My client cancelled after paying an advance. Can I refund it?

A foreign client who pays a deposit and then cancels is a common problem for agencies, studios and consultants. Refunding the money is allowed; the question is how to do it so that your bank's export records end up clean.¹

What do the 2026 Regulations say about refunds?

The FEMA (Export and Import of Goods and Services) Regulations, 2026 (the 2026 Regulations), in force from 1 October 2026, do not set out a separate refund procedure for export advances.¹ Your Authorised Dealer (AD) bank handles the refund under its own policy and procedure, which regulation 19 requires it to document and publish.¹

The old rule that an unused advance older than three years needed RBI approval to refund sat in regulation 15 of the 2015 Regulations, which the 2026 Regulations replaced.¹²

Which bank should send the refund?

Use the bank that received the advance. Regulation 10(1) requires an exporter to route an advance and any later export proceeds through the same AD bank, unless the change is intimated to both banks.¹ Refunding from the same bank keeps the whole transaction in one place, so that bank can close its record.

How do you request the refund?

Give the bank a short request with supporting papers:¹

1. The contract or statement of work, and the cancellation email from the client.
2. The date, amount and reference of the advance as credited.
3. The client's bank details for the refund, which should normally be the account the advance came from.
4. If you keep part of the advance for work done, a revised invoice for that part.

Example: a wedding-film editor in Jaipur takes a $600 advance from a couple in Melbourne, edits nothing, and the couple cancels. The editor asks the same bank to remit $600 back and to close the advance record.¹

What if you cannot refund the advance?

Sometimes the client cannot be reached, or the money cannot be sent back. Regulation 18(1)(i) lets the bank, on your request citing reasons, close the entry for an export advance in the Export Data Processing and Monitoring System (EDPMS) where no export has been made and a refund is not possible, if it is satisfied the reasons are genuine.¹

What about tax?

GST and income tax treat an advance and its refund under their own rules, which this answer does not cover. See GST on advance received from a foreign client and, for the FEMA side in full, refunding an export advance. Check the tax position with a chartered accountant.