The Complete Guide to Getting Paid from Abroad Without Headaches.
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My $50,000 Purpose Code Nightmare 💸
Back in 2018, I was consulting for a US fintech company from Bangalore. Everything was going smooth. Monthly payments of $4,200 were hitting my account like clockwork.
Until one day they weren’t.
My bank called. “Sir, we need clarification on your purpose code.”
I had been using P0101. Export of goods. For software consulting. For 6 months.
Wrong code. Completely wrong.
The payment was stuck. Client was frustrated. I was panicking.
That’s when I learned purpose codes aren’t just bureaucratic nonsense. They’re the difference between smooth business and sleepless nights.
What I Wish Someone Had Told Me Earlier 💭
Purpose codes are like postal codes for international money. Use the wrong one and your money gets lost in the system.
The Reserve Bank of India tracks every rupee coming into the country. They want to know why it’s coming. Is it payment for exports? Software services? Family support? Each reason has a specific code.
Pick wrong. Get flagged. Simple as that.
After that nightmare, I’ve helped hundreds of NRIs, freelancers, and exporters get this right. Here’s everything you need to know.
The Reality Check: Why This Matters 📊
Personal story: My friend Pradeep runs a digital marketing agency in Mumbai. He was using P0806 (advertising services) for everything. SEO work. Social media management. Website development.
Last month, his payment for web development got delayed by 2 weeks. Bank wanted clarification. Web development should be P0802 (software services). Not P0806.
Cost of the delay: ₹2.5 lakh stuck in limbo. Client relationship strained. Cash flow problems.
The lesson: One wrong character can cost you thousands.
Most Common Purpose Codes: What I Use & Recommend 🏆
For Freelancers & Consultants:
| Service Type | Purpose Code | RBI Description | What I’ve Learned |
|---|---|---|---|
| Software Development | P0802 | Software implementation services | Most versatile code for tech work. Use for app dev, web dev, coding services |
| Business Consulting | P1006 | Business & management consultancy | Perfect for strategy, process consulting. Not for tech consulting |
| Digital Marketing | P0806 | Advertising & market research | Social media, SEO, content marketing. But NOT web development |
| Legal Services | P1015 | Legal services | Contract review, compliance work, legal consulting |
| Design & Creative | P0901 | Royalty & license fees | For design work, creative content, IP licensing |
For Exporters & Businesses:
| Transaction Type | Purpose Code | RBI Description | My Experience |
|---|---|---|---|
| Export Payment (Goods) | P0101 | Export bills realization (goods) | Only after goods are shipped & received |
| Advance for Exports | P0103 | Advance against export contracts | Use when receiving advance payment |
| Services Export | P0102 | Payment for services | For service businesses serving international clients |
| Commission Income | P1002 | Commission on exports/imports | Agency work, affiliate income |
| Freight & Logistics | P0404 | Freight charges | Shipping, logistics, transportation services |
For Personal & Family:
| Purpose | Purpose Code | RBI Description | Tax Implications |
|---|---|---|---|
| Family Support | P1301 | Maintenance of relatives | No tax if from relatives |
| Personal Gifts | P1305 | Donations & gifts | Tax if >₹50k from non-relatives |
| Medical Treatment | P1307 | Medical treatment | No tax liability |
| Education Expenses | P1308 | Education related expenses | No tax. Keep receipts |
| NRI Savings | P1302 | Savings (NRI) | No tax on legitimate savings |
Real Stories: When Purpose Codes Go Wrong 🚨
Case 1: The Freelancer’s Mistake
Rahul (WordPress developer, Chennai):
- Used P0101 (export of goods) for website development
- Payment of $3,000 stuck for 3 weeks
- Had to provide export documentation (which didn’t exist)
- Solution: Changed to P0802 (software services)
Case 2: The Export Confusion
Meera (handicrafts exporter, Jaipur):
- Used P0102 (services) for physical product exports
- Bank demanded service tax documentation
- Delayed shipment, angry customers
- Solution: P0101 (export of goods) with proper shipping docs
Case 3: The Family Transfer Gone Wrong
Suresh (receiving money from brother in Canada):
- Brother used business consulting code P1006
- Bank treated it as taxable income
- Extra documentation required
- Solution: P1301 (family maintenance) with relationship proof
My Personal Code Selection Framework 🧠
After 6 years of helping people, here’s my simple decision tree:
Step 1: Physical vs Digital
- Physical goods exported → P0101
- Digital services provided → P0802, P1006, P0806 (depending on type)
- Family money → P1301, P1305
Step 2: Timing Check
- Payment after delivery → P0101, P0102
- Advance payment → P0103
- Ongoing services → Match service type
Step 3: Documentation Ready?
