Anshul Sharma

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Export business in India

What are tariff barriers in international trade?

A tariff is a tax a government charges on goods coming into its country. Your buyer doesn't pay it up front, but it's added to the landed cost of your product, which means your price in that market goes up.

Governments do this to protect local industries from cheaper imports, and sometimes just to collect revenue. Either way, the exporter feels it first.

A practical example: Say you're shipping cotton fabric to Brazil. Brazil charges a 20% import duty on that category. Your buyer clears customs, pays the duty, and suddenly your fabric costs 20% more than it did when you quoted it. That difference either comes out of your margin or makes you more expensive than local suppliers.

What are the main types of tariff barriers?

Here are the main types of tariff barriers you'll come across.

This is the most common type. The duty is calculated as a percentage of your product's declared value. So if a country charges 15% ad valorem on electronics and you're shipping a consignment worth $10,000, you owe $1,500 in duty.

Here, the tariff is a fixed amount per unit, regardless of the product's cost. A country might charge $2 per kilogram of imported coffee beans, whether that coffee is worth $5/kg or $15/kg. This can hit lower-value products harder.

This is a combination of both. You pay a percentage of the product's value, plus a fixed amount per unit. Luxury goods often attract compound tariffs, since governments want both a revenue cut and a price deterrent on high-value imports.

For example, a country might charge 10% of the invoice value plus $5 per kilogram on imported chocolates. So a 100 kg shipment worth $2,000 would attract $200 (10% ad valorem) plus $500 (specific duty), bringing the total tariff to $700.

Protective tariffs are designed to make foreign goods expensive enough that local buyers stick to domestically produced alternatives.&nbsp;

Revenue tariffs are less about blocking trade and more about collecting income for the government.&nbsp;

The duty on petroleum imports in many countries, for instance, isn't meant to stop imports; it's just a steady revenue source.

A non-tariff barrier is any restriction on trade that isn't a tax. It could be a rule, a standard, a quota, a licensing requirement, or a procedure that governs what enters or leaves a country. Unlike a tariff, there's no clear number attached to it. You just find out you can't sell there, or that selling there costs far more than you planned.

Countries use these measures for all kinds of reasons: food safety, environmental protection, national security, and public health. Some of those reasons are completely legitimate. But governments don't always draw a clear line between protecting public health and protecting local industry, and for an exporter, the impact is the same either way.

A practical example: An Indian food exporter shipping to the EU, for instance, may need to obtain FSSAI-aligned documentation and pass pesticide residue checks before the goods are cleared.

What are the main types of non-tariff barriers?

Non-tariff barriers show up at different points in the export process. Here are the main types to know:

A quota is a hard limit on how much of a product can enter a country within a given period. If you're exporting garments to a country that allows only 500,000 units of a particular fabric category per year, and that limit is reached in Q2, your Q3 shipment will wait until the next cycle.

Some products need government approval before they can be imported. Your buyer must apply for and obtain that license before your shipment can clear customs. For exporters, this adds an unpredictable step to the timeline that's entirely outside your control.

These are product standards, testing requirements, and labeling rules set by the destination country. Your product has to meet them before it's allowed in. An Indian electronics exporter selling to Europe, for instance, needs CE certification confirming the product meets EU safety and electromagnetic standards. Without it, the shipment doesn't clear.

These apply mainly to food, agricultural products, and anything involving animals or plants. The destination country inspects for pesticide residues, disease, contamination, or non-compliance with its food safety standards. Indian basmati rice exports to the EU, for example, are regularly tested for pesticide levels, and shipments that don't pass get rejected at the port.

When a government financially supports its own producers, it indirectly makes imports less competitive. If a country subsidizes its wheat farmers, locally produced wheat is cheaper on the shelf than anything you ship in, even if your product is genuinely better. There's no rule blocking you, but the economics work against you.

Lengthy documentation requirements, inconsistent inspections, and slow clearance processes delay shipments and add costs you didn't budget for. A few extra days at the border means storage charges, missed delivery windows, and buyers who start looking elsewhere.

What is the difference between tariff and non-tariff barriers?

Both restrict trade, but they work differently and require different responses from exporters. Here's a side-by-side look at how they compare in practice.

