How Does an Indian Company Receive Payments From Its Overseas Parent or Group Company?

Receiving a payment from an overseas parent or group company means taking money from a related foreign entity into India through an authorised bank. The purpose of the money decides which rules apply. Payment for services is an export, while money for shares is a foreign investment.

• Bank route: Receipts from a person resident outside India must come through an authorised bank or authorised person, in rupees or any foreign currency for most countries (Manner of Receipt and Payment Regulations, Regulation 3(2)).
• Service fees: Under FEMA, export includes the provision of services from India to any person outside India (FEMA section 2(l)). A subsidiary that bills its parent for support, software or research work is an exporter of services, and software counts as a service (Regulation 2(1)).
• Share capital: Money sent by the parent to buy new shares is consideration for equity instruments. It must come as an inward remittance through banking channels (FEMA 395, Schedule I, para A(1)) and follows the foreign investment rules, not the export rules.
• Related party: For income tax, a parent that holds at least 26% of the voting power is an associated enterprise (Income-tax Act, 2025, section 162(1)(a)(ii)). Income from a transaction with it is computed at the arm's length price (section 161(1)).

In short, the same bank account may receive group money for very different reasons, and each reason has its own paperwork. For the export side in more depth, see FEMA rules for exports.

The export of services rules cover an Indian company that is a separate legal entity from its overseas parent or group company and bills it for services. A branch or liaison set-up of the foreign company is treated differently for GST. Share capital and loans from the parent fall under other FEMA rules.

An Indian subsidiary receives a service payment from its overseas parent by signing an intra-group agreement, invoicing at an arm's length price, filing the EDF with its AD bank, and receiving the money through that bank. It then gets the bank's inward remittance advice and keeps the transfer pricing records.

1. Sign a written service agreement with the parent or group company that sets out the services, the pricing method and payment terms. Income tax law requires the price to be at arm's length (Income-tax Act, 2025, section 161).
2. Furnish a Letter of Undertaking in FORM GST RFD-11 before exporting if you want to bill without paying IGST (CGST Rule 96A(1)). See LUT filing on the GST portal.
3. Raise the invoice in foreign currency or in rupees. Both are allowed for trade with most countries (Regulation 3(2)(I)(a)(iii)), but rupee invoicing changes the realisation period.
4. File the Export Declaration Form with your AD bank within 30 days from the end of the month in which you raised the invoice. One EDF may cover all service exports made in a month (Regulation 3(2)). See EDF form for exports.
5. Ask the parent to pay from its own account and to quote the invoice number, so the bank can match the money to the EDF entry.
6. When the money arrives, give the bank the purpose of the payment. The bank credits your account after it is satisfied the transaction is genuine and then closes the entry in EDPMS (Regulation 4(2)).
7. Keep the information and documents on the transaction that the income tax rules prescribe (section 171(1)) and get the accountant's report for the tax year (section 172).

The documents and deadlines depend on whether the payment is a service fee or share capital. Service fees need an invoice, an EDF and realisation within nine months. Share capital needs shares issued within 60 days and an FC-GPR report within 30 days of issue.

If an Indian company does not follow the rules for payments from its overseas parent company, it risks FEMA penalties, export restrictions, GST demands and income tax adjustments. The exact result depends on which rule was missed and for how long.

• Unrealised fees: If export proceeds stay unrealised for more than one year beyond the due or extended date, further exports are allowed only against full advance or an irrevocable letter of credit (Regulation 13).
• FEMA penalty: A contravention of FEMA can attract a penalty of up to three times the sum involved where the amount is quantifiable (FEMA section 13(1)).
• GST: If payment is not received within one year, or the FEMA period with extensions if later, tax under an LUT becomes payable with interest within fifteen days (CGST Rule 96A(1)(b)).
• Pricing: The Assessing Officer may determine the arm's length price if your price was not set as the law requires or your records were not kept (section 165(4)).
• Late report: A late accountant's report under section 172 attracts a fee of Rs 50,000 for a delay of up to one month and Rs 1,00,000 after that (section 428(d)).
• Late FDI filing: Delays in FC-GPR or other foreign investment reports attract a late submission fee decided by RBI (FEMA 395, Regulation 5).

