S0012 Purpose Code: Repayment of long and medium term loans with original maturity above one year received from Non-Residents

Purpose code S0012 is used when an Indian company or resident investor pays a non-resident to repay a long or medium term loan with an original maturity of more than one year.

What is the S0012 purpose code?

Purpose code S0012 is used when an Indian resident sends money abroad to repay a long or medium term loan with an original maturity of more than one year that was borrowed from a non-resident. This includes scheduled instalments or bullet repayments of principal, along with any eligible interest or charges that form part of the loan obligation to the overseas lender. Do not use this code for trade credit on imports, short term borrowings, or repayments linked to foreign investment instruments, which have their own specific RBI purpose codes. Under RBI FEMA guidelines, this outward payment is classified under Capital Account transactions and reported accordingly.

When to use S0012 purpose code?

Use S0012 when you are remitting funds to a non-resident lender to repay a long or medium term loan with an original maturity above one year that was raised from outside India. It is the correct RBI purpose code for scheduled or prepayment of such external loans by Indian companies or resident investors, whatever your business structure. S0012 covers the loan repayment itself, not payments for goods, services or equity.

When to use a different code:

• Use the relevant import of goods or services purpose code if the borrowing is actually a short term trade credit linked to an import transaction
• Use the specific foreign investment repayment or disinvestment code when you are settling amounts related to equity or debt investment from non-residents
• Use the matching P code when you are receiving money rather than paying

Who typically uses S0012 purpose code?

Indian companies, LLPs and large proprietorships that have raised medium or long term foreign currency loans from non-resident lenders and are making scheduled repayments. Resident individual investors who have legitimately borrowed from non-residents under FEMA-compliant structures may also use this code when repaying those eligible long term loans.

Examples of transactions covered

• Quarterly principal repayment to a foreign bank on a 5 year external commercial borrowing raised by an Indian company
• Bullet repayment of a 3 year shareholder loan provided in foreign currency by a non-resident promoter to an Indian entity
• Part prepayment of an overseas term loan taken from a non-resident financial institution to fund a capital project in India
• Annual instalment covering principal and agreed charges on a 7 year foreign currency loan from a non-resident lender

When NOT to use S0012 purpose code

• The payment is for settling import trade credit or short term supplier credit linked to an import transaction (use the relevant import of goods or services purpose code)
• The payment is for buyback, redemption or repayment linked to foreign equity or debt investment rather than a pure loan (use the specific foreign investment repayment code)
• The payment is for interest income remittance to a non-resident that is not tied to a qualifying long or medium term loan under this code (use the appropriate income remittance code)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S0012, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S0012 Purpose Code declared?

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

1. Review the loan documents: Refer to the foreign loan agreement and repayment schedule to identify the due principal and eligible charges payable to the non-resident lender.
2. Complete applicable RBI or ECB reporting: Ensure the underlying foreign loan has been properly reported or approved under the relevant RBI framework before making repayments.
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 S0012 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 loan repayment with trade or investment flows: Tagging repayment of import trade credit or foreign investment instruments under S0012 instead of using the specific import or investment code.
2. Code and invoice mismatch: The code not matching what your loan statement, repayment schedule or contract describes, 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 loan agreement, repayment schedule or Form A2, 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 a payment code to money coming in instead of the matching P code.

How Skydo helps Indian businesses with cross-border payments

S0012 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.