For small exporters, non-tariff barriers tend to be the harder problem. A tariff rate is published, and you can price around it. A certification requirement you didn't know about, or a quota that filled up before your shipment arrived, is much harder to plan for.

How do tariff and non-tariff barriers affect international trade?

Trade barriers do more than slow goods at the border. They affect your pricing, your cash flow, and sometimes your ability to enter a market at all

How can exporters navigate barriers to global trade?

Here are a few ways in which exporters can plan ahead and navigate barriers to global trade:

Research the destination market requirements before exporting

Partner with customs brokers or freight forwarders

Use digital tools for tracking and payments

Simplify your cross-border payments with Skydo

Navigating trade barriers already takes enough bandwidth. Skydo handles the payment side so you're not also chasing transfers, decoding fee structures, or waiting on settlements while your shipment clears.

<a href="https://www.skydo.com/">Explore how Skydo works for Indian exporters →</a>

How to Sell on Amazon USA from India: Fees, Shipping, Products (2025 Guide)

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Export incentives are benefits, refunds, credits, and concessions given by the Indian government to exporters to make their goods and services more competitive in global markets.

Exporters end up paying several embedded taxes and duties during manufacturing or distribution that don't get refunded through regular GST or customs channels. Things like tax on electricity, fuel cess, and other hidden state and central levies. Export incentives compensate for these, so you keep a healthy margin while offering attractive pricing to your global buyers.

Here's a quick glance at the benefits covered across these programs:

What types of export incentive schemes can Indian exporters claim

Here’s an overview of the major export incentive schemes that Indian exporters can claim a refund on:

RoDTEP (Remission of Duties and Taxes on Exported Products)

The <a href="https://www.skydo.com/blog/rodtep-scheme-rates-notifications-and-benefits">RoDTEP scheme</a> remits central, state, and local taxes not refunded under any other program. That means you can claim a refund for electricity duty, fuel tax, and stamp duty on documentation.

You get transferable electronic scrips on the ICEGATE portal as a refund. If this is new to you, think of scrips as coupons that you can redeem to get a discount on future import duties. Or you can transfer it to a fellow importer if you don’t need it.

The scheme covers 8,555 tariff lines and the remission rate can range from 0.3% to 4.3% of the FOB value depending on your 8-digit HSN code.

With this scheme, you can claim a refund for customs duties on imported raw materials used in manufacturing an export order. Like a leather bag exporter claiming a refund for customs duties on imported leather.

The refund amount depends on the All Industry Rates (AIR), which are fixed percentages set by the government for various product categories.

AIR is calculated on the Free On Board (FOB) value, which is the price of goods at the time of loading them onto the vessel minus insurance and freight. However, if it covers less than 80% of your actual duties paid, you can apply for a Brand Rate.&nbsp;

Brand rate is a customized refund calculated for your business. It is calculated based on your evidence, such as duty payment receipts and consumption data. If approved, it can increase your reimbursement to 6–8%, but you must diligently maintain production and consumption records for the next five years to support your claim during audits.

Here’s an example of AIR and brand rate to make it simpler for you: An industrial machinery manufacturer exports an order with an FOB value of Rs.10 lakh. The AIR is 2%, so the exporter will receive a refund of Rs. 20,000. However, they paid Rs. 50,000 as customs duties on importing high-value steel and electronic controllers; AIR only covers 40% of the duties paid. The exporter is eligible for a brand rate, and after submitting all the verified receipts, he gets a refund of Rs. 50,000, 5% of the FOB value.&nbsp;

Export Promotion Capital Goods (EPCG) Scheme

The <a href="https://www.skydo.com/blog/export-obligation-period">EPCG</a> scheme is for manufacturers to import capital goods, like advanced machinery, computer systems, and software at 0% customs duty. The cost of high-tech equipment reduces, and businesses can upgrade their production quality and competitiveness simultaneously.

But there is one condition: the manufacturer must export goods worth six times the duty saved within six years.&nbsp;

You can take advantage of duty-free imports of raw materials, packaging, and fuel for manufacturing export products with this scheme. The Standard Input-Output Norms (SION) calculates the exact amount of raw material needed for an export order that you can claim duty-free.

