If your payroll outsourcing firm in India processes payroll for clients abroad and bills them in foreign currency, those invoices are service exports and go on a monthly Export Declaration Form with your AD bank. List each foreign invoice dated in the month as a Part 2B row and file within 30 days from the end of that month. The part that needs real thought is separating your service fee from any money that merely passes through you.
Key takeaways
- Payroll processing, payslip generation and related back-office work for foreign clients is generally a service export. Type of export is "Services"; mode of delivery is usually "Internet".
- Recurring per-employee invoices make payroll firms natural candidates for the one-EDF-per-month approach.
- Codes such as SAC 998222 (accounting and bookkeeping) and purpose code P1005 (accounting, auditing and tax consulting) may fit some payroll work. Confirm both.
- Money received only to pay someone else, such as salaries you disburse on a client's behalf, raises separate FEMA and GST questions. Do not mix it into your service invoices without advice.
- Most monthly payroll invoices are under ₹10 lakh, so periodic realisation declarations can keep EDPMS tidy.
What a payroll firm actually exports
The typical engagement for an Indian payroll firm serving foreign clients looks like one of these:
- Offshore processing. A UK or US company's in-house HR team sends inputs; your team calculates pay, prepares payslips and reports, and returns files. The client pays its own staff from its own bank.
- Global payroll support. You work as a subcontractor to a foreign payroll provider, processing data for its end clients.
- India payroll for a foreign company. A foreign company with staff in India asks you to run their Indian payroll.
Models 1 and 2 are the clean service-export cases. Model 3 can be more complicated: if the foreign client funds salaries through you, or if you act as a go-between, GST place-of-supply and intermediary questions can arise, and FEMA treatment of the pass-through money is a separate matter. Talk to your CA before you structure that kind of deal.
Invoice patterns and how they map to the EDF
| Charge | Billing pattern | EDF treatment |
|---|---|---|
| Monthly processing fee | Per employee per month | One row per client invoice per month |
| Setup or onboarding | One-off at contract start | One row in the invoice month |
| Off-cycle runs | Ad hoc, as requested | One row per invoice, or included in the monthly invoice |
| Year-end returns and certificates | Annual | One row in the month invoiced |
| Reimbursed costs (e.g. courier, software seats) | With the monthly invoice | Discuss with CA and bank whether they belong on the EDF value |
Keep one rule simple: the invoice date decides the EDF month. If you process October payroll and invoice on 3 November, that invoice goes on the November EDF.
On reimbursements, our article on reimbursement of expenses from foreign clients sets out the questions to ask.
Worked example
Saltpan Payroll Services LLP, Chennai, processes payroll for three foreign clients:
| Client | Country | Employees | Fee per employee | November invoice |
|---|---|---|---|---|
| Westmoor Clinics Ltd | UK | 220 | GBP 9 | GBP 1,980 |
| Bluefin Freight Pty Ltd | Australia | 480 | AUD 8 | AUD 3,840 |
| Calder Retail Inc | USA | 1,150 | USD 6 | USD 6,900 |
In November 2026 it also invoices Calder a one-off setup fee of USD 4,500 for a new state entity.
Saltpan's November EDF, due 30 December 2026:
- Part 1: Services; mode of delivery Internet; category of exporter as applicable; AD code of the branch receiving all three clients' payments.
- Part 2B: four rows, one per invoice, including the separate Calder setup invoice.
- SAC: its CA confirmed 998222 for processing fees; the same code appears on each invoice.
- Total value (1.22): about ₹13,75,000.
- Part 4: signed by a designated partner, with "will be received" kept, since all four invoices were raised on 30-day terms.
Every invoice is below ₹10 lakh. Saltpan gives its bank a quarterly declaration of realisation using the realisation declaration tool, so each entry closes without individual matching. It still files the FIRAs against each invoice for GST and audit.
Getting purpose codes right
Payroll receipts can easily be tagged with the wrong purpose code, especially if the client's bank uses a generic description such as "services". P1005 covers accounting, auditing, bookkeeping and tax consulting, and P1006 covers business and management consultancy. Which fits depends on what you actually do. Ask your bank which code it will use and check each FIRA. If a code is wrong, a purpose code correction letter puts the request on record.
Realisation and recurring clients
Recurring monthly invoices mean an unpaid month can hide inside a healthy account. A client may pay November and January but quietly skip December during a billing dispute. Run an ageing report every month and match it to your EDF rows.
The regulations require full realisation within 9 months of each invoice date (12 months for rupee invoices). If a client confirms a delayed payment, request an extension from your bank before the deadline.
GST and confidentiality notes
Payroll processing for a client abroad can be a zero-rated export of services under Section 16 of the IGST Act if all five Section 2(6) conditions hold. Most firms invoice under LUT, with "Supply meant for export under LUT without payment of IGST" on the invoice.
A practical point: your EDF describes services, not payroll data. Part 2B wants a description such as "Payroll processing services, November 2026", not employee details. Keep personal data out of documents you send to the bank.
This is general information, not legal or tax advice. The EDF does not change GST or income-tax obligations.
Frequently asked questions
Is payroll processing for a foreign company an export of services?
Generally, yes, where an Indian firm processes payroll for a client located abroad, the place of supply is outside India and payment comes in foreign exchange. If the client's staff are in India or you handle salary funds, take advice, because GST and FEMA treatment can differ.
Which SAC code should a payroll outsourcing firm use?
SAC 998222 (accounting and bookkeeping) is often considered for payroll processing, but classification depends on your services. Confirm with your CA and use the same code on invoices and on the EDF.
Should salary funds I receive from a client go on the EDF?
Money received only to pay a client's employees is not your service fee and raises separate questions. Do not add it to your EDF value without discussing it with your CA and AD bank first.
Can I file one EDF for all my payroll clients?
Yes. One EDF per month can cover service exports to one or more recipients, with each invoice as a row in Part 2B. If clients pay into different banks, you may need one EDF per bank.
What should the description of services say on the EDF?
Keep it short and functional, such as "Payroll processing services, November 2026". Avoid including employee names or other personal data on the form.
Bottom line
For payroll outsourcing firms, recurring invoices make the EDF predictable, provided fees and pass-through money are kept separate. Prepare your monthly form with the free EDF form generator.
This guide is general information for Indian businesses, not legal or tax advice. Rules and bank processes change — confirm specifics with your AD bank or chartered accountant.