P0006 Purpose Code: Foreign direct investment in India in equity

Purpose code P0006 is used when an Indian company receives money from an overseas investor subscribing to or purchasing its equity.

What is the P0006 purpose code?

Purpose code P0006 is used when an overseas investor puts money into the equity of an Indian company and that money lands in the company's Indian bank account. This covers a fresh share subscription, a purchase of existing shares from a resident holder, and other equity infusions made as direct investment. The distinction from portfolio investment is the lasting interest the investor takes in the company, so a foreign investor's portfolio holding in listed equity uses P0009 instead. Under RBI FEMA guidelines, this inward payment is classified under Capital Account and reported accordingly.

When to use P0006 purpose code?

Use P0006 when your Indian company receives equity investment from a foreign investor, whether the shares are newly issued or bought from an existing resident shareholder. It is the correct RBI receipt code for foreign direct investment into Indian equity. P0006 applies to the nature of the investment, not to the sector or the size of the company receiving it.

When to use a different code:

• Use P0009 when the payment is foreign portfolio investment in India in equity shares
• Use P0007 when the payment is foreign direct investment in India in debt securities
• Use the matching S-code when you are sending money abroad rather than receiving money

Who typically uses P0006 purpose code

Indian companies and startups raising equity from overseas investors, including venture and private equity rounds, strategic investments by foreign parent or partner companies, and secondary purchases of shares by a non-resident. This is a company-level code, since the recipient is the Indian company whose equity is being subscribed or bought.

Examples of transactions covered under P0006 purpose code

• Funds received by an Indian startup from an overseas venture fund subscribing to a fresh share issue
• Equity infusion from a foreign parent company into its Indian arm
• Money received when a non-resident buys shares in an Indian company from a resident shareholder
• Payment received against allotment of shares in a foreign-funded round

When NOT to use P0006 purpose code

• The investment is a portfolio holding in listed equity rather than direct investment (use P0009)
• The foreign direct investment is in debt securities rather than equity (use P0007)
• The foreign direct investment is in real estate rather than company equity (use P0008)
• You are sending money abroad rather than receiving (use the matching S-code)

Documents required for P0006 purpose code

To receive a payment under P0006, keep the following documents ready so your bank can verify the transaction and report it correctly under FEMA.

How is a P0006 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 equity subscription or share purchase.
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 investment 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 P0006 purpose code

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

1. Tagging portfolio investment as direct investment: Using P0006 when the overseas investor took a portfolio holding in listed equity, which belongs under P0009.
2. Missing the FC-GPR filing: Treating the inward remittance as the end of the process, when the company still has to report the share allotment to the RBI in Form FC-GPR.
3. Code and document mismatch: The code not matching what your share agreement describes, which flags the payment.
4. Incomplete documents: Missing the investment 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

P0006 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.