P0002 Purpose Code: Repatriation of Indian investment abroad in debt securities

Purpose code P0002 is used when an Indian resident receives money from the sale, redemption, or maturity of debt securities held outside India.

What is the P0002 purpose code?

Purpose code P0002 is used when an Indian resident brings back to India money that was invested in debt securities held outside the country. This covers proceeds from selling overseas bonds or debentures, redeeming them, or holding them to maturity, and the return of the capital originally sent out to acquire them. It applies to the return of the invested capital itself, so interest or coupon payments earned on those securities 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 P0002 purpose code?

Use P0002 when money comes back to India from debt securities you held abroad, whether the instrument was sold, redeemed, or reached maturity. It is the correct RBI receipt code for the return of capital originally invested in overseas debt instruments. P0002 applies to the asset type, whether the original investment was made by an individual or a company.

When to use a different code:

• Use P0001 when the payment is repatriation of Indian investment abroad in equity capital (shares)
• Use P0011 when the payment is repayment of a loan you extended to a non-resident
• Use the matching S-code when you are sending money abroad rather than receiving money

Who typically uses P0002 purpose code

Indian residents who have sold, redeemed, or held to maturity debt securities issued outside India, including individuals who invested abroad under the Liberalised Remittance Scheme and companies unwinding an overseas debt 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 P0002 purpose code

• Redemption proceeds from a foreign bond held by an Indian resident
• Sale proceeds from debentures or debt instruments issued by an overseas company
• Money returned to India when an overseas debt security reaches maturity
• Funds received after exiting a debt investment made abroad before maturity

When NOT to use P0002 purpose code

• The payment is repatriation of Indian investment abroad in equity capital or shares (use P0001)
• The payment is repayment of a loan you extended to a non-resident rather than proceeds from a security (use P0011)
• The receipt is interest or a coupon earned on the overseas security 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 P0002 purpose code

To receive a payment under P0002, keep the following documents ready so your bank can verify the transaction and report it correctly under FEMA.

How is a P0002 Purpose Code declared?

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

1. Complete the sale or redemption: Sell, redeem, or hold to maturity the debt securities you own 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 redemption statement, 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 P0002 purpose code

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

1. Tagging equity repatriation as debt: Using P0002 when the money came back from shares or equity capital held abroad, which belongs under P0001.
2. Code and document mismatch: The code not matching what your redemption statement and remittance records describe, which flags the payment.
3. Incomplete documents: Missing redemption statement, 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

P0002 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.