of freely exportable items have no limit, gifts are capped at Rs 5,00,000 a licensing year, and status holders have an annual cap on promotional supplies.
| Shipment | Limit or rule | Document or authority | Source | Best for |
|---|---|---|---|---|
| Trade and technical samples, freely exportable | Allowed without any limit | Shipping bill; EDF deemed filed at an EDI port | FTP para 2.43, HBP para 2.63(a) | Exporters sending product samples |
| Samples or exhibits of restricted items | Need DGFT permission | Application in ANF-2Q | HBP para 2.63(b) | Exporters of restricted goods |
| Gifts, including edible items | Up to Rs 5,00,000 in a licensing year; restricted items need an Authorisation | Application in ANF 2Q above the ceiling | FTP para 2.44, HBP para 2.65 | Firms sending gifts to overseas partners |
| Replacement goods for exported goods found defective | Allowed in line with the relevant Customs notification unless restricted or SCOMET | Authorisation if restricted or SCOMET | FTP para 2.47 | Exporters honouring quality claims |
| Warranty spares | Within the contracted warranty period, subject to approval of RBI | Application in ANF 2Q beyond the period set in the FTP | FTP para 2.49, HBP para 2.65 | Machinery and equipment exporters |
| Promotional supplies by status holders | Annual cap linked to 2% of average export realisation; no Duty Drawback or incentives | Status holder certificate | FTP para 1.29(h), HBP para 2.70 | Status holders entering new markets |
| Exhibits for fairs abroad | Six months on re-export or re-import basis; extension by Customs on merits | Bond or security to Customs, or ATA Carnet | HBP para 2.60 | Exporters taking part in trade fairs |
What happens if a free of cost export is left as an open entry in EDPMS?
A free of cost export left as an open entry in EDPMS looks like an unpaid export to your AD bank. The bank must follow up on outstanding entries, and an export unrealised for over a year past the due date can restrict future exports to full advance or a letter of credit.
- Follow-up: The AD bank must monitor EDPMS entries for closure and follow up with the exporter for documents (Regulation 18(1)(f)).
- Future exports: If export proceeds remain unrealised beyond one year from the due date or extended date, further exports need full advance or an irrevocable letter of credit (Regulation 13).
- Bank charges: Charges must be reasonable and proportional, and the AD bank cannot levy a charge or penalty for the exporter's regulatory delay or violation (Regulation 19(3)).
- Incentives: Free of cost supplies by status holders are not entitled to Duty Drawback or any other export incentive (FTP para 1.29(h)).
Write to your AD bank with the shipping bill, the invoice and a note that the goods were a free supply. For entries up to ₹10 lakh per shipping bill, ask for reduction or non-realisation on your declaration under Regulation 6. For older free shipments that needed RBI approval, AD banks now handle the case under Regulation 20. See EDPMS closure.
Which RBI rules govern free of cost exports and samples?
From 1 October 2026, Regulations 3, 6, 19 and 20 of FEMA 23(R)/2026-RB govern free of cost exports and samples, and Circular No. 20 supersedes the old waiver circulars. Shipments made up to 30 September 2026 stay under Regulation 4 of the 2015 regulations and the Master Direction.
| Circular or regulation | Clause | Date | Plain meaning | Best for |
|---|---|---|---|---|
| FEMA 23(R)/2015-RB | Regulation 4 | 12 January 2016; superseded 1 October 2026 | Listed exports needing no declaration, including free trade samples, gifts up to five lakh rupees and free replacement goods | Shipments made before 1 October 2026 |
| A.P. (DIR Series) Circular No. 94 (listed in Circular No. 20, Annex A) | Item 21 of Annex A | 26 April 2003; superseded 1 October 2026 | Enabled waiver for export of goods on promotional grounds | Tracing where the free of cost waiver began |
| A.P. (DIR Series) Circular No. 53, RBI/2015-16/332 | Para 2 | 3 March 2016; superseded 1 October 2026 | EDF waiver for status holders exporting goods free of cost, within an annual limit | Status holders checking past waivers |
| Master Direction: Export of Goods and Services | Paras B.12, C.1, C.3 and C.4 | Updated to 17 July 2026; superseded 1 October 2026 | Exemptions, EDF waiver for free supplies, exhibition gifts up to USD 5000 and EDF approval for re-imports | Exporters with pre-October 2026 shipments |
| A.P. (DIR Series) Circular No. 20, RBI/2025-26/194 | Paras 2, 4 and Annex | 16 January 2026; effective 1 October 2026 | Supersedes the Master Direction and the waiver circulars; AD banks must follow FEMA and the Foreign Trade Policy | Checking whether an old waiver still applies |
| FEMA 23(R)/2026-RB | Regulations 3, 6, 19 and 20 | 13 January 2026, amended 22 September 2026; in force 1 October 2026 | EDF for all goods exports, reduction on declaration up to ₹10 lakh, AD bank SOPs, and AD banks handling older cases | Every free shipment from 1 October 2026 |
What are the common mistakes with free of cost exports and samples under FEMA?
- Old exemption: Assuming the 2015 exemption for free trade samples or gifts still removes the declaration for shipments made from 1 October 2026.