If a parent payment is late, ask your AD bank for an extension before the nine month period ends; the bank may extend it if satisfied with the reasons (second proviso to Regulation 5(1)). See extension of export realisation period.

The timeline for receiving and reporting a payment from an overseas parent or group company starts with the invoice date or the date money arrives. Service fees run on a 30 day EDF clock and a nine month realisation clock. Share capital runs on a 60 day issue clock and a 30 day reporting clock.

• Mixed purpose: Sending share money and service fees in one remittance without telling the bank which is which. Each needs a different code and different reporting.
• No agreement: Billing the parent without a signed intra-group agreement. Without one it is harder to show the bank that the transaction is genuine and to support the price for income tax.
• Assumed export: Treating supplies by an Indian branch of a foreign company to its head office as zero-rated exports. Circular 161 says they are not (para 4.3).
• Missed EDF: Forgetting the EDF because the payer is a group company. From 1 October 2026 the EDF applies to software and other services alike.
• Wrong payer: Letting a sister company pay without first asking the AD bank to permit the third-party receipt.
• Late shares: Holding parent share money past 60 days without issuing shares or refunding it.

Every rule, deadline and form on this page is linked to its official source, checked on the dates below.

1. Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, Notification FEMA 23(R)/2026-RB, amended up to 22 September 2026, Regulations 2(1), 3(2), 4(2), 5(1), 7, 8, 10, 13 and 19 (checked 9 Oct 2026)
2. RBI A.P. (DIR Series) Circular No. 20, RBI/2025-26/194: Export and Import of Goods and Services, 16 January 2026, Annex listing superseded circulars, including SOFTEX circulars (checked 9 Oct 2026)
3. Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023, FEMA 14(R)/2023-RB, Regulation 3(2)(I)(a)(iii) (checked 9 Oct 2026)
4. Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, FEMA 395/2019-RB, amended up to 13 June 2026, Regulation 3.1, Schedule I para A(1) to A(3); Regulations 4(1), 4(2), final proviso to 4, and 5 (checked 9 Oct 2026)
5. RBI Master Direction: Foreign Investment in India, updated up to 15 June 2026, Mode of payment, issue of equity instruments and refund, paras 2.1 to 2.3 (checked 9 Oct 2026)
6. The Foreign Exchange Management Act, 1999 (text hosted by IFSCA), Sections 2(l) and 13(1) (checked 9 Oct 2026)
7. CBIC Circular No. 161/17/2021-GST: Clarification relating to export of services, condition (v) of section 2(6) of the IGST Act, 20 September 2021, Paras 4.3, 4.4, 5.1 and 5.2 (checked 9 Oct 2026)
8. Integrated Goods and Services Tax Act, 2017: Section 2 (Definitions), Section 2(6) (checked 9 Oct 2026)
9. Integrated Goods and Services Tax Act, 2017: Section 13 (Place of supply where supplier or recipient is outside India), Section 13(2) and footnote 3 on section 13(8)(b) (checked 9 Oct 2026)
10. Central Goods and Services Tax Rules, 2017: Rule 96A, Rule 96A(1)(b) (checked 9 Oct 2026)
11. Income-tax Act, 2025 (as amended), Income Tax Department, Sections 161, 162, 163, 165(4), 171, 172, 173(d) and 428(d) (checked 9 Oct 2026)
12. Income Tax Department: Non-Resident Individual for AY 2026-2027, forms list, Form 3CEB, report under section 92E of the Income-tax Act, 1961 (checked 9 Oct 2026)
13. RBI A.P. (DIR Series) Circular No. 84: Purpose codes for reporting under FETERS, 29 February 2012, Annex of purpose codes (checked 9 Oct 2026)