S0006 Purpose Code: Repatriation of Foreign Direct Investment made by overseas Investors in India, in equity shares

Purpose code S0006 is used when an Indian company or resident investor pays an overseas investor to repatriate foreign direct investment made in Indian equity shares.

What is the S0006 purpose code?

Purpose code S0006 is used when an Indian company or resident investor sends money abroad to repatriate foreign direct investment in Indian equity shares held by an overseas investor. It covers outward remittances such as paying a foreign shareholder for sale, buyback or reduction of their equity stake, or returning FDI capital in line with FEMA and company law. It does not apply to dividend payouts or interest income on that investment, which fall under separate income purpose codes. Under RBI FEMA guidelines, this outward payment is classified under capital account and reported accordingly.

When to use S0006 purpose code?

Use S0006 when you are remitting funds to an overseas investor against their foreign direct investment in Indian equity shares, such as on sale, buyback or capital reduction. It is the correct RBI purpose code for capital repatriation on FDI in equity, whether you are an Indian company settling with a foreign shareholder or a resident investor closing out a foreign-held equity position. S0006 covers the capital transaction, not ongoing returns like dividends or interest.

When to use a different code:

• Use the adjacent capital account code when the remittance relates to FDI in instruments other than equity shares
• Use the relevant income code when remitting dividends, interest or other returns on the investment
• Use the matching P code when you are receiving money rather than paying

Who typically uses S0006 purpose code?

Indian companies and resident investors that remit funds abroad to overseas shareholders when foreign direct investment in their equity shares is being repatriated. It applies to private limited companies, listed entities and resident individuals making compliant capital account remittances to close or reduce foreign-held equity positions in India.

Examples of transactions covered

• Remittance to an overseas parent company for buyback of its equity shares in an Indian subsidiary
• Payment to a foreign private equity fund for exiting its FDI stake in an unlisted Indian company
• Outward remittance to a non-resident shareholder on reduction of share capital approved under company law and FEMA
• Settlement to an overseas investor for sale of its equity shares in an Indian company where funds are repatriated abroad

When NOT to use S0006 purpose code

• The payment relates to foreign direct investment in instruments other than equity shares (use the adjacent capital account FDI code)
• The remittance is for dividends, interest or profit distribution on the investment (use the relevant income code)
• The payment is for importing goods or services rather than a capital account transaction (use the appropriate import of goods or services code)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S0006, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S0006 Purpose Code declared?

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

1. Prepare capital transaction records: Finalise the share transfer, buyback or capital reduction documentation with the overseas investor, along with required company law and FEMA approvals.
2. Complete FEMA reporting: Ensure applicable FDI filings, such as FC-TRS or other FIRMS portal submissions, are filed or in process for the investment and its exit, as required by your AD bank.
3. File Form 145: Submit the declaration before remitting, with Form 146 from your CA where the taxable amount exceeds ₹5 lakh in the Tax Year.
4. Complete Form A2: State the purpose of the outward remittance as S0006 and submit the supporting documents to your bank.
5. Get your MT103: Once the payment is sent, request the SWIFT MT103 as proof and retain your Form A2 record.

Common mistakes to avoid

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

1. Confusing capital and income: Using S0006 for dividends or interest payouts instead of the correct income purpose code.
2. Code and invoice mismatch: The code not matching what your transaction documents describe, which flags the payment.
3. Assuming a Rule 220(3) exemption: Skipping Form 145 on a payment that is not on the specified list, which carries a ₹1,00,000 penalty per instance.
4. Incomplete documents: Missing share agreements, board approvals, Form A2 or FEMA filing proofs, so the bank holds the remittance until provided.
5. Missing PAN or KYC: Incomplete verification stops the bank from releasing the payment.
6. Using an outward code for an inward receipt: Applying an S code to money coming in instead of the matching P code.

How Skydo helps Indian businesses with cross-border payments

S0006 covers capital account transactions, which sit outside the PA-CB framework and which Skydo does not process. If you also invoice foreign clients or pay overseas vendors, here is where Skydo fits.

1. Complete onboarding: Share PAN, Aadhaar and business details. Setup is fully online and takes about five minutes.
2. Get virtual account details: Receive from international clients in USD, GBP, EUR and other currencies they already pay in.
3. Pay your overseas vendors: Send payments to foreign suppliers, software platforms and service providers under Skydo's outward approval.
4. Documentation in one place: Your invoices, remittance records and payment proofs stay together for your CA and your AD bank.
5. A rate you can see: The live mid-market rate with a transparent fee, instead of a markup hidden inside the bank's rate.