P0602 Purpose Code: Freight insurance – relating to import & export of goods

Purpose code P0602 is used when an Indian insurer receives premium from abroad for insuring goods in transit under an import or export.

What is the P0602 purpose code?

Purpose code P0602 covers premium an Indian insurer receives from abroad for insuring cargo in transit under an import or export. Freight insurance has its own code because the cover attaches to goods moving across borders rather than to a person or a business, which separates it from both the life codes and the general insurance code. The direction of the underlying trade does not matter: cover on an export leaving India and cover on an import arriving here both report under this one code. Under RBI FEMA guidelines, this inward payment is classified under Insurance and Pension Services and reported accordingly.

When to use P0602 purpose code?

Use P0602 when premium reaches your Indian insurance business from abroad for covering goods in transit under an import or export. It is the correct RBI receipt code whether the policy is written for a single shipment or as an open cover across many, and whether the insured is an exporter, an importer, or a freight forwarder arranging cover on a customer's behalf. What settles the code is that the cover is on cargo moving under trade rather than on anything else.

When to use a different code:

• Use P0603 when the premium is other general insurance, reinsurance, or term life rather than freight cover
• Use P0601 when the premium is on a life policy other than term insurance
• Use the matching S-code when you are paying a foreign vendor rather than receiving money

Who typically uses P0602 purpose code

Indian general insurers and marine cargo underwriters receiving premium from overseas parties for covering goods in international transit, along with insurers dealing with foreign freight forwarders and logistics operators who arrange cover for their customers. The recipient is the insurer, since the code is declared on the money arriving here.

Examples of transactions covered under P0602 purpose code

• Marine cargo premium received from an overseas buyer covering a shipment into India
• Premium remitted from abroad against an open cover policy on regular consignments
• Freight insurance premium paid by a foreign freight forwarder on a customer's cargo
• Cover taken out from overseas on goods being exported from India

When NOT to use P0602 purpose code

• The premium is other general insurance or reinsurance rather than freight cover on goods (use P0603)
• The premium is life insurance, whether term or otherwise (use P0603 for term, P0601 for other life policies)
• The money is a claim settlement paid out on damaged or lost cargo rather than premium coming in, which reports under the claim settlement codes
• You are paying a foreign vendor rather than receiving (use the matching S-code)

Documents required for P0602 purpose code

To receive a payment under P0602, keep the following documents ready so your bank or platform can verify the transaction and report it correctly under FEMA.

How is a P0602 Purpose Code declared?

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

1. Issue the cover: Write the policy or certificate covering the cargo in transit.
2. Raise the premium note: Bill the overseas insured for the premium due on the shipment or period.
3. Receive the premium: The money is remitted from abroad to your Indian account.
4. Declare the purpose: State the purpose of the inward remittance, on your bank's form or through your platform.
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 while using P0602 purpose code

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

1. Confusing premium with claim settlement: Using P0602 for money moving when a claim is paid on lost or damaged cargo, when this code covers premium coming in and settlements report under the claim codes.
2. Coding other general insurance as freight cover: Applying P0602 to general insurance that is not cover on goods in transit, which belongs under P0603.
3. Code and document mismatch: The code not matching what your policy or certificate describes, which flags the payment.
4. Incomplete documents: Missing the policy or premium note, so the bank cannot confirm what the cover relates to and 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 simplifies inward remittance under P0602 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 P0602 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.