RBI and FEMA

What should you do when export proceeds are short-realised?

Author:: Editorial team, serviceexportguide.com
Verified by:: Editorial team
Published: 28 October 2026
Last modified: 30 October 2026
Reading time: 6 min read

Short answer

Short realisation means the amount realised is less than an invoice's full export value.¹ From 1 October 2026, you ask your AD bank to allow a reduction under regulation 6, citing reasons.¹ For invoices up to ₹10 lakh, your declaration is enough.¹ The EDPMS entry can then close on a declaration that payment was realised "in full or otherwise".¹

Applies to	Governed by	Deadline	Penalty	Last verified
Regularising an under-realised export invoice	FEMA (Export and Import of Goods and Services) Regulations, 2026, regulation 6¹	Full or reduced value realised within nine months; twelve months for rupee exports¹²	The bank cannot levy a charge or penalty for a regulatory delay or violation on your part (regulation 19(3))¹	28 October 2026
Closing the EDPMS entry for invoices up to ₹10 lakh	Regulation 4¹	Declarations can be given quarterly for bulk closure¹	Not applicable	28 October 2026
Bank documents for under, over and non-realisation	Regulation 19¹	Not applicable	Not applicable	28 October 2026

Short realisation happens to almost every service exporter at some point. A US client pays a $3,000 invoice but $2,965 reaches your account; a platform pays out after its fee; a client in Europe deducts a contested line item. Under the Foreign Exchange Management Act, 1999 (FEMA), you must realise the full export value of each export, so a shortfall left unexplained shows up as an open entry with your bank.¹

What is short realisation of export proceeds under FEMA?

Short realisation of export proceeds (or under-realisation) means the amount realised and repatriated against an export invoice is less than its full export value.¹ Regulation 5 of the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 (the 2026 Regulations) requires the full export value, or a reduced value allowed under regulation 6, to be realised within nine months from the invoice date (twelve months for rupee exports).¹²

The question is whether your bank has accepted a reduced value that matches what you received, because any shortfall must be regularised.¹

What causes short realisation of export proceeds?

Short realisation of export proceeds is usually caused by bank charges, platform fees, client deductions, withholding tax or exchange-rate differences, and each would be explained to the bank under regulation 6.¹

Cause	Example	What usually helps	Best for
Correspondent or intermediary bank charges	$3,000 invoice, $2,965 credited after charges abroad	SWIFT message or bank advice showing charges deducted	Exporters paid by wire
Payer-side fees on platforms or gateways	A designer's invoice paid through a platform that deducts its fee before payout	Platform statement showing gross and net	Exporters paid through platforms
Client deduction or discount	A marketing client withholds 10% for a missed KPI	Email or settlement agreeing the lower figure	Agreed reductions
Withholding tax deducted abroad	A client deducts tax under its local law and pays the net	Withholding certificate from the client	Clients in countries that withhold
Exchange-rate difference on a rupee or third-currency invoice	Invoice in one currency, settled in another	Contract terms and conversion details	Multi-currency invoicing

The 2026 Regulations do not single out any of these causes; the bank decides whether it is satisfied with the reason you cite.¹ How each cause is treated for GST and income tax is a separate question; see foreign withholding tax and intermediary bank charges.

How do you regularise short realisation of export proceeds?

You regularise short realisation of export proceeds by asking your Authorised Dealer (AD) bank to allow a reduction in export value under regulation 6, which the bank may allow on your request citing reasons for under-realisation, if it is satisfied with the reasons.¹

Confirm the shortfall is final: if the balance is still coming, it is not yet a short realisation.
Identify the cause: use the table above and collect the evidence.
Prepare the declaration: banks use their own formats, and the usual contents are listed below.
Submit to the bank: for an invoice up to ₹10 lakh (or the equivalent in foreign currency), the bank may allow the reduction on your declaration alone; for larger invoices the bank will want the reasons and supporting papers.¹
Confirm the EDPMS closure: regulation 4 lets the bank close the Export Data Processing and Monitoring System (EDPMS) entry for an invoice up to ₹10 lakh on your declaration that payment has been realised "either in full or otherwise", and you may give these declarations quarterly for bulk closure.¹

The full procedure, and how it compares with the pre-October 2026 rules, is in reduction in export invoice value.¹³

What does a short-realisation declaration contain?

A short-realisation declaration usually contains the invoice details, the amount realised, the shortfall and its reason, and whether more is expected, though banks use their own formats.¹

Invoice: the invoice number, date and currency amount.
Realisation: the amount actually realised and the date.
Shortfall and reason: for example, "charges deducted by correspondent bank" or "discount agreed with client by email dated 4 December 2026".¹
Balance: a statement that no further amount is expected, or that the balance will follow by a stated date.

For invoices above ₹10 lakh, attach evidence. Regulation 19 requires each bank to list the documents it needs for adjustment of under, over and non-realisation.¹

How are intermediary bank charges treated in a short realisation?

