P1410 Purpose Code: Inward remittance on account of interest payment by Indian FDI enterprises operating abroad to their Parent company in India

Purpose code P1410 is used when an overseas enterprise pays interest to the Indian parent company that has lent to it.

What is the P1410 purpose code?

Purpose code P1410 covers interest an Indian parent receives from an overseas enterprise it directs, where the parent has lent money to that enterprise. It exists because a parent can hold two quite different positions in the same subsidiary at once: it owns shares, and it may also be a lender. A dividend is a return on ownership and reports under its own code, while interest is a return on lending and reports here, even though both may arrive from the same entity in the same period. What separates this from ordinary lending income is the relationship, since interest from a borrower outside your group has a different code again. Under RBI FEMA guidelines, this inward payment is classified under Primary Income and reported accordingly.

When to use P1410 purpose code?

Use P1410 where an overseas enterprise your company directs pays interest to you as its Indian parent under a loan or other financing arrangement. Two things settle it: the borrower is an enterprise in which you hold a direct investment, and the money is interest rather than a dividend or a return of principal. Where you have lent to an unrelated party abroad, the ordinary lending code applies instead.

When to use a different code:

• Use P1403 when the borrower is a non-resident outside your group rather than an enterprise you direct
• Use P1409 when the money is a dividend on your shareholding rather than interest on a loan
• Use the matching S-code when money is being sent abroad rather than received

Who typically uses P1410 purpose code

Indian parent companies that have financed their overseas subsidiaries or group entities through loans and receive interest on that lending. It concerns intra-group financing income rather than payments from customers or returns on passive investments.

Examples of transactions covered under P1410 purpose code

• Interest paid by an overseas subsidiary on a loan from its Indian parent
• Periodic interest on an intra-group financing facility extended to a foreign group entity
• Interest received by an Indian company on funding provided to its overseas joint venture
• Accrued interest settled by a group entity abroad on parent company lending

When NOT to use P1410 purpose code

• The borrower is a non-resident outside your group rather than an enterprise you direct (use P1403)
• The money is a dividend on your shareholding rather than interest on a loan (use P1409)
• The money is profit remitted by an overseas branch rather than interest (use P1408)
• Money is being sent abroad rather than received (use the matching S-code)

Documents required for P1410 purpose code

To receive a payment under P1410, keep the following documents ready so your bank can verify the transaction and report it correctly under FEMA.

How is a P1410 Purpose Code declared?

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

1. Confirm the relationship: Establish that the borrower is an overseas enterprise in which you hold a direct investment.
2. Establish what the payment covers: Confirm the amount is interest rather than a dividend or a repayment of principal.
3. Receive the interest: The overseas enterprise remits the payment to the Indian parent's account.
4. Declare the purpose: State the purpose of the inward remittance on your bank's form.
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 P1410 purpose code

A few common slips can cause reporting problems.

1. Treating all money from a subsidiary the same way: Coding interest and dividends from the same overseas entity under one code, when ownership returns and lending returns report separately even where they arrive together.
2. Using the ordinary lending code: Applying P1403 where the borrower is an enterprise you direct, when intra-group lending has its own code in the restructured group.
3. Coding principal as interest: Including repayment of the loan itself, which is a capital account transaction rather than income.
4. Code and document mismatch: The code not matching what the loan agreement describes, which flags the payment.
5. Incomplete documents: Missing the loan agreement or the documents establishing the group relationship, so the bank holds the remittance until provided.
6. Using an inward code for an outward payment: Applying a receipt code to money being sent out instead of the matching outward code.

How Skydo helps you receive international business payments

P1410 covers intra-group interest from your own overseas enterprises, which Skydo does not process. If your business invoices 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.