P0604 Purpose Code: Receipts of Reinsurance premium

Purpose code P0604 is used when an Indian insurer receives a reinsurance premium payment from abroad.

What is the P0604 purpose code?

What is the P0604 purpose code?

Purpose code P0604 is used when an Indian insurer receives a reinsurance premium payment from a foreign insurance or reinsurance company. This covers premium ceded to an Indian reinsurer as part of a cross-border risk-sharing arrangement. It applies specifically to reinsurance premium, and general insurance premium receipts use P0603 instead. Under RBI FEMA guidelines, this inward payment is classified under Insurance Services and reported accordingly.

When to use P0604 purpose code?

When to use P0604 purpose code?

When to use a different code:

• Use P0604 when you receive a reinsurance premium payment from a foreign insurer or reinsurer. It is the correct code for premium ceded under a reinsurance treaty, as distinct from direct general insurance premium.
• Use P0603 when the payment is general insurance premium rather than reinsurance
• Use P0601 when the payment is life insurance premium
• Use the matching S-code when you are paying a foreign vendor rather than receiving money

Who typically uses P0604 purpose code

Who typically uses P0604 purpose code

Indian insurance and reinsurance companies that receive premium payments from foreign cedants under reinsurance treaties. This code applies to registered insurance entities rather than individuals.

Examples of transactions covered

• Examples of transactions covered under P0604 purpose code
• Premium received from a foreign insurer under a proportional reinsurance treaty
• Reinsurance premium ceded by an overseas cedant for a facultative risk placement
• Cross-border premium settlement under a quota share reinsurance arrangement
• Premium instalment received from a foreign reinsurance broker on behalf of a cedant

When NOT to use P0604 purpose code

• When NOT to use P0604 purpose code
• The payment is general insurance premium rather than reinsurance (use P0603)
• The payment is life insurance premium (use P0601)
• The payment is a claim settlement rather than a premium (use P0606)
• You are paying a foreign vendor rather than receiving (use the matching S-code)

Documents required

Documents required for P0604 purpose code

To receive a payment under P0604, keep the following documents ready so your bank can verify the transaction and report it correctly under FEMA.

How is a P0604 Purpose Code declared?

How is a P0604 Purpose Code declared?

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

1. Confirm the treaty terms: Establish the reinsurance arrangement and the premium due from the foreign cedant.
2. Receive the payment: The foreign insurer or broker remits the premium to your bank or receiving account.
3. Declare the purpose: State the purpose of the inward remittance using P0604 on your bank's form.
4. Submit supporting documents: Provide the treaty, premium statement, 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 P0604 purpose code

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

1. Using the general insurance code instead: Tagging a reinsurance premium payment with P0603 when it should be P0604.
2. Code and document mismatch: The code not matching what your treaty or premium statement describes, which flags the payment.
3. Incomplete documents: Missing treaty, premium statement, 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 P0604 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 P0604 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.