S0022 Purpose Code: Investment in Indian Depositories Receipts (IDRs)

Purpose code S0022 is used when an Indian company or resident investor pays abroad for investment in Indian Depositories Receipts (IDRs).

What is the S0022 purpose code?

Purpose code S0022 is used when an Indian company or resident investor sends money abroad for investment in Indian Depositories Receipts (IDRs). It covers outward remittances linked to subscribing to, purchasing, converting or redeeming IDRs held with an overseas depository or intermediary. It does not apply to other overseas portfolio investments that are not routed through IDRs and that fall under different capital account purpose codes. Under RBI FEMA guidelines, this outward payment is classified under capital account transactions and reported accordingly.

When to use S0022 purpose code?

Use S0022 when you are remitting funds abroad to participate in, settle or unwind an investment in Indian Depositories Receipts through an overseas depository or intermediary. It is the correct RBI purpose code for IDR related capital account payments made outside India, whether you are an Indian company or a resident individual investor. S0022 is specific to IDR investments and should not be used for unrelated foreign securities or other capital account flows.

When to use a different code:

• Use the appropriate capital account purpose code when the payment is for direct investment or other foreign securities instead of IDRs
• Use the applicable income or capital gains code when the payment relates to repatriation of returns on foreign investments rather than IDR investment itself
• Use the matching P code when you are receiving money rather than paying

Who typically uses S0022 purpose code?

Indian listed and unlisted companies, financial institutions and resident individual investors that make or settle investments in Indian Depositories Receipts through overseas depositories or intermediaries. It applies when the remitter is in India and the IDR related transaction leg requires a payment to a foreign counterparty or account.

Examples of transactions covered

• Remittance to an overseas depository bank to subscribe to a new tranche of Indian Depositories Receipts
• Payment to a foreign intermediary for purchasing existing IDRs in the secondary market abroad
• Outward remittance to settle the consideration payable on conversion or redemption of IDRs held overseas
• Transfer of funds to an overseas custodian to adjust margins or obligations arising from IDR investment activity

When NOT to use S0022 purpose code

• The payment is for acquiring foreign shares, bonds or units directly rather than Indian Depositories Receipts (use the appropriate foreign investment capital account code)
• The payment is for income repatriation such as dividends or capital gains arising from foreign investments (use the relevant income or capital gains code)
• The payment relates to import of goods or services and not to any IDR linked capital account transaction (use the correct 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 S0022, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S0022 Purpose Code declared?

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

1. Receive the IDR transaction note: Your broker, depository participant or intermediary issues a contract note or instruction describing the specific IDR investment or redemption.
2. Complete required capital account filings: Ensure any applicable ODI or other capital account reporting or approvals for the IDR transaction are in place as required by RBI and 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 S0022 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 IDRs with other foreign investments: Tagging a general overseas share or bond purchase under S0022 instead of using the correct foreign investment capital account code.
2. Code and invoice mismatch: The code not matching what your contract note or transaction advice 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 investment agreement, broker note, contract 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

S0022 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.