When the money for your invoice comes from someone other than the client you served, the EDF has a place for it: fields 1.15 and 1.16 name the third party and its relationship to your client, and Part 4 lets you declare that payment will come from a third party instead of the buyer. Fill those correctly, keep a paper trail that explains why the payer is different, and your AD bank has what it needs to match the remittance.
Key takeaways
- Fields 1.15 (third party) and 1.16 (relationship) exist for exactly this situation.
- In Part 4, strike out "buyer" and keep "third party" when someone else is paying.
- The bank's question is always "why is this entity paying?" — answer it before they ask.
- Common cases: parent company pays for a subsidiary, a client's agency pays, or a platform pays out.
- Rules on acceptable third parties are a bank and RBI matter; confirm with your AD bank before you rely on an arrangement.
What counts as a third-party payment
Your EDF lists a service recipient in Part 2B — the entity you invoiced. A third-party payment is any remittance where the remitter on the bank's inward message is a different legal entity.
Typical examples for service exporters:
| Situation | Service recipient (invoiced) | Actual payer |
|---|---|---|
| Group treasury pays all vendors | Brightwave GmbH (Germany) | Brightwave Holdings AG (Switzerland) |
| Client's marketing agency settles creative bills | Pinecrest Retail Ltd (UK) | Northlight Media Ltd (UK) |
| Client's US entity pays for its Australian arm | Coastline Health Pty (Australia) | Coastline Health Inc (USA) |
| Client pays via an outsourced accounts-payable firm | Vela Foods BV (Netherlands) | APX Payments BV (Netherlands) |
Note what is not a third-party payment in the usual sense: a client paying through its own bank, or through a correspondent or intermediary bank. The remitter is still the client; only the route is different.
Filling fields 1.15 and 1.16
Field 1.15 asks for the third party — give the full legal name and address of the payer, exactly as you expect it to appear on the remittance. Field 1.16 asks for the relationship between the third party and the buyer. Keep it factual and short:
- "Parent company of the service recipient"
- "Group company — shared services entity"
- "Agency appointed by the service recipient to settle vendor invoices"
Vague entries such as "known party" or "friend" invite questions. If you don't know the relationship well enough to describe it in one line, that is a sign to get written confirmation from your client before the money arrives.
Field 1.13 (consignee or recipient) and Part 2B should still name the client you actually served. Don't swap the recipient's name for the payer's name to make the matching look neat — that misstates who received the service.
The Part 4 declaration
Part 4 is a declaration with alternatives you strike out. One of those pairs is buyer / third party. Where the client pays directly, you strike out "third party". Where someone else pays, strike out "buyer" so the declaration reads that payment will be (or has been) received from a third party.
If one month's EDF mixes invoices paid directly and invoices paid by a third party, the single Part 4 declaration becomes awkward. Ask your bank how it prefers to handle this; some exporters split such months into separate forms for clarity, but that is a bank-by-bank question, not a rule we can state. Our explainer on the Part 4 declaration covers the other strike-out pairs.
Giving your bank comfort
Banks have to match each inward remittance to an export entry in EDPMS. When the payer name doesn't match the recipient name, someone at the bank has to decide whether the link is genuine. You make that decision easy by sending, along with or before the EDF:
- A letter or email from your client confirming that the named third party will pay on its behalf, quoting the invoice numbers.
- The contract clause or purchase order that mentions the paying entity, if there is one.
- The invoice itself, showing your client as the recipient.
- The FIRA or bank advice once the money arrives, so the remitter name can be compared.
Here is how that works for a real-looking case. Tarang Tech Solutions LLP invoices Coastline Health Pty, Sydney, AUD 9,000 (about ₹4,95,000) for app maintenance. Coastline's US parent pays. Tarang's EDF names Coastline Health Pty in Part 2B, puts "Coastline Health Inc, Delaware, USA" in 1.15 and "Parent company of the service recipient" in 1.16, strikes out "buyer" in Part 4, and attaches a one-paragraph confirmation from Coastline's finance head. When the USD remittance arrives, the bank sees a parent paying for its subsidiary, with paperwork that says so.
Ask your branch whether it has its own format for a third-party confirmation. Banks publish their own EDF policies and may want specific wording. This is general information, not legal or tax advice.
Country and currency wrinkles
Third-party payments often come from a different country than the client. Field 1.17 asks for the country of final destination, and the Part 2B country column is about the service recipient. Keep those pointing to where your client is. The payer's country belongs with the third-party details.
Currency can differ too: an AUD invoice paid in USD by a US parent. That affects the amount realised and your net realisable value, so record the actual credit carefully. Our piece on clients paying in a different currency goes deeper.
When a third-party arrangement is a red flag
Most third-party payments are routine group-treasury arrangements. A few patterns deserve a pause:
- The payer has no visible link to your client.
- The payer is an individual paying for a company's invoice.
- The payment comes from a country unrelated to either party.
- The client asks you to describe the payer differently from reality.
In any of these, talk to your AD bank before accepting the money. A bank that holds an unexplained credit is doing its job, and releasing it later takes longer than getting it right at the start.
Frequently asked questions
What should I write in field 1.16 of the EDF?
Describe the relationship between the third-party payer and your client in a few words, such as "parent company of the service recipient" or "agency appointed to settle vendor invoices". The aim is to let the bank see at a glance why that entity is paying.
Should the service recipient in Part 2B be the payer or the client?
The client — the entity that received your service and to whom you raised the invoice. The payer goes in field 1.15. Swapping them would misstate who received the service and can cause GST and FEMA mismatches.
Is a payment through an intermediary bank a third-party payment?
Generally no. Intermediary and correspondent banks only route the money; the remitter is still your client. A third-party payment is when a different legal entity sends the money on your client's behalf.
Do I need a letter from my client for a third-party payment?
It is the simplest way to give your AD bank comfort. A short confirmation naming the payer, the relationship and the invoice numbers usually answers the bank's first question. Ask your bank whether it wants a particular format.
Can a payment platform count as a third party?
Payouts through platforms and payment aggregators raise their own matching questions, and banks treat them in different ways. Check with your AD bank how it wants platform remittances shown on the EDF before you file.
Bottom line
A third-party payment is easy to declare when fields 1.15–1.16 and Part 4 tell the same story as your client's confirmation letter. Fill the form in our free EDF generator, attach the paperwork, and check the third-party wording with your bank once.
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.