S0027 Purpose Code: Capital transfers (Guarantee payments, Investment Grant given by the Non-government, exceptionally large Non-life insurance claims), Non-Government

Purpose code S0027 is used when an Indian company or resident investor pays a non-resident for non-government capital transfers such as guarantee payments, investment grants or exceptionally large non-life insurance claims.

What is the S0027 purpose code?

Purpose code S0027 is used when an Indian company or resident investor sends money abroad for non-government capital transfers such as guarantee payments, investment grants or exceptionally large non-life insurance claim settlements. It covers one-off or infrequent capital transfers to non-residents that are not part of routine current account transactions, but instead change the capital position between resident and non-resident parties. These payments are distinct from regular service fees, interest, dividends or trade settlements, which fall under other RBI purpose codes. Under RBI FEMA guidelines, this outward payment is classified under the Capital Account and reported accordingly.

When to use S0027 purpose code?

Use S0027 when you are making a non-government capital transfer from India to a non-resident, such as paying out under a guarantee, sending an investment grant, or settling an exceptionally large non-life insurance claim that affects capital rather than routine business expense. It is the correct RBI purpose code when the transaction changes your capital position with the overseas party, whether you remit as a company, LLP, partnership, trust or resident individual investor. S0027 covers capital transfers, not ongoing service charges or operational payments.

When to use a different code:

• Use the code for routine import of goods when the payment is for merchandise or equipment supplied by the overseas vendor
• Use the code for service imports when the payment is for professional, technical or other recurring service fees
• Use the matching P code when you are receiving money rather than paying

Who typically uses S0027 purpose code?

Indian companies, financial institutions, insurers and other entities that make non-government capital transfer payments abroad, such as guarantee payouts, investment grants or large non-life insurance claim settlements to non-resident parties. Resident individual investors may also use this code when remitting qualifying capital transfers to non-residents outside normal trade or service arrangements.

Examples of transactions covered

• Payment under a performance guarantee issued in favour of an overseas beneficiary after the guarantee is invoked
• Investment grant paid by an Indian company to a foreign affiliate or project as a capital contribution that is not structured as equity or a loan
• Settlement of an exceptionally large non-life insurance claim by an Indian insurer to a non-resident policyholder or beneficiary
• One-time capital transfer from an Indian entity to a foreign counterparty as part of a negotiated settlement that alters the capital relationship

When NOT to use S0027 purpose code

• The payment is for importing goods or equipment under a trade contract (use the relevant import of goods purpose code)
• The payment is for professional, technical or other service fees to an overseas vendor (use the relevant service import purpose code)
• The payment is for routine insurance premiums or normal-sized claims that are treated as current account transactions (use the appropriate insurance-related purpose code)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S0027, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S0027 Purpose Code declared?

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

1. Finalise the capital transfer: Confirm the guarantee invocation, grant approval, claim settlement or capital transfer agreement with the non-resident party and obtain the supporting documents.
2. Complete the relevant capital account filing: Where applicable, ensure any required reporting (such as forms prescribed under FEMA for capital account transactions) is completed or in process in line with your authorised dealer bank's guidance.
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 S0027 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 with current account payments: Tagging routine service fees, small insurance claims or trade payments as S0027 when they belong under import, service or insurance-related purpose codes.
2. Code and invoice mismatch: The code not matching what your documentation describes, which flags the payment for additional checks.
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 guarantee or policy documents, settlement note, agreement 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

S0027 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.