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What is Purpose Code For Receiving Foreign Currency Payment in India?

Reading Time: 7 mins. Posted on May 16, 2018, last updated on May 19, 2020 .

Purpose Code is a code issued by Reserve Bank of India (RBI) to classify the nature of foreign currency transaction.

What is Purpose Code For Receiving Foreign Currency Payment in India?

Purpose code is a code issued by Reserve Bank of India (RBI) to classify each transaction with the nature of foreign currency transactions. In other words, the Purpose code helps regulators in identifying the exact nature of a cross-border transaction. So, it is mandatory for any cross-border payments in India. There are two categories of purpose codes.

  1. Receipt Purposes – For payments received by Indians in foreign currency.
  2. Payment Purposes – For Payments sent by Indians in foreign currency.

In each of the above categories, there are various purposes of a foreign currency transaction known as purpose code.

Bank and other payment processors have to report each of the transactions with a purpose code. Any Payment Processing Option even if they send a payment in Indian currency to the bank account, they require a purpose code for the transaction.

Table of Content

  • The Codes as Defined by RBI
  • What Are Options for Purpose Code in PayPal?
  • Which Purpose Code to Choose?
  • How to Change Purpose Code in PayPal?

The Codes as Defined by RBI

Here is an official PDF from RBI with all the purpose codes that you can refer in the Tabular form below for convenience:

Group Code Description
00 Capital Account P0001 Repatriation of Indian investment abroad in equity capital (shares)
P0002 Repatriation of Indian investment abroad in debt securities.
P0003 Repatriation of Indian investment abroad in branches
P0004 Repatriation of Indian investment abroad in subsidiaries and associates
P0005 Repatriation of Indian investment abroad in real estate
P0006 Foreign direct investment in India in equity
P0007 Foreign direct investment in India in debt securities
P0008 Foreign direct investment in India in real estate
P0009 Foreign portfolio investment in India in equity shares
P0010 Foreign portfolio investment in India in debt securities including debt funds
P0011 Repayment of loans extended to Non- Residents
P0012 Loans from Non-Residents to India
P000H Receipts of Non-Resident deposits (FCNRB/NRERA etc.) ADs should report these even if funds are not “swapped” into Rupees.
P0015 Loans & overdrafts taken by ADs on their account. (Any amount of loan credited to the NOSTRO account which may not be swapped into Rupees should also be reported)
P0016 Purchase of a foreign currency against another currency
P0017 Sale of intangible assets like patents, copyrights, trademarks, etc. by Indian companies
P0018 Other capital receipts not included elsewhere
01 Exports of Goods P0101 Value of export bills negotiated/purchased/discounted etc. (covered under GR/PP/SOFTEX/EC copy of shipping bills etc.)
P0102 The realization of export bills (in respect of goods) sent on collection (full invoice value)
P0103 Advance receipts against export contracts (export of goods only)
P0104 Receipts against the export of goods not covered by the GR/PP/SOFTEX/EC copy of shipping bill etc.
P0105 Export bills (in respect of goods) sent on collection.
P0106 Conversion of overdue export bills from NPD to collection mode
P0107 The realization of NPD export bills (full value of the bill to be reported)
02 Transportation P0201 Receipts of surplus freight/passenger fare by Indian shipping companies operating abroad
P0202 Purchases, on account of operating expenses of Foreign shipping companies operating in India
P0205 Purchases on account of operational leasing (with crew) – Shipping companies
P0207 Receipts of surplus freight/passenger fare by Indian Airlines companies operating abroad.
P0208 Receipt on account of operating expenses of Foreign Airlines companies operating in India
P0211 Purchases on account of operational leasing (with crew) -Airlines companies
P0213 Receipts on account of other transportation services (stevedoring, demurrage, port handling charges, etc.)
03 Travel P0301 Purchases towards travel (Includes purchases of foreign TCs, currency: notes, etc. over the counter, by hotels, hospitals, Emporiums, Educational institutions, etc. as well as the amount received by TT/SWIFT transfers or debit
P0308 FC surrendered by returning Indian tourists.
04 Communication Service P0401 Postal services
P0402 Courier services
P0403 Telecommunication services
P0404 Satellite services
05 Construction Service P0501 Receipts for the cost of construction of services projects in India
06 Insurance Service P0601 Receipts of life insurance premium
P0602 Receipts of freight insurance – relating to import & export of goods
P0603 Receipts on account of other general insurance premiums
P0604 Receipts of Reinsurance premium
P0605 Receipts on account of Auxiliary services { commission on Insurance)
P0606 Receipts on account of the settlement of claims
07 Financial Services P0701 Financial intermediation except investment banking – Bank charges, collection charges, LC charges, cancellation of forwarding contracts, commission on financial! Leasing etc.
P0702 Investment banking – brokerage, underwriting commission, etc.
P0703 Auxiliary services – charges on operation & regulatory fees, custodial services, depository services, etc.
08 Computer& Information Services P0801 Hardware consultancy
P0802 Software implementation/consultancy (other than those covered in SOFTEX form)
P0803 Database, data processing charges
P0804 Repair and maintenance of computer and software
P0805 News agency services
P0806 Other information services- Subscription to newspapers, periodicals, etc.
09 Royalties & License Fees P0901 Franchises services – patents, copyrights, trademarks, industrial processes, franchises, etc.
P0902 Receipts for use, through licensing arrangements, of produced originals or prototypes (such as manuscripts and films)
10 Other Business Services P1001 Merchanting Services – net receipts (from sale and purchase of goods without crossing the border).
P1002 Trade-related services – Commission on exports/imports.
P1003 Operational leasing services (other than financial leasing and without operating crew) including charter hire
P1004 Legal services
P1005 Accounting, auditing, bookkeeping, and tax consulting services
P1006 Business and management consultancy and public relations services
P1007 Advertising, trade fair, market research, and public opinion polling services
P1008 Research & Development services
P1009 Architectural, engineering and other technical services
P1010 Agricultural, mining and on-site processing services – protection against insects & disease, increasing harvest yields, forestry services, mining services like analysis of ores, etc.
P1011 Inward remittance for maintenance of offices in India
P1012 Distribution services
P1013 Environmental services
P1019 Other services not included elsewhere
11 Personal, Cultural & Recreational services P1101 Audio-visual and related services -services and associated fees related to the production of motion pictures, rentals, fees received by actors, directors, producers, and fees for distribution rights.
P1102 Personal, cultural services such as those related to museums, libraries, archives, and sporting activities and fees for correspondence courses of Indian Universities/Institutes
12 Government, not included elsewhere (G.n.i.e.) P1201 Maintenance of foreign embassies in India
P1203 Maintenance of international institutions such as offices of IMF mission, World Bank, UNICEF, etc. In India
13 Transfers P1301 Inward remittance from Indian nonresidents towards family maintenance and savings
P1302 Personal gifts and donations
P1303 Donations to religious and charitable institutions in India
P1304 Grants and donations to governments and charitable institutions established by the governments
P1306 Receipts / Refund of taxes
14 Income P1401 Compensation of employees
P1403 Inward remittance towards interest on loans extended to non-residents (ST/MT/LT loans)
P1404 Inward remittance of interest on debt securities – debentures/bonds/FRNsetc,
P1405 Inward remittance towards interest receipts of ADs on their own account (on investments.)
P1406 Repatriation of profits to India
P1407 Receipt of dividends by Indians
15 Others P1501 Refunds/rebates on account of imports
P1502 Reversal of wrong entries, refunds of the amount remitted for non-imports
P1503 Remittances (receipts) by residents under the international bidding process.
P1590 Receipts below $10,000 (say Rs 5,00,000)

