S0605 Purpose Code: Auxiliary services including commission on insurance

Purpose code S0605 is used when an Indian business pays a foreign insurer or intermediary for auxiliary insurance services, including commission on insurance.

What is the S0605 purpose code?

Purpose code S0605 is used when an Indian business sends money abroad to pay for auxiliary insurance services, including commission on insurance. This covers payments such as broker or agent commission to a foreign intermediary, claim handling or administration services provided from outside India, and other support services directly connected to an insurance contract. It applies to the insurance-related service component, not to the underlying goods or non-insurance services that may be covered under other purpose codes. Under RBI FEMA guidelines, this outward payment is classified under insurance and pension services and reported accordingly.

When to use S0605 purpose code?

Use S0605 when you are paying an overseas insurer, broker, agent or service provider for auxiliary services linked to an insurance contract, including commission on insurance. It is the correct RBI purpose code for cross-border insurance support services bought from a foreign party, regardless of your business structure. S0605 covers the insurance-related services, not the import of insured goods or unrelated advisory work.

When to use a different code:

• Use a trade import goods code when the payment is primarily for goods being imported that happen to be insured
• Use a general business or management consultancy services code when the payment is for broad advisory services not directly tied to an insurance policy
• Use the matching P code when you are receiving money rather than paying

Who typically uses S0605 purpose code?

Indian companies and intermediaries that pay overseas insurers, brokers or service providers for commission on insurance, claim handling, policy administration or other auxiliary insurance services. It applies whether you pay as a private limited company, an LLP or a proprietorship, as long as the service comes from outside India.

Examples of transactions covered

• Commission paid to an overseas insurance broker for arranging marine cargo insurance with a foreign insurer
• Fees to a foreign claims administrator for handling international insurance claims on behalf of your Indian business
• Payment to an overseas assistance company for emergency support services bundled with an insurance policy
• Service charges to a foreign insurance intermediary for policy administration and back-office processing

When NOT to use S0605 purpose code

• The payment is mainly for goods you are importing, even if they are insured (use a suitable import of goods purpose code)
• The payment is for general business or management consultancy not directly linked to an insurance policy (use a relevant consultancy services purpose code)
• The payment is for reinsurance premiums or primary insurance cover itself where another dedicated insurance purpose code applies
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S0605, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S0605 Purpose Code declared?

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

1. Receive the vendor invoice: Your overseas insurer, broker or service provider bills you, clearly describing the auxiliary insurance services and any commission on insurance.
2. Determine taxability: Establish whether the payment is chargeable to tax in India, since that decides which part of Form 145 you file.
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 S0605 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.
6. With a traditional bank you handle each step of the payment journey. But with a platform built for cross-border payments, you can preselect a default purpose code so the payments go out smooth.

Common mistakes to avoid

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

1. Confusing auxiliary services with core insurance or goods: Tagging primary insurance premium or the value of imported goods as auxiliary services under S0605 when another code fits better.
2. Code and invoice mismatch: The code not matching what your vendor invoice describes, which can flag 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 if you are wrong.
4. Incomplete documents: Missing invoice, contract or Form A2, so the bank holds the remittance until everything is 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 with payments under S0605 Purpose Code

With a bank, you fill a fresh Form A2 and chase documents for every single vendor payment. With Skydo, your outward payments run on the same account you already collect into.

1. One account, both directions: Receive from international clients and pay overseas vendors from a single onboarded account, with one KYC.
2. Purpose code applied consistently: Set S0605 as your default for these payments so every remittance is tagged the same way.
3. Documentation in one place: Your invoices, Form A2 records and payment proofs stay together, ready for your CA and your AD bank.
4. A rate you can see: You get the live mid-market rate with a transparent fee, instead of a markup hidden inside the bank's rate.
5. Payments that go out on schedule: Your vendor gets paid without a branch visit or a week of back and forth.