ACH payments for Indian businesses: The complete guide to getting paid by US clients

ACH is the go-to payment method in the US. It’s fast, cheap, and built for domestic transfers. But there’s one big problem—Indian bank accounts don’t support ACH.

This mismatch creates a silent pain point: Indian SaaS companies are going global faster than ever, but many don’t fully understand how to get paid the way US clients prefer.

In this guide, we’ll break down what ACH really is, why your US clients love it, why your Indian bank says “no,” and how to bridge the gap using virtual accounts. 

We’ll also show you how to make ACH work for your business without setting up a US entity or losing money to international wire fees.

• ACH is US-only and not supported by Indian bank accounts, making direct acceptance impossible for Indian businesses.

• US clients prefer ACH due to low fees ($0–2), faster settlement, and seamless recurring payments.

• Wire transfers add friction—they’re costly and less convenient, which can lead to lost deals.

• Virtual USD accounts (via platforms like Xflow) allow Indian businesses to receive ACH like a local US vendor.

• Funds are settled in INR to your Indian bank, with automatic compliance (eFIRA, FEMA, GST docs) handled for you.

• Fast, compliant, and cost-effective—ACH via virtual accounts improves cash flow, client experience, and regulatory accuracy.

ACH stands for Automated Clearing House. It acts as the backbone of electronic payments in the United States.

The ACH network is a US-based system that processes low-cost domestic bank transfers. It's used for vendor payments, salaries, and B2B invoices because it's reliable, cheap, and automated.

Here's how it works: instead of writing checks or sending expensive wire transfers, businesses can set up ACH payments that automatically transfer money between US bank accounts using just a routing number and account number.  Think of it as India's UPI, but for bank-to-bank transfers that can handle larger amounts.

Current account transactions, as defined under Section 5 of FEMA, refer to day-to-day operational flows that do not alter an individual's or a company's asset-liability position. These include payments for exports, services, travel, and routine imports, and are typically more liberalized than capital account transactions.

Common current account transactions:

• Export of goods and services
• Payments received for IT services, design work, consultancy, and merchandise exports
• Professional and salary income from abroad
• Freelancers and remote workers receiving foreign income
• Dividend and interest payments
• Income earned from investments abroad (non-repatriable under current account rules)
• Business travel and operational expenses
• Remittances for overseas travel, training, software subscriptions, and more
• Routine imports
• Payments for importing consumables, raw materials, or software tools

Compliance and documentation

• e-FIRAs or FIRCs
• Mandatory for export earnings or inward remittances under the current account
• Purpose codes
• Correct classification of transaction nature (e.g., P1017 for IT services)
• Import Export Code (IEC)
• Required for most business-related international transactions
• Invoices and contracts
• Documentation to support the nature and value of the service or product

The regime here is largely liberalized. You don't need RBI approval to receive export proceeds or make most business payments abroad.

Recent updates have focused on streamlining outward remittance reporting and rationalizing purpose codes to reduce confusion. The RBI has also been pushing for more digital reporting through the EDPMS (Export Data Processing and Monitoring System) and similar platforms.

Let's take the case of Ankit, an Indian entrepreneur running a successful SaaS company. Ankit wants to expand his operations by opening a small sales office in the UK and also plans to send monthly payments to support his sister, who is studying in Canada.

The monthly payments to his sister for her living expenses and tuition fall under current account transactions. These are permitted under the Liberalised Remittance Scheme (LRS) and can be made without special RBI approval, as long as they stay within the annual limit and are supported by basic documentation.

However, if Ankit decides to invest in commercial property in the UK to house his sales team or becomes a shareholder in a UK-based company, that would qualify as a capital account transaction. These activities involve creating assets abroad, which affect India's foreign exchange position and fall under stricter FEMA and Overseas Direct Investment (ODI) regulations. They require additional filings and approvals.

Key distinction:

• Current account = recurring operational expenses (e.g., support, services, travel)
• Capital account = long-term asset creation or ownership abroad

Understanding this line helps entrepreneurs like Ankit avoid compliance pitfalls and structure their cross-border payments correctly.

Here's a simple checklist. 

Step 1: Ask the core question

Is the transaction creating or altering an asset or liability abroad?

• Yes → Likely a capital account transaction

• No → Likely a current account transaction

Step 2: Check the intent and nature

Current account includes:

• Export payments (goods or services)

• Freelance income

• SaaS subscription revenue

• Business travel or operational expenses

• Import of raw materials/tools

Capital account includes:

• Foreign investments (equity or real estate)

• External commercial borrowings (ECBs)

• Startup funding (VC rounds)

• Acquisition of overseas businesses or assets

• Setting up a branch or office abroad

Real examples

• Freelance designer receiving monthly fees → Current

• Same designer buying US company shares → Capital

• Indian startup earning SaaS revenue → Current

• Startup raising Series A from US VC → Capital

Common mistakes to avoid

• Assuming all foreign service payments are current account. Check if it's tied to equity or asset creation.
• Not filing Form FC-GPR for capital inflows like FDI, even under the automatic route.
• Using incorrect purpose codes can lead to compliance flags and bank delays.
• Skipping e-FIRA collection for exports, causing issues during GST refunds or audits.
• Ignoring Form 15CA/15CB requirements for outward payments above threshold limits.

Latest developments and policy trends

• The RBI has been actively modernizing FEMA compliance through its fintech sandbox initiatives and digital reporting systems. Recent updates include API-based reporting systems, real-time transaction monitoring, and streamlined documentation processes.
• There's been a noticeable tightening of the Liberalized Remittance Scheme limits and increased scrutiny of capital account routes, particularly for startups and fintech companies. The digitization of FIRA issuance has made export compliance faster and more transparent.
• The push for greater transparency in capital inflows, especially through startup funding rounds, reflects the RBI's focus on monitoring hot money flows and ensuring genuine investments.

FEMA compliance doesn't have to be a maze of forms, codes, and bank delays. Platforms like Xflow automate the entire process—classifying transactions under the correct FEMA route, applying the correct purpose codes, and instantly generating e-FIRAs for current account flows, such as service exports.

For Indian exporters and startups, Xflow ensures:

• Automated compliance for GST, IEC, and FEMA filings.
• Instant e-FIRA issuance for faster, audit-ready documentation.
• Accurate purpose code mapping without guesswork.
• INR settlements with better FX rates.
• Hands-free reporting, even without a compliance team.

Understanding the difference between current and capital account transactions is key, but with the right platform, you don't have to manage it alone. Xflow reduces errors, speeds up payments, and turns compliance into a competitive edge.