S0607 Purpose Code: Insurance claim Settlement of non-life insurance, and life insurance (only term insurance)

Purpose code S0607 is used when an Indian business pays a foreign insurer or intermediary for settling non-life or term life insurance claims.

What is the S0607 purpose code?

Purpose code S0607 is used when an Indian business sends money abroad to settle non-life insurance or term life insurance claims with a foreign insurer or intermediary. It covers outward payments such as reimbursements of claim amounts, settlement of deductibles, or related claim settlement charges payable to an overseas insurance company for policies that cover your business or assets. Do not use this code for paying regular insurance premiums or contributions, which fall under other specific insurance service codes. Under RBI FEMA guidelines, this outward payment is classified under insurance and pension services and reported accordingly.

When to use S0607 purpose code?

Use S0607 when you are paying an overseas insurer, reinsurer, broker or claims handler for settling non-life or term life insurance claims related to your business in India. It is the correct RBI purpose code when the underlying transaction is a claim settlement, reimbursement or associated claim charges on an eligible foreign insurance policy. S0607 covers the settlement of insurance claims, not the ongoing payment of premiums or investment-linked life policies.

When to use a different code:

• Use the code for insurance premium payments when you are paying regular non-life or term life premium to a foreign insurer
• Use the code for reinsurance services when the payment is for reinsurance premium rather than a claim settlement
• Use the matching P code when you are receiving money rather than paying

Who typically uses S0607 purpose code?

Indian companies, exporters and other businesses that hold eligible non-life or term life insurance policies with overseas insurers and need to remit claim settlement amounts abroad. It applies whether you are structured as a private limited company, LLP, partnership or proprietorship, as long as the claim settlement is payable to a service provider outside India.

Examples of transactions covered

• Payment to a foreign insurer to settle a marine cargo insurance claim on goods damaged in transit
• Settlement of a property damage claim with an overseas insurance company covering equipment located at an overseas site
• Reimbursement to a foreign broker or loss adjuster for claim settlement charges on a liability insurance policy
• Outward remittance to an overseas term life insurer for settlement of a valid claim under a term policy held by your business

When NOT to use S0607 purpose code

• The payment is for regular non-life or term life insurance premiums rather than a claim settlement
• The payment is for reinsurance premiums or treaty arrangements with an overseas reinsurer
• The payment relates to investment-linked or savings life insurance products instead of pure term or non-life claim settlement
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S0607, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S0607 Purpose Code declared?

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

1. Receive the claim documents: Your overseas insurer or intermediary issues a claim settlement advice, invoice or debit note describing the insurance claim and amount due.
2. Determine taxability: Establish whether the claim settlement 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 S0607 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's what to watch for.

1. Confusing claim settlement with premium payment: Tagging regular insurance premiums or reinsurance premiums as claim settlements under S0607.
2. Code and invoice mismatch: The code not matching what your insurer's invoice or claim 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 claim advice, policy copy, 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 with payments under S0607 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 S0607 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.