- Export docs available → Use export codes
- Service invoices only → Use service codes
- Relationship proof → Use family codes
Hidden Traps I’ve Seen People Fall Into ⚠️
Trap 1: The “One Size Fits All” Mistake
Using P0102 (services) for everything because it’s generic.
Problem: Bank scrutiny increases. Delays become common.
Solution: Be specific. Use exact codes for exact services.
Trap 2: The “Export Everything” Approach
Using P0101 for digital services because “we’re exporting our work.”
Problem: Banks expect physical export documentation.
Solution: Digital services are P0802, not P0101.
Trap 3: The “Family Business” Confusion
Mixing business payments with family codes.
Problem: Tax implications and compliance issues.
Solution: Business is business. Family is family. Don’t mix.
What Banks Actually Check (Inside Info) 🔍
I’ve spoken to bank managers. Here’s what they really look for:
Immediate Red Flags:
- ✅ Goods codes without shipping documents
- ✅ Service codes without service invoices
- ✅ Family codes for business amounts
- ✅ Frequent code changes for same client
Smooth Sailing Indicators:
- ✅ Consistent code usage
- ✅ Matching documentation
- ✅ Reasonable amounts for code type
- ✅ Clear invoice descriptions
The Tax Angle Nobody Talks About 💰
Different purpose codes have different tax treatments:
Business Income (Most Codes):
- Fully taxable as business income
- GST implications possible
- Deductions available
Family Money:
- P1301 (relatives): Generally not taxable
- P1305 (gifts): Taxable if >₹50k from non-relatives
Investment Related:
- Different rates depending on classification
- Consult CA for complex cases
My Updated 2025 Recommendations 🌟
Based on recent RBI changes and bank feedback:
For Tech Freelancers:
- Primary: P0802 (Software services)
- Backup: P1006 (Business consultancy) for strategy work
- Avoid: P0101 (unless you’re actually shipping products)
For Digital Agencies:
- Web development: P0802
- SEO/Marketing: P0806
- Strategy consulting: P1006
- Mix of services: Use majority service type
For Physical Exporters:
- After shipment: P0101
- Advance payments: P0103
- Sample shipments: Check with bank first
Common Questions I Get Asked 🤔
Q: Can I change purpose code after payment?
A: Very difficult. Some banks allow within 24 hours. Prevention is better than cure.
Q: What if my work doesn’t fit any code perfectly?
A: Pick the closest match. Document your reasoning. Consistency matters more than perfection.
Q: Do different banks have different requirements?
A: Basic codes are same. Documentation requirements may vary. Check with your bank.
Q: How often can I receive payments without scrutiny?
A: No official limit. But large/frequent payments get more attention.
Tools That Make Life Easier 🛠️
Platforms I Recommend:
- Wise: Clear purpose code selection during transfer
- Skydo: Automatic FIRC generation
- Infinity: Purpose code guidance built in
Documentation Apps:
- Keep photos of all invoices
- Maintain client contracts
- Save FIRC certificates
- Track payment patterns
My 2025 Prediction 🔮
Purpose codes will become stricter. Digital compliance will increase. More real time verification.
What to do now:
- Clean up your purpose code usage
- Maintain better documentation
- Use legitimate service providers
- Consult professionals for complex cases
The Bottom Line 💡
After helping 500+ people with international payments, here’s what matters:
3 Golden Rules:
- Be consistent – Same service, same code
- Document everything – Invoices, contracts, relationships
- When in doubt, ask – Bank, CA, or experienced consultant
Most Common Mistake: Trying to be too clever with codes
Best Practice: Boring consistency beats creative optimization
Personal Note 📝
I spent my first year back in India making purpose code mistakes. Cost me money, relationships, and sleep.
Now my payments flow smoothly. My documentation is clean. My CA is happy.
The difference? Understanding that compliance isn’t just rules. It’s respect for the system that enables our global business dreams.
Choose wisely. Pay smoothly. Grow confidently.
Sources and References 📚
All information compiled from official sources and practical experience:
- Reserve Bank of India – Purpose Codes for Reporting FOREX Transactions
- Wise India – Purpose Code Guide for Inward Remittances
- Skydo – RBI Purpose Code Complete Guide
- Infinity – Purpose Codes for Freelancers Guide
- Foreign Exchange Management Act (FEMA) – Compliance Guidelines
- Unimoni – International Money Transfer Purpose Codes
- LeRemitt – Purpose Code Compliance Guide
Data accurate as of June 2025. Regulations change frequently. Consult professionals for specific situations.
Questions? I reply personally to every email. My DMs are always open for the NRI community.
– Mani Karthik
