P0001 Purpose Code: Repatriation of Indian investment abroad in equity capital (shares)

Purpose code P0001 is used when an Indian resident receives money from the sale, redemption, or divestment of equity capital or shares held outside India.

What is the P0001 purpose code?

Purpose code P0001 is used when an Indian resident brings back to India money that was invested in equity capital or shares held outside the country. This covers proceeds from selling overseas shares, exiting an equity stake in a foreign company, and the return of the capital originally sent out to acquire that holding. It applies to the return of the invested capital itself, so dividends and other income earned on those shares while they were held are current account receipts and are reported under a different code. Under RBI FEMA guidelines, this inward payment is classified under Capital Account and reported accordingly.

When to use P0001 purpose code?

Use P0001 when money comes back to India from shares or equity capital you held abroad, whether the holding was sold, redeemed, or otherwise exited. It is the correct RBI receipt code for the return of capital originally invested in overseas equity. P0001 applies to the asset type, whether the original investment was made by an individual or a company.

When to use a different code:

• Use P0002 when the payment is repatriation of Indian investment abroad in debt securities
• Use P0004 when the payment is repatriation of Indian investment abroad in subsidiaries and associates
• Use the matching S-code when you are sending money abroad rather than receiving money

Who typically uses P0001 purpose code

Indian residents who have sold or exited shares they held in a company outside India, including individuals who invested abroad under the Liberalised Remittance Scheme and companies unwinding an overseas equity holding. It applies to whoever made the original investment from India, whether that was an individual or a registered company.

Examples of transactions covered under P0001 purpose code

• Sale proceeds from shares in a foreign company, remitted to the investor's Indian bank account
• Funds received after divesting an equity stake held in an overseas company
• Money returned to India when a shareholding acquired abroad is fully exited
• Buyback or redemption proceeds paid to an Indian shareholder of a foreign company

When NOT to use P0001 purpose code

• The payment is repatriation of Indian investment abroad in debt securities (use P0002)
• The payment is repatriation of Indian investment abroad in subsidiaries and associates (use P0004)
• The receipt is a dividend or other income earned on the overseas shares rather than the return of the invested capital (use the current account code that matches that income)
• You are sending money abroad rather than receiving (use the matching S-code)

Documents required for P0001 purpose code

To receive a payment under P0001, keep the following documents ready so your bank can verify the transaction and report it correctly under FEMA.

How is a P0001 Purpose Code declared?

Declaring the code is pretty straightforward. Here's how the payment gets tagged and reported.

1. Complete the sale or exit: Sell, redeem, or divest the shares you hold outside India.
2. Receive the proceeds: The funds are remitted from abroad into your Indian bank account.
3. Declare the purpose: State the purpose of the inward remittance on your bank's form.
4. Submit supporting documents: Provide the sale contract, proof of the original investment, and KYC so the bank can verify the transaction.
5. Get your FIRA: Once processed, your FIRA is issued as proof and the payment is reported under FEMA.

Common mistakes to avoid while using P0001 purpose code

A few common slips can hold up your payment or cause compliance issues. Here's what to watch for.

1. Tagging a subsidiary or associate stake as ordinary equity: Using P0001 when the money came back from a subsidiary or associate holding, which belongs under P0004.
2. Code and document mismatch: The code not matching what your sale contract and remittance records describe, which flags the payment.
3. Incomplete documents: Missing sale contract, proof of original investment, or KYC, so the bank holds funds until provided.
4. Missing PAN or KYC: Incomplete verification stops the bank from releasing the payment.
5. Ignoring small payments: Assuming low-value receipts don't need the correct code, which invites scrutiny.
6. Using an inward code for an outward payment: Applying a receipt code to money you're sending out instead of the matching outward code.

How Skydo helps you receive international business payments

P0001 covers capital account transactions, which Skydo does not process. If you also invoice foreign clients for goods or services, here is how Skydo helps you get paid.

1. Complete onboarding: Share PAN, Aadhaar, and Indian bank details. Setup is fully online.
2. Get virtual account details: Receive account details in USD, GBP, EUR and other currencies your clients pay in.
3. Your client pays like a local: They send a domestic transfer in their own country, no SWIFT and no wire fee on their end.
4. FIRA is generated automatically: Free e-FIRA on every payment, stored in your dashboard for GST and audits.
5. INR settles within 24 hours: Mid-market rate with a flat, visible fee, no FX markup.