Advance Remittance for Imported Services: Bank Checklist

Advance remittance controls

Finance SOP

• Tag foreign advances separately in books.
• Set service-receipt follow-up date.
• Keep vendor correspondence and delivery proof.
• Reconcile advance with final invoice and GST/tax treatment.
• Escalate non-performance before ageing becomes stale.

For the connected rule, example or next step, see Form 15CA and 15CB for Foreign Remittance: Finance Evidence Pack.

Finin2min warning

Statutory basis and current threshold

Advance remittance for import of services is a current-account transaction under Section 5 of FEMA, 1999, read with the Foreign Exchange Management (Current Account Transactions) Rules, 2000 and RBI’s Master Direction on Import of Goods and Services. Form A2 - the bank’s FEMA declaration - is now mandatory for every outward remittance irrespective of value, following AP (DIR) Circular No. 13 dated 5 July 2024; smaller advances are not exempt from it.

Threshold change to track: the earlier fixed USD 200,000 cap, above which a standby letter of credit or bank guarantee was typically required for an import advance, has been replaced under the 2026 Foreign Exchange Management (Export and Import of Goods and Services) Regulations by a threshold that each AD (authorised dealer) bank now determines itself. Confirm the current figure with your own bank rather than assuming the old USD 200,000 number still applies uniformly.

Tax treatment before you remit

Two separate tax questions sit alongside the FEMA paperwork. First, Section 195 income-tax withholding: if the payment is chargeable to tax in India (subject to the vendor’s country DTAA), Form 15CA must be filed online before remittance, and Form 15CB - a chartered accountant’s certificate on taxability, rate and DTAA relief - is required only once the taxable part of the remittance crosses ₹5 lakh in a financial year; below that, or where the sum is genuinely not chargeable to tax, no CA certificate is needed. Second, GST: import of services by a person in India is generally treated as an import liable to IGST under reverse charge, and that RCM liability can be triggered by the advance payment itself under the time-of-supply rules, not only when the final invoice is later raised - so the GST review belongs in the SAME pre-payment step as the Section 195 check, not after.

Worked example

A company pays a USD 50,000 advance to a US-based software vendor under a six-month development agreement. Before remittance: the signed agreement and proforma invoice are reviewed, Form A2 is filed with the bank (mandatory regardless of the amount), the Section 195/DTAA position is assessed and Form 15CA is filed (Form 15CB is skipped here only if the taxable portion stays under ₹5 lakh), and the GST/RCM position on the advance is recorded. After remittance, the advance is tagged separately in the books, service-receipt evidence is chased against the agreed milestones, and the advance is finally reconciled to the vendor’s completion invoice - not left open indefinitely as an unexplained balance.

Official sources used

This article is intentionally source-limited to official RBI / India Code material. Verify final filing positions with the latest FEMA Act, regulations, RBI directions, bank instructions and portal advisories before publishing.

• India Code: Foreign Exchange Management Act, 1999 official record
• RBI: Master Circular on Import of Goods and Services
• RBI: Miscellaneous forex facilities / current account transaction FAQ

For the connected rule, example or next step, see Education Fees Abroad: LRS, Bank Documents and Proof Checklist.