Can I offset what a foreign client owes me against what I owe them?
- Verified by:
- Editorial team
- Published
- Last modified
- Reading time
- 2 min read
Short answer
Yes, with your bank's permission. Regulation 7 of the FEMA (Export and Import of Goods and Services) Regulations, 2026 lets your Authorised Dealer bank allow set-off of export receivables against import payables with the same overseas buyer or supplier, or its overseas group or associate companies, within the realisation period or any extension.1 A permitted set-off counts as realisation of the export value under regulation 5.1
Some exporters both sell to and buy from the same foreign business. An agency might build campaigns for a US software company while paying that company for its tools. Rather than send money both ways, the two sides may want to net the amounts. FEMA allows this, but only through your bank.1
What does regulation 7 allow?
Regulation 7 of the FEMA (Export and Import of Goods and Services) Regulations, 2026 (the 2026 Regulations) lets an Authorised Dealer (AD) bank allow set-off of export receivables against import payables to or from the same overseas buyer or supplier, or its overseas group or associate companies.1 The set-off must take place within the realisation period or any extension of it.1
Regulation 5 counts a permitted set-off as realisation: the export value must be realised and repatriated "including by way of set off" under regulation 7.1 So a bank-approved set-off closes your export invoice just as a payment would.
What would a set-off look like?
Example: a Bengaluru analytics firm invoices a Singapore client $20,000 for dashboards in November 2026. In the same month, it owes the client's Singapore group company $5,000 for a data licence it imported. With the bank's permission, the firm sets off the $5,000 and receives $15,000. The bank records the export as realised in full.1
| Item | Amount |
|---|---|
| Export invoice to client | $20,000 |
| Import payable to client's group company | $5,000 |
| Net amount received | $15,000 |
The table illustrates regulation 7 with the bank's approval.1 Without that approval, the firm would have realised only $15,000 against a $20,000 invoice.
How do you ask for a set-off?
The 2026 Regulations prescribe no form, so follow your bank's published procedure. Give the bank the export invoice, the import invoice or contract, proof that the counterparty is the same entity or a group or associate company, and the netting agreement.1
What are the limits?
The set-off must be within the realisation period, which for services is nine months from the invoice date, or twelve if invoiced or settled in rupees.12 Your bank's policy may add conditions. Ask it before agreeing a netting arrangement with the client. See set-off of export receivables.
GST and income tax treat the export and the import separately, whatever the cash flow, so record both in full. For tax on the import side, see RCM on imported services, and check the details with a chartered accountant.
How did we verify this?
We checked this page against the sources below on 28 October 2026. Read our methodology or report an error.
- [1]RBI: Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, Notification No. FEMA 23(R)/2026-RB, amended up to 22 September 2026 (regulations 5 and 7)
- [2]RBI: FEMA (Export and Import of Goods and Services) (Amendment) Regulations, 2026, Notification No. FEMA 23(R)/(1)/2026-RB dated 22 September 2026
Frequently asked questions
Can I net the amounts myself without telling the bank?+
No. Regulation 7 says the Authorised Dealer may allow set-off, so the bank has to agree before it counts as realisation.1
Can I offset against a client's sister company?+
Regulation 7 allows set-off with the same overseas buyer or supplier or with its overseas group or associate companies.1
This page is general information for Indian service exporters, not tax or legal advice. Rules change and outcomes depend on your facts, so confirm with a chartered accountant before acting.
Keep reading
Can you set off export receivables against import payables?
When an Indian service exporter can net what a foreign client owes against what it owes that client or its group, under regulation 7 of the 2026 FEMA rules.
RBI and FEMAHow long does a service exporter have to realise export proceeds?
How long Indian service exporters have to get paid by foreign clients under FEMA from 1 October 2026, how extensions work and what happens if you miss it.
RBI and FEMACan a third party pay your export invoice under RBI rules?
Can a foreign client's parent, agent or another company pay your export invoice? How regulation 8 of the 2026 FEMA rules lets your bank allow it.
GSTDo you pay GST under reverse charge on foreign SaaS tools and services?
When an Indian freelancer or agency pays IGST under reverse charge on foreign software subscriptions and services, and when the foreign supplier charges GST instead.