P0901 Purpose Code: Franchises services

Purpose code P0901 is used when an Indian franchisor receives payment from an overseas franchisee for franchise services.

What is the P0901 purpose code?

Purpose code P0901 covers money an Indian franchisor receives from a franchisee abroad for the franchise arrangement itself: the right to operate under the brand, together with the systems, standards and support that come with it. It sits in the intellectual property group because what a franchisee is really paying for is access to something the franchisor owns and has developed. Note that the neighbouring code's description also mentions franchises, in the context of licensing arrangements for intellectual property, so the two overlap and the split between them is worth confirming. Under RBI FEMA guidelines, this inward payment is classified under Charges for the use of intellectual property n.i.e. and reported accordingly.

When to use P0901 purpose code?

Use P0901 when your overseas franchisee pays you for the franchise arrangement, whether that is an initial franchise fee, ongoing service fees, or payment for the operating support you provide. It is the correct RBI purpose code for franchise services. Because the neighbouring code also names franchises in its description, confirm with your bank how your particular fee structure divides between the two rather than assuming everything sits here.

When to use a different code:

• Use P0902 when the payment is for use of intellectual property through a licensing arrangement rather than for franchise services
• Use P0019 when the money is the outright sale of a trademark or brand rather than payment for its use
• Use the matching S-code when you are paying a foreign vendor rather than receiving money

Who typically uses P0901 purpose code

Indian franchisors with franchisees operating overseas, including food and beverage brands, education and training businesses, and retail and services chains expanding through franchise arrangements abroad. The recipient is the franchisor receiving fees from the franchisee.

Examples of transactions covered under P0901 purpose code

• Initial franchise fee received from a new overseas franchisee
• Ongoing franchise service fees remitted from a franchisee operating abroad
• Payment for operating support, systems access, and training provided to an international franchisee
• Renewal fee received on extending a franchise arrangement overseas

When NOT to use P0901 purpose code

• The payment is for use of intellectual property under a licensing arrangement rather than for franchise services (use P0902)
• The money is the outright sale of a trademark, brand, or other intangible asset rather than payment for its use (use P0019)
• The payment is for goods supplied to the franchisee rather than for the franchise arrangement, which reports under the export codes
• You are paying a foreign vendor rather than receiving (use the matching S-code)

Documents required for P0901 purpose code

To receive a payment under P0901, keep the following documents ready so your bank or platform can verify the transaction and report it correctly under FEMA.

How is a P0901 Purpose Code declared?

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

1. Grant the franchise: Enter the franchise agreement with the overseas franchisee, setting out the rights and the fee structure.
2. Raise your invoice: Bill the franchisee for the initial fee, ongoing service fees, or renewal due.
3. Declare the purpose: State the purpose of the inward remittance, on your bank's form or through your platform.
4. Submit supporting documents: Provide the franchise agreement and fee statement 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 while using P0901 purpose code

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

1. Coding the whole fee bundle as one: Applying P0901 to everything a franchisee pays, when licensing payments for the underlying intellectual property may belong under P0902 and the split is worth settling with your bank.
2. Confusing use with sale: Using P0901 when you have sold the brand outright rather than licensed its use, which is a capital account receipt under P0019.
3. Code and invoice mismatch: The code not matching what your franchise agreement describes, which flags the payment.
4. Incomplete documents: Missing the franchise agreement or fee statement, so the bank cannot establish the basis for the payment 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 P0901 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 P0901 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.