P0007 Purpose Code: Foreign direct investment in India in debt securities

Purpose code P0007 is used when an Indian company receives money from an overseas investor subscribing to its debt securities as direct investment.

What is the P0007 purpose code?

Purpose code P0007 is used when an overseas investor puts money into the debt securities of an Indian company as part of a direct investment, and that money lands in the company's Indian bank account. This covers subscription to debentures and similar instruments issued to a foreign direct investor, as distinct from an equity stake in the same company. The boundary that matters most here is borrowing: money lent to an Indian company by a non-resident is a loan rather than a debt security subscription, and reports under the loan codes such as P0012. Under RBI FEMA guidelines, this inward payment is classified under Capital Account and reported accordingly.

When to use P0007 purpose code?

Use P0007 when your Indian company receives money from a foreign direct investor subscribing to debt instruments you have issued. It is the correct RBI receipt code for the debt side of foreign direct investment, where the same investor relationship might otherwise bring money in as equity. P0007 applies to the instrument the money buys, not to the sector or the size of the company receiving it.

When to use a different code:

• Use P0006 when the payment is foreign direct investment in India in equity
• Use P0010 when the payment is foreign portfolio investment in India in debt securities
• Use the matching S-code when you are sending money abroad rather than receiving money

Who typically uses P0007 purpose code

Indian companies raising money from overseas investors through debt instruments rather than shares, including foreign parent companies funding their Indian arm on debt terms and investors structuring part of a round as debt. This is a company-level code, since the recipient is the Indian company issuing the instrument.

Examples of transactions covered under P0007 purpose code

• Funds received by an Indian company against debentures subscribed by an overseas direct investor
• Money received from a foreign parent company subscribing to debt instruments issued by its Indian arm
• Payment received on allotment of debt securities to a non-resident investor
• Investment received where a foreign investor funds the company on debt terms rather than taking shares

When NOT to use P0007 purpose code

• The foreign direct investment is in equity rather than debt instruments (use P0006)
• The investment is a portfolio holding in debt securities rather than direct investment (use P0010)
• The money is a loan from a non-resident rather than a subscription to debt securities (use the loan codes, such as P0012 for maturity above one year)
• You are sending money abroad rather than receiving (use the matching S-code)

Documents required for P0007 purpose code

To receive a payment under P0007, keep the following documents ready so your bank can verify the transaction and report it correctly under FEMA.

How is a P0007 Purpose Code declared?

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

1. Agree the investment: The overseas investor and your company agree the terms of the debt instrument being issued.
2. Receive the funds: The investor remits the money into your company's 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 subscription agreement, the KYC report on the investor, and your own 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 P0007 purpose code

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

1. Tagging a loan as investment in debt securities: Using P0007 when the money is borrowing from a non-resident, which belongs under the loan codes rather than the direct investment ones.
2. Stopping at the remittance: Treating the money landing as the end of the process, when the investment still has to be reported to the RBI under the filing that applies to the instrument you issued.
3. Code and document mismatch: The code not matching what your subscription agreement describes, which flags the payment.
4. Incomplete documents: Missing the subscription agreement, investor KYC, or your own KYC, so the bank holds funds until provided.
5. Missing PAN or KYC: Incomplete verification stops the bank from releasing the payment.
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

P0007 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.