Unlike the Duty Drawback scheme, which is a post-export refund of duties already paid, Advance Authorization is a pre-import exemption. Your initial product costs reduce, and you’re left with more working capital.

The IES provides subsidized interest rates on<a href="https://www.skydo.com/blog/pre-shipment-credit"> pre-shipment credit</a> and post-shipment loans for MSME exporters.

Latest Update: Under the government’s recently launched<a href="https://www.pib.gov.in/PressReleasePage.aspx?PRID=2199733&amp;reg=3&amp;lang=1"> Export Promotion Mission</a> (EPM), eligible MSMEs can now receive a 2.75% interest subvention on their export credit costs.

The goal is to reduce their interest burden, allowing them to reinvest those savings into operations or improving production efficiency.

Who is eligible for tax incentives for exporters in India

Whether you’re eligible to claim tax incentives depends on what you export. Here’s what you must know:

Eligibility for service exporters and freelancers

How to claim export incentives: A step by step guide

Note: This is the generalised workflow. Specific steps and application requirements vary by scheme, see our dedicated guides on Duty Drawback, <a href="https://www.skydo.com/blog/rodtep-scheme-rates-notifications-and-benefits">RoDTEP</a>, and EPCG for more details.

Start by obtaining a ten-digit Import Export Code (IEC) from the DGFT portal. It is your unique business identifier for all international trade transactions. Link IEC to your GST registration on the portal to synchronize your trade data with tax records.

Step 2. File shipping bills with incentive declaration

A shipping bill is a mandatory customs document. File it electronically when your goods physically leave India. You must also declare your intent to claim benefits on the shipping bill, at the time of filing it.

File GSTR-1 and GSTR-3B returns regularly to be eligible for a refund claim. The government systems match the GST portal and ICEGATE data to reconcile your<a href="https://www.skydo.com/blog/what-is-export-invoice"> export invoices</a> with shipping bill data.

Post-shipment, log into the DGFT or ICEGATE portal to submit your application online. Provide digital copies of the shipping bill, commercial invoice, and packing list.

Step 5. Track claim status and receive credit

You can track your application’s real-time status online. Once your application is approved, you get benefits as electronic credits to your duty credit ledger.

What documents are required to claim export benefits

Most exporters have digital and physical records of essential export documents. They are required for claiming refunds and present as proof during audits.

How long does it take to receive export incentive payments

Having realistic expectations for your payout is crucial because timelines vary based on the scheme and the verification process.

Delays are most commonly caused by data mismatches between your shipping bills and GST returns. A single character difference can stop the automated system from releasing your funds.

What are common mistakes that delay export incentive claims

A minor error can cause weeks of delay, which will impact liquidity. You don’t want that and the best way to avoid it, is by preventing from making these common errors:

How can service exporters and freelancers claim export benefits

The claim process for service exporters and freelancers differs from that for goods exporters. Here’s how:

Simplify your export payment documentation with Skydo

If you have read till here, you must have realized the importance of documentation in claiming export benefits. And it doesn’t just end there. There’s also post-payment documentation, which involves getting FIRC from the bank.&nbsp;

There are two challenges with banks: the process is slow, requiring multiple follow-ups, and they don’t provide an FIRC ‌for free. Plus, banks charge costly SWIFT fees and apply forex markups on the conversion rate, which takes a deep cut in your earning.

<a href="https://www.skydo.com">Skydo</a> is a modern payment platform that serves as a potent alternative to these challenges.&nbsp;

FIRC and eBRC comes in handy while claiming export benefits under various government schemes. Try Skydo.

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Accept ACH payments

FCNR deposit rates are offered by Indian banks to Non-Resident Indians (NRIs), on depositing their international earnings in a fixed deposit account in India. The rates are quoted per annum and fixed at the time of booking. These deposits provide a safe and practical way to grow overseas income while enjoying tax benefits. They are accessible in key currencies including USD, GBP, EUR, CAD, AUD, JPY and others.

According to the current Reserve Bank of India (RBI) regulations, FCNR deposits can be opened for a minimum tenure of 1 year and a maximum tenure of 5 years. Banks are not allowed to accept or renew FCNR deposits for a period exceeding 5 years.

