Export Receivable Write Off

Hi Kallol,

Your question about writing off the unrealized export receivable of Rs. 8 lakhs is quite relevant, especially considering RBI guidelines and accounting norms.

Key Points:

• Export invoice: Rs. 20 lakhs (2015-16)

• Amount received: Rs. 12 lakhs (2016-17)

• Balance Rs. 8 lakhs to be written off (customer’s written confirmation)

• Total export proceeds received previous calendar year: Rs. 2 crores

• RBI guideline allows self write-off up to 5% of export proceeds received in previous calendar year (i.e., Rs. 10 lakhs in your case)

RBI Guidelines on Write-Off of Export Bills

• As per Foreign Exchange Management Act (FEMA) guidelines, exporters can write off unrealized export bills up to 5% of export proceeds realized in the previous financial year without prior approval from RBI.

• This is commonly known as the “self write-off” limit.

Can You Write Off Rs. 8 Lakhs in 2020-21?

• Yes, since the write-off amount (Rs. 8 lakhs) is less than 5% of Rs. 2 crore (i.e., Rs. 10 lakhs), you can write off this amount without seeking RBI approval.

• You should maintain proper documentation including:

  • Customer’s written confirmation of non-payment.

  • Justification for write-off (technical non-compliance, etc.).

  • Board resolution or management approval for write-off.

  • Accounting entries reflecting write-off.

  • Evidence of export proceeds received in previous years.

Accounting Treatment

• Debit: Bad Debts Expense (or Provision for Doubtful Debts)

• Credit: Trade Receivables (Export Debtor)

Important Notes

• Ensure all compliance with RBI’s Liberalized Remittance Scheme and FEMA regulations.

• If the amount to be written off exceeds 5% limit, prior RBI approval is mandatory.

• Write off should be done after due efforts for recovery have failed.

• Also disclose this write-off in notes to accounts under export receivables.

Summary Table