Intermediary bank charges are not addressed specifically in the 2026 Regulations.¹ If the client paid the full invoice but the amount credited in India is lower because banks deducted charges on the way, the credit is still below the invoice value.¹

Bank policy: whether your bank closes such entries routinely or asks for a declaration under regulation 4 or 6 is a matter for its internal policy, which regulation 19 requires it to publish.¹
Prevention: agree "OUR" charges with clients on wire transfers or build expected charges into your price. See OUR, SHA and BEN charges.

What happens if short realisation is not regularised?

If short realisation is not regularised, the shortfall shows up as an open entry with your bank, because regulation 5 requires the full export value, or a reduced value allowed under regulation 6, within the realisation period.¹ Small, regular shortfalls are routine, but a pattern of large unexplained gaps can prompt questions from your bank.

Balance still coming: keep the invoice open, chase the balance, and if it will arrive after nine months, ask for an extension under regulation 5.¹ See extension of export realisation period.
Balance never coming: see writing off export bills.
Penalties: regulation 19(3) says the bank cannot levy any charge or penalty on you for a regulatory delay or violation on your part.¹

Which RBI rule covers short realisation of export proceeds?

Regulation 6 of the 2026 Regulations, in force from 1 October 2026, is the RBI rule that covers short realisation of export proceeds, and it has no percentage cap and keeps the ₹10 lakh declaration route.¹ Circular No. 20 superseded the Master Direction on Export of Goods and Services from 1 October 2026.⁴

Rule	Period	Plain meaning	Best for
Master Direction paragraph C.17	Until 30 September 2026	Reduction in invoice value capped at 25% for most exporters³	Understanding older cases
Master Direction paragraph B.9	Until 30 September 2026	Banks checked by random audit that any short realisation allowed was within delegated powers or approved by the Reserve Bank of India (RBI)³	Understanding older bank checks
Master Direction paragraph C.31	From October 2025 to 30 September 2026	Banks could accept reductions on entries of ₹10 lakh or less on the exporter's declaration³	Small invoices before October 2026
Regulation 6, 2026 Regulations	From 1 October 2026	Bank may allow a reduced value on reasons; declaration alone up to ₹10 lakh; no percentage cap¹	All short realisations now

What are the common mistakes with short realisation of export proceeds?

The common mistakes with short realisation of export proceeds are leaving shortfalls unexplained, treating a pending balance as final, and applying the old 25% cap.¹³

Leaving shortfalls unexplained: an unexplained gap stays as an open entry with the bank.¹
Closing too early: a balance still coming is not yet a short realisation.
Applying the old cap: the 25% cap in paragraph C.17 ended on 30 September 2026.³⁴
No evidence for large invoices: above ₹10 lakh, the bank will want reasons and papers.¹

For example, a Kolkata data analyst whose $3,000 invoice arrives as $2,965 after correspondent charges can give the bank a declaration citing the charges, because the invoice is below ₹10 lakh.¹ For anything unusual, confirm the approach with your bank and a chartered accountant.

How did we verify this?

We checked this page against the sources below on 30 October 2026. Read our methodology or report an error.

Frequently asked questions

What is the FEMA term for short realisation of export proceeds?+

The FEMA term for short realisation of export proceeds is under-realisation, used in regulation 6 of the 2026 Regulations.¹ It describes the case where the amount realised and repatriated to India is less than the full export value of the invoice, and regulation 6 lets the AD bank allow a reduced value.

Is a declaration enough for a small export shortfall?+

A declaration is enough for a small export shortfall on an invoice up to ₹10 lakh or its foreign currency equivalent. The AD bank can allow the reduction on your declaration and close the EDPMS entry on a declaration that payment was realised in full or otherwise, under regulations 4 and 6.¹

Can the bank penalise me for an export shortfall?+

The AD bank cannot penalise you for an export shortfall caused by a regulatory delay or violation on your part. Regulation 19(3) of the 2026 Regulations says the bank cannot levy any charge or penalty on the exporter for such a delay or violation.¹ The shortfall still needs to be regularised under regulation 6.

Is there a percentage cap on short realisation after 1 October 2026?+

There is no percentage cap on short realisation after 1 October 2026. Regulation 6 of the 2026 Regulations has no percentage cap and keeps the ₹10 lakh declaration route.¹ The old 25% cap in paragraph C.17 of the Master Direction ended when Circular No. 20 superseded it.³⁴

Can export shortfall declarations be given in bulk?+

Export shortfall declarations for invoices up to ₹10 lakh can be given in bulk. Regulation 4 of the 2026 Regulations lets the bank close the EDPMS entry on your declaration that payment was realised either in full or otherwise, and you may give these declarations quarterly for bulk closure.¹

What if the balance of an export invoice will never arrive?+

If the balance of an export invoice will never arrive, the case moves from short realisation towards a write-off, and regulation 6 of the 2026 Regulations also covers non-realisation of the full export value.¹ See the guide on writing off export bills, and confirm the approach with your AD bank and a chartered accountant.

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.

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