<a></a>What are the Key Features and Benefits of FCNR Deposits?

Tax-free interest earnings, complete repatriability of principal and interest and protection against changes in currency exchange rates are some of the benefits of FCNR fixed deposits in India. Here is a detailed list of features and benefits of FCNR deposits in India:

<a></a>What are the Current FCNR Interest Rates Across Major Banks in India?

You can make an FCNR deposit rate comparison to choose the right bank for your deposits. Here are the current FCNR deposit rates of major banks for different currencies, including USD, GBP, EUR, CAD, AUD, JPY, and SGD:

<a></a> Kotak Mahindra Bank FCNR Deposit Rates

<a></a>Bank of Baroda FCNR Deposit Rates

<a></a>IDFC First Bank FCNR Deposit Rates

<a></a>Which Bank Offers the Highest FCNR Deposit Rates in India?

Currently, Bank of Baroda is offering the highest FCNR deposit interest rate of 5% on USD deposits for a tenure of 1 to 2 years in comparison to other major Indian banks. IndusInd Bank and IDFC FIRST Bank also provide competitive FCNR deposit rates for select currencies and tenures.

<a></a>How are FCNR Deposit Rates Calculated?

FCNR deposit interest is worked out on a 360-day year rather than the usual 365. This is just the day-count convention banks use for these foreign-currency deposits: each year is treated as 360 days (twelve 30-day months) when calculating how much interest you have earned. It is an international money-market standard, not something that reduces your return in any meaningful way.

The interest is compounded every 180 days, that is, twice a year. Compounding means that at the end of each 180-day period, the interest you have earned is added to your principal, and the next period's interest is then calculated on this larger amount. So your interest earns interest, and the deposit grows a little faster than it would with simple interest. (For deposits of one year or less, interest is simple and not compounded; compounding applies to longer tenures.)

Beyond the day-count method, the rate itself is set by the bank based on its own pricing rules, the tenure, the deposit currency, and global benchmark rates.

The interest rate cannot be changed in the middle of the term. It is fixed at the time of booking, so your funds are protected from market movement.

FCNR(B) deposit rates are subject to strict ceilings set by the RBI, and Indian banks are not allowed to offer rates above these limits. The ceilings are tied to international benchmark rates (the Overnight Alternative Reference Rate, such as SOFR for US dollars), plus a small margin.

<a></a>How to Choose the Best FCNR Deposit Rate?

To choose the best FCNR deposit rate, pick the currency that matches your income source, select a tenure that fits when you will need the money, and compare the spread each bank offers above the international benchmark rate. The factors below explain each of these in turn.

<a></a>Currency That Aligns with Your Income Source

You may save money in any currency, but be sure it fits your financial objectives. Additionally, see if the interest rates are reasonable for the currency of your choosing.

<a></a>Tenure Aligns with Your Repatriation Plans

The best FCNR tenure will depend on when you might need access to your funds. If you are going to repatriate money overseas in 1-2 years, you may want a shorter tenure for more flexibility.

FCNR deposit rates are usually influenced by international benchmark rates such as the USD's SOFR or the GBP's SONIA. Before you invest, check the extra return the bank is offering above current benchmark rates.

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An FCNR (Foreign Currency Non-Resident) account is a fixed deposit account that allows NRIs to hold their savings in designated foreign currencies with an Indian bank. Since the deposit is maintained in foreign currency, both the principal and interest remain protected from fluctuations in the Indian Rupee during the deposit tenure.

The funds in this account, along with the interest earned, are tax-free in India, similar to a Non-Resident External (NRE) bank account. Banks also allow transfers between FCNR (B) and NRE accounts, providing flexibility in managing your NRI savings. The amount will be converted into the chosen foreign currency based on the bank’s prevailing exchange rates.

Commonly accepted currencies include Australian dollars (A$), British pounds (£), Canadian dollars (C$), euros (€), Japanese yen (¥), and US dollars ($). However, banks may accept FCNR (B) deposits in any freely convertible currency, subject to current Foreign Exchange Management Act (FEMA) regulations.

