P1021 Purpose Code: Operational leasing services (other than financial leasing) without operating crew, including charter hire - Shipping companies

Purpose code P1021 is used when an Indian vessel owner receives payment from abroad for chartering out a ship without crew.

What is the P1021 purpose code?

Purpose code P1021 covers money received for chartering a vessel to an overseas charterer where the charterer supplies its own crew. Two exclusions in the description define it. Without operating crew separates it from the manned charter code in the transport group, since a lease including crew is treated as a transport service while a lease of the asset alone is a business service. Other than financial leasing separates it from arrangements that are really financing. Charter hire is named as included, so a bareboat charter belongs here. Under RBI FEMA guidelines, this inward payment is classified under Other Business Services and reported accordingly.

When to use P1021 purpose code?

Use P1021 when you charter out a vessel to an overseas charterer and the charterer crews and operates it themselves. It is the correct RBI purpose code for bareboat and dry charter of ships, whatever the length of the term. Three things need to be true: the asset is a vessel, the crew do not go with it, and the arrangement is an operating lease rather than a financing structure.

When to use a different code:

• Use P0205 when the charter includes operating crew, which is a transport service rather than a business service
• Use P1003 when the asset chartered without crew is an aircraft rather than a vessel
• Use the matching S-code when you are paying a foreign vendor rather than receiving money

Who typically uses P1021 purpose code

Indian shipping companies and vessel owners chartering out ships on bareboat terms, where the charterer takes the vessel and puts its own crew aboard. The owner is the party this code applies to, since it records income from making the vessel available rather than from operating it.

Examples of transactions covered under P1021 purpose code

• Charter hire received from an overseas charterer on a bareboat charter
• Lease rentals on a vessel placed at a foreign operator's disposal without crew
• Periodic payments from an international charterer under a multi-year operating charter
• Income received for making a vessel available to an overseas charterer who crews it themselves

When NOT to use P1021 purpose code

• The charter includes operating crew (use P0205, in the transport group)
• The asset chartered without crew is an aircraft rather than a vessel (use P1003)
• The arrangement is a financial lease rather than an operating one, which reports under the financial services codes
• You are paying a foreign vendor rather than receiving (use the matching S-code)

Documents required for P1021 purpose code

To receive a payment under P1021, keep the following documents ready so your bank or platform can verify the transaction and report it correctly under FEMA.

How is a P1021 Purpose Code declared?

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

1. Agree the charter: Put the vessel at the charterer's disposal on terms where they supply the crew.
2. Raise your invoice: Bill the overseas charterer for the hire due for the period.
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 charter party and hire 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 P1021 purpose code

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

1. Overlooking the crew condition: Using P1021 for a charter where you supply the crew, which is P0205 in a different group entirely. The crew condition is what moves the receipt between groups.
2. Coding a financial lease as operational: Applying P1021 to an arrangement that is really a financing structure, which the description excludes and which reports under the financial services codes.
3. Code and document mismatch: The code not matching what your charter party describes, which flags the payment.
4. Incomplete documents: Missing the charter party or hire statement, so the bank cannot confirm the crew and lease type 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 hire you're paying out instead of the matching outward code.

How Skydo simplifies inward remittance under P1021 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 P1021 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.