- Policy confusion: Treating the Foreign Trade Policy permission to export samples or gifts as a FEMA exemption. The trade policy sets what can be exported; FEMA sets the declaration and bank reporting.
- Silent shipment: Shipping a free sample without telling the AD bank, so the EDPMS entry later looks like an unpaid export.
- Wrong cap: Using one rupee cap for status holder supplies without noting that FTP para 1.29(h) and HBP para 2.70 state different figures.
- Claiming incentives: Claiming Duty Drawback or other export incentives on free of cost supplies by status holders, which the FTP does not allow.
- Mixed periods: Applying 2026 rules to shipments made before 1 October 2026. Those stay under the superseded rules for things already done; see EDF and SOFTEX waivers for low-value exports.
How did we verify this?
Every rule, deadline and form on this page is linked to its official source, checked on the dates below.
- Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, Notification FEMA 23(R)/2026-RB dated 13 January 2026, amended up to 22 September 2026, Preamble, Regulations 1(2), 3(1), 3(3), 5(1), 6 and proviso, 13, 18(1)(f), 19(1)(a), 19(3), 20 (checked 8 Oct 2026)
- RBI A.P. (DIR Series) Circular No. 20, RBI/2025-26/194: Export and Import of Goods and Services, 16 January 2026, Paras 2, 4 and 7; Annex A, items 21 and 86 (checked 8 Oct 2026)
- Foreign Exchange Management (Export of Goods and Services) Regulations, 2015, Notification FEMA 23(R)/2015-RB dated 12 January 2016, as amended, Regulation 4 (Exemptions), clauses (a), (b), (d), (h), (i), (j) (checked 8 Oct 2026)
- RBI A.P. (DIR Series) Circular No. 53, RBI/2015-16/332: Grant of EDF Waiver for Export of Goods Free of Cost, 3 March 2016, Paras 1 and 2 (checked 8 Oct 2026)
- RBI Master Direction: Export of Goods and Services (FED Master Direction No. 16/2015-16), updated as on 17 July 2026, superseded from 1 October 2026, Paras B.12, C.1, C.3 and C.4 (checked 8 Oct 2026)
- DGFT, Foreign Trade Policy 2023, Chapter 1: Legal Framework and Trade Facilitation, Para 1.29(h) Privileges of Status Holders (checked 8 Oct 2026)
- DGFT, Foreign Trade Policy 2023, Chapter 2: General Provisions Regarding Imports and Exports, Paras 2.43 (Export of Samples), 2.44 (Export of Gifts), 2.47 (Export of Replacement Goods), 2.49 (Export of Spares) (checked 8 Oct 2026)
- DGFT, Handbook of Procedures 2023, Chapter 2 (July 2026 version), Paras 2.60, 2.63, 2.65 and 2.70 (checked 8 Oct 2026)
Frequently asked questions
Do trade samples need an EDF under FEMA 23(R)/2026-RB?
FEMA 23(R)/2026-RB has no exemption for trade samples. Regulation 3(1) asks every exporter of goods to declare the full export value in the EDF at the time of export. At an EDI port the shipping bill counts as the EDF. Ask your AD bank how it records a sample with no payment due.
Is the five lakh rupee gift limit in FTP para 2.44 a FEMA exemption?
No. FTP para 2.44 is a trade policy rule that allows goods worth up to Rs 5,00,000 in a licensing year to be exported as a gift. The separate FEMA exemption for gifts sat in Regulation 4(d) of the 2015 regulations, which stopped applying to shipments from 1 October 2026.
Can AD banks still grant an EDF waiver under Circular No. 53 after October 2026?
Circular No. 53 of 3 March 2016, which let AD banks grant status holders an EDF waiver for free of cost exports, is listed as superseded in Annex A of Circular No. 20. It stops applying from 1 October 2026. The FTP entitlement for status holders to make free supplies continues separately.
Can a free sample entry in EDPMS be closed under the ₹10 lakh Regulation 6 proviso?
The proviso to Regulation 6 lets an AD bank permit reduction or non-realisation of export value on the exporter's declaration where the value is up to ₹10 lakh per shipping bill. The regulation does not mention samples specifically. Ask your AD bank whether it will use this route for a free shipment.
Do free of cost supplies by status holders get Duty Drawback under FTP para 1.29(h)?
No. FTP para 1.29(h) says free of cost supplies by status holders for export promotion are not entitled to Duty Drawback or any other export incentive under any export promotion scheme. HBP para 2.70 repeats this. Keep these shipments separate from paid exports when you claim incentives.
Who handles a pre-October 2026 export without foreign exchange that needed RBI approval?
Regulation 20 of the 2026 regulations says AD banks handle export transactions undertaken before 1 October 2026 that needed Reserve Bank approval under the 2015 regulations or the Master Direction. So an older free shipment that needed an RBI EDF waiver now goes to your AD bank.
Does the ATA Carnet route in HBP para 2.60 remove the FEMA declaration for exhibits?
HBP para 2.60 lets exhibits leave for six months on a re-export or re-import basis against a bond, security or ATA Carnet with Customs, without a DGFT Authorisation. It is a trade and Customs rule. The 2026 FEMA regulations list no exemption for exhibits, so confirm the bank treatment.