<a></a>What are the Key Features of an FCNR Account?

An FCNR (B) account comes with several notable features, including full repatriation of principal and interest, fixed-tenure deposits in foreign currency and the ability to avail loans or overdrafts against the deposit.

Here is a detailed understanding of these key features:

Instead of being used for ordinary savings, FCNR accounts are intended for fixed-term deposits. This implies that you commit your money for a predetermined amount of time, often 1 to 5 years. Premature withdrawals are possible, but they may result in penalties and interest is usually only paid after a minimum of a year.

You do not have to pay tax on the interest earned from FCNR deposits. This tax-free status allows you to grow your savings and make investments independently while living abroad.

You can avail a loan or overdraft against your FCNR account. It allows you to access funds without prematurely withdrawing your investment. This provides liquidity while your deposit continues to earn interest.

As per FEMA regulations, Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) with foreign currency earnings can open an FCNR account. It is designed for those who wish to invest in India without<a href="https://www.skydo.com/blog/currency-conversion-fees"> currency conversion </a>while enjoying full repatriation benefits.

However, resident Indians are not eligible to open an FCNR account. An FCNR deposit can only be funded using eligible foreign currency funds, such as overseas remittances or transfers from an NRE account. Domestic savings maintained in India are not permitted as a funding source.

<a></a>What are the Benefits of an FCNR Account?

The key benefits of an FCNR account include tax-free returns, the flexibility to hold deposits in foreign currency, multiple tenure options and competitive interest rates. Here is a detailed overview of the benefits of an FCNR account:

<a></a>What Are the Drawbacks of an FCNR Account?

While FCNR accounts offer several benefits, they also come with certain limitations, such as premature withdrawal penalties, funding restrictions, a limited tenure range, and potential currency conversion risk at the time of repatriation or withdrawal. Here is a detailed guide:

<a></a>FCNR vs NRE vs NRO: Differences and Similarities

The table below compares the FCNR account, NRE account, and NRO account:

You can open an FCNR (B) account in person at your local branch or online using mobile or internet banking. Follow the steps below to open an FCNR account online:

<a></a>Choose a Bank and Compare Deposit Options

Start by comparing FCNR deposit rates and tenure options across different banks. Since interest rates vary by bank and currency, selecting the right option can help maximise your returns while meeting your financial goals.

Choose the foreign currency in which you want to hold the deposit and specify the amount you wish to invest. The applicable interest rate will be locked in when the deposit is booked.

Gather the documents required by the bank, such as your passport, a valid visa or residence permit, overseas address proof, PAN card, and any other documents requested for KYC verification.

<a></a>Apply Online or Through a Branch Visit

Most banks allow NRIs to open FCNR deposits online through internet banking or their mobile banking app. You can also open the account by visiting the nearest branch. Review the deposit details carefully before submitting the application.

Once the application is processed, the bank will issue a deposit confirmation. You can then manage the deposit through the bank's online or mobile banking platform.

<a></a>What Documents Are Required to Open an FCNR Account?

To open an FCNR account, you need to submit documents for tax compliance and identity verification. Here is the list of common documents that are required:

<a></a>What Happens to Your FCNR Account When You Return to India?

When an NRI returns and becomes a resident Indian under <a href="https://www.skydo.com/blog/fema-foreign-exchange-management-act">FEMA</a>, the rules for FCNR account change and the account cannot continue indefinitely in the same way. Let us break them down:

Holding option: Existing FCNR deposits can be held until maturity even after returning to India. However, once the depositor becomes a resident, the interest earned thereafter is taxable in India.

Post-maturity conversion: On maturity, FCNR deposits are typically converted into a Resident Foreign Currency (RFC) account or a standard resident fixed deposit, as applicable.

Notification obligation: Depositor must notify the bank about the change in residency status.

Suppose you open an FCNR deposit of $50,000 for 3 years at a fixed interest rate, but you return to India after 2 years and become a resident. In this case, you do not need to break the deposit immediately.

The FCNR account can continue until maturity. During the remaining 1 year, it may continue to earn interest as per applicable rules, but its residential status will be updated. On maturity, the principal plus interest is converted into INR or transferred into a RFC account.