P0606 Purpose Code: Receipts on account of settlement of claims

Purpose code P0606 is used when an Indian insurer receives a claim settlement payment from a foreign reinsurer or insurer.

What is the P0606 purpose code?

What is the P0606 purpose code?

Purpose code P0606 is used when an Indian insurer receives a claim settlement payment from a foreign insurer or reinsurer. This covers the foreign counterparty's share of a claim payout under a reinsurance or co-insurance arrangement. It applies specifically to claim settlements, and premium receipts use the dedicated premium codes instead. Under RBI FEMA guidelines, this inward payment is classified under Insurance Services and reported accordingly.

When to use P0606 purpose code?

When to use P0606 purpose code?

When to use a different code:

• Use P0606 when you receive a claim settlement payment from a foreign insurer or reinsurer. It is the correct code for claims recoveries, as distinct from premium receipts or commission.
• Use P0604 when the payment is reinsurance premium rather than a claim settlement
• Use P0605 when the payment is commission on insurance auxiliary services
• Use the matching S-code when you are paying a foreign vendor rather than receiving money

Who typically uses P0606 purpose code

Who typically uses P0606 purpose code

Indian insurance and reinsurance companies that recover their share of a claim from foreign reinsurers or co-insurers. This code applies to registered insurance entities rather than individuals.

Examples of transactions covered

• Examples of transactions covered under P0606 purpose code
• Claim recovery received from a foreign reinsurer under a proportional treaty
• Settlement received from an overseas co-insurer for a shared risk claim
• Cross-border claim payout received from a foreign reinsurance pool
• Recovery instalment received from a foreign reinsurance broker on behalf of a reinsurer

When NOT to use P0606 purpose code

• When NOT to use P0606 purpose code
• The payment is reinsurance premium rather than a claim settlement (use P0604)
• The payment is commission on insurance auxiliary services (use P0605)
• The payment is general insurance premium (use P0603)
• You are paying a foreign vendor rather than receiving (use the matching S-code)

Documents required

Documents required for P0606 purpose code

To receive a payment under P0606, keep the following documents ready so your bank can verify the transaction and report it correctly under FEMA.

How is a P0606 Purpose Code declared?

How is a P0606 Purpose Code declared?

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

1. Confirm the claim recovery: Establish the claim and the amount due from the foreign insurer or reinsurer.
2. Receive the payment: The foreign counterparty remits the settlement to your bank or receiving account.
3. Declare the purpose: State the purpose of the inward remittance using P0606 on your bank's form.
4. Submit supporting documents: Provide the settlement statement, agreement, 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 P0606 purpose code

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

1. Using the premium code instead: Tagging a claim settlement payment with P0604 when it should be P0606.
2. Code and document mismatch: The code not matching what your settlement statement describes, which flags the payment.
3. Incomplete documents: Missing settlement statement, agreement, 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 P0606 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 P0606 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.