P1005 Purpose Code: Accounting, auditing, book keeping and tax consulting services

Purpose code P1005 is used when an Indian accounting practice receives payment from an overseas client for accounting, auditing, bookkeeping or tax work.

What is the P1005 purpose code?

Purpose code P1005 covers money an Indian practice receives from a client abroad for financial and tax work. The description names four services together: accounting, auditing, bookkeeping and tax consulting. That grouping is useful in practice, since a firm doing several of them for the same overseas client uses one code across the whole relationship rather than splitting the work by task. Tax consulting being named here is the detail worth noticing, because it means tax advice reports under this code even when the adviser is a law firm rather than an accounting one. Under RBI FEMA guidelines, this inward payment is classified under Other Business Services and reported accordingly.

When to use P1005 purpose code?

Use P1005 when you receive money from an overseas client for accounting, auditing, bookkeeping or tax consulting delivered from India. It is the correct RBI purpose code across all four, so monthly bookkeeping, year-end accounts, audit support and tax advice for the same client all sit here. The code follows the service rather than the kind of firm providing it.

When to use a different code:

• Use P1004 when the work is legal services rather than accounting or tax
• Use P1006 when the work is business or management consultancy rather than financial and tax work
• Use the matching S-code when you are paying a foreign vendor rather than receiving money

Who typically uses P1005 purpose code

Indian chartered accountants, accounting and audit practices, bookkeeping firms and finance and accounting outsourcing businesses billing clients abroad, including firms handling monthly books for overseas small businesses and practices supporting foreign audit teams. It applies whether you invoice as an individual practitioner, a proprietorship, or a registered firm.

Examples of transactions covered under P1005 purpose code

• Monthly bookkeeping retainer received from an overseas client
• Fees for preparing year-end accounts for a foreign business
• Payment from an international audit firm for audit support work carried out in India
• Tax consulting fees received from a client abroad

When NOT to use P1005 purpose code

• The work is legal services rather than accounting or tax (use P1004)
• The work is business or management consultancy rather than financial and tax work (use P1006)
• The work is data processing on the client's records rather than accounting judgement applied to them (use P0803)
• You are paying a foreign vendor rather than receiving (use the matching S-code)

Documents required for P1005 purpose code

To receive a payment under P1005, keep the following documents ready so your bank or platform can verify the transaction and report it correctly under FEMA.

How is a P1005 Purpose Code declared?

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

1. Raise your invoice: Bill your overseas client for the accounting, audit, bookkeeping or tax work, describing the service and the period.
2. Receive the payment: The client sends the money to your bank or receiving account.
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 invoice, engagement letter, 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 while using P1005 purpose code

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

1. Splitting the code by task within one relationship: Using different codes for bookkeeping, accounts and tax work for the same client, when all four named services sit under this one code.
2. Coding tax advice by the type of firm: Sending tax consulting to the legal code because a law firm provided it, when tax consulting is named here and the code follows the service.
3. Code and invoice mismatch: The code not matching what your invoice describes, which flags the payment.
4. Incomplete documents: Missing the invoice or engagement letter, so the bank cannot establish what the work was 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 P1005 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 P1005 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.