P0106 Purpose Code: Conversion of overdue export bills from NPD to collection mode

Purpose code P0106 is used when an Indian exporter converts an overdue export bill that was under normal payment terms into collection mode.

What is the P0106 purpose code?

What is the P0106 purpose code?

Purpose code P0106 is used when an Indian exporter has an export bill that has gone overdue under its original payment terms and the bill is converted to collection mode for realisation. This applies specifically to goods export bills, not services. It differs from P0107, which covers the actual realisation of the bill once collection is complete rather than the conversion step itself. Under RBI FEMA guidelines, this inward payment is classified under Export of Goods and reported accordingly.

When to use P0106 purpose code?

When to use P0106 purpose code?

When to use a different code:

• Use P0106 when your export bill has gone overdue and you are converting it from normal payment terms to collection mode. It is the correct code for that conversion step, distinct from the eventual realisation of the bill.
• Use P0107 when you are realising the overdue bill once it has moved to collection mode
• Use P0101 when you are negotiating, purchasing, or discounting a fresh export bill
• Use the matching S-code when you are paying a foreign vendor rather than receiving money

Who typically uses P0106 purpose code

Who typically uses P0106 purpose code

Goods exporters in India whose export bills have gone overdue under their original terms. It applies whether the exporter invoices as a proprietorship, partnership, or registered company.

Examples of transactions covered

• Examples of transactions covered under P0106 purpose code
• An export bill originally sent on normal payment terms that has now gone overdue
• A shipment invoice converted from open-account terms to a collection arrangement after non-payment
• A bank-initiated conversion of an overdue trade bill to documentary collection
• An exporter's request to their bank to move a stalled bill into collection mode

When NOT to use P0106 purpose code

• When NOT to use P0106 purpose code
• The bill is being realised after collection rather than converted into it (use P0107)
• The payment is for a fresh export bill being negotiated or discounted (use P0101)
• The payment is for a service export rather than goods (use the matching service code)
• You are paying a foreign vendor rather than receiving (use the matching S-code)

Documents required

Documents required for P0106 purpose code

To receive a payment under P0106, keep the following documents ready so your bank can verify the transaction and report it correctly under FEMA.

How is a P0106 Purpose Code declared?

How is a P0106 Purpose Code declared?

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

1. Flag the overdue bill: Identify the export bill that has gone past its original payment terms.
2. Request collection conversion: Ask your bank to move the bill from open terms to collection mode.
3. Declare the purpose: State the purpose of the inward remittance using P0106 on your bank's form.
4. Submit supporting documents: Provide the shipping bill, invoice, and 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.
6. With a traditional bank you handle each step of your payment journey. But with a platform built for cross-border payments, you can preselect a default purpose code so that the payments land smooth.

Common mistakes to avoid

Common mistakes to avoid while using P0106 purpose code

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

1. Confusing conversion with realisation: Tagging the bill with P0106 when it should be P0107 for the actual realisation.
2. Code and invoice mismatch: The code not matching what your shipping bill and invoice describe, which flags the payment.
3. Incomplete documents: Missing shipping bill, invoice, or KYC, so the bank holds funds until provided.
4. Missing PAN or KYC: Incomplete verification stops the bank from releasing the payment.
5. Ignoring small payments: Assuming low-value receipts don't need the correct code, which invites scrutiny.
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 Indian businesses with cross-border payments

How Skydo simplifies inward remittance under P0106 Purpose Code

With a bank, you declare the purpose code on your own for every single payment. With Skydo, you can preselect your code once and every payment gets tagged automatically.

1. Preselect the code once - Set P0106 as your default and Skydo tags every incoming payment for you, so there's no form to fill on each one.
2. No repeat declarations - A bank makes you restate the purpose for every remittance. Skydo does it in the background, the same way each time.
3. Instant, free FIRA - Your remittance proof is generated and stored on every payment, ready for your CA, GST, and audits, with no request and no fee.
4. Zero FX markup - You get the live mid-market rate with a flat, visible fee, instead of a markup hidden inside the bank's rate.
5. Settled in 24 hours - Your payment reaches your Indian bank within a day, fully reported and compliant.