P1501 Purpose Code: Refunds / rebates on account of imports

Purpose code P1501 is used when an Indian importer receives a refund or rebate from a foreign supplier on goods imported.

What is the P1501 purpose code?

Purpose code P1501 covers money a foreign supplier returns to an Indian importer, whether as a refund on goods that were not supplied as agreed or as a rebate allowed against what was paid. It sits in a group that records corrections rather than transactions: the money is coming back on an earlier outward payment rather than arriving as something new. That is the point to hold on to, because a refund reaching an exporter's account can look like ordinary income and is not. What was originally paid for settles which refund code applies, since imports of goods report here and everything else reports under the neighbouring code. Under RBI FEMA guidelines, this inward payment is classified under Others and reported accordingly.

When to use P1501 purpose code?

Use P1501 when a foreign supplier returns money to you in connection with goods you imported, whether that is a refund for a short or rejected shipment, a rebate against volumes purchased, or money back on a cancelled order. What settles it is that the original payment was for an import of goods. Where the original payment was for services or anything other than an import, the neighbouring code applies instead.

When to use a different code:

• Use P1502 when the refund relates to something other than an import, or is the reversal of a wrong entry
• Use P1306 when the money is a refund of taxes rather than a supplier refund
• Use the matching S-code when money is being sent abroad rather than received

Who typically uses P1501 purpose code

Indian importers receiving money back from overseas suppliers, including businesses importing materials, components, equipment or finished goods. It applies whether you import as a proprietorship, a partnership, or a registered company.

Examples of transactions covered under P1501 purpose code

• Refund from an overseas supplier for goods short shipped or rejected
• Rebate allowed by a foreign supplier against purchase volumes
• Money returned after an import order was cancelled
• Credit settled in cash by a supplier abroad on an earlier import

When NOT to use P1501 purpose code

• The refund relates to something other than an import of goods, or is the reversal of a wrong entry (use P1502)
• The money is a refund of taxes rather than a supplier refund (use P1306)
• The money is payment from a customer for goods or services you supplied, which is export income under the relevant code
• Money is being sent abroad rather than received (use the matching S-code)

Documents required for P1501 purpose code

To receive a payment under P1501, keep the following documents ready so your bank can verify the transaction and report it correctly under FEMA.

How is a P1501 Purpose Code declared?

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

1. Agree the refund: Settle with the supplier what is being returned and on what basis, and obtain a credit note or refund advice.
2. Receive the money: The supplier remits the refund or rebate to your Indian account.
3. Declare the purpose: State the purpose of the inward remittance on your bank's form, identifying it as a refund on an import.
4. Submit supporting documents: Provide the credit note and the original import documents so the bank can link the refund to the underlying 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 P1501 purpose code

A few common slips can cause reporting problems.

1. Coding a refund as export income: Treating money from abroad as a sale because it arrived in the same account as your export receipts, when a supplier refund is a reversal and coding it as income overstates what you earned.
2. Using the wrong refund code: Applying P1501 where the original payment was for services rather than an import of goods, when the neighbouring code covers non-import refunds.
3. Failing to link the refund to the import: Declaring the refund without the underlying documents, so the bank cannot connect it to the earlier payment.
4. Code and document mismatch: The code not matching what the credit note describes, which flags the payment.
5. Incomplete documents: Missing the credit note or import documents, so the bank holds the payment 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

P1501 covers refunds from overseas suppliers on imports, which is money coming back rather than money earned and is not something Skydo processes. If your business also 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.