Similarly, for payment of money in foreign currency, a similar purpose code exists in the official PDF. They start with an S.

Also read:
How to Create and Verify an Indian PayPal Account?
How to Create and Verify an Indian PayPal Account?
Verified PayPal means a valid PAN card, verified bank account and a purpose code. A step by step guide to verify an Indian PayPal Account

What Are Options for Purpose Code in PayPal?

One can’t use PayPal for payment within India. It is for receiving payments from abroad. So specifying a purpose code is a must for all transactions in PayPal. So PayPal has made it mandatory to provide a purpose code.

The default purpose code remains selected for all transactions until you need to specify a different Purpose code for a specific transaction.

PayPal offers the following Purpose code options for us to select.

Purpose Code in PayPal

Also read:
How To Deposit USD Check In Indian Bank Account in 2022
How To Deposit USD Check In Indian Bank Account in 2022
I have deposited Checks from Adsense, Clickbank, Amazon in my HDFC, SBI, SCB. Let me share the process to deposit USD check to Indian bank savings account.

Which Purpose Code to Choose?

Some of the options in the PayPal purpose code look overlapping. So I will help you make the right choice of purpose code for you.

The choice of purpose code will be based on where you get most of your PayPal payments. For me, software consulting is perfect because most of my PayPal payments come from my web development and consulting clients.

Yes, I do get some payments for the advertising revenue of my websites. But most of my payment is from my clients for web development and consulting. So my default purpose code is Software consulting under Information Technology or P0802

Software consulting will be the best-suited purpose code for all freelance developers.

Cross-border delivery of goods and services can also be valid for developers where a developer is delivering his or her services overseas. If you look at the category of the purpose code in bold, it is under Export of Goods (not an export of services), which I don’t see as the right category for a developer. So I avoid it as purpose code should be under the services and not under the export of goods.

If you are a writer where clients pay you for writing, the purpose code can be Other information services.

Remember, the choice of purpose code is to allow regulators to identify the nature of a transaction.

How to Change Purpose Code in PayPal?

In PayPal business account, you can edit the Purpose code on the profile settings > Financial Information Page.

Step 1 Profile > Financial Information

Scroll to the bottom, and you will find the option to edit the Purpose Code.

Scroll to Purpose Code

Now click on manage, and the page opens where you can view your selected default Purpose code in PayPal as well as have an option to change it.

Purpose Code Manage

Click the Change link, and the option to edit the Purpose code opens up.

Purpose Code Change

Select the right purpose you want to set as default for automatic payment and click on the Save button.

However, in PayPal professional account, there is no option to edit the default Purpose code in the profile section. At least I couldn’t find it. The only way to edit the default Purpose code is at the time of withdrawal.

PayPal Personal Account Purpose Code

It asks if you would like to change the purpose code for current withdrawal or making it a default for all future withdrawals as well.

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