S0608 Purpose Code: Life Insurance Claim Settlements

Purpose code S0608 is used when an Indian business pays a foreign insurer for settling life insurance claims.

What is the S0608 purpose code?

Purpose code S0608 is used when an Indian business sends money abroad to pay a foreign insurer for life insurance claim settlements. This covers claim payouts, reimbursements or settlement amounts that are due under a life insurance policy issued by an overseas insurance company. It applies to life insurance claim payments only, not to general insurance claims or health or motor insurance, which fall under other insurance service codes. Under RBI FEMA guidelines, this outward payment is classified under insurance and pension services and reported accordingly.

When to use S0608 purpose code?

Use S0608 when you are paying an overseas insurer or insurance intermediary to settle a life insurance claim under a policy held by your business or your covered employees. It is the correct RBI purpose code for outward remittances that represent life insurance claim settlements, refunds or related claim amounts payable to a foreign life insurance provider. S0608 covers only life insurance claim settlement, not the initial premium or other types of insurance.

When to use a different code:

• Use the other insurance services code when the payment is for life insurance premiums instead of claim settlement
• Use the other non life insurance services code when the payment is for general, health or motor insurance services
• Use the matching P code when you are receiving money rather than paying

Who typically uses S0608 purpose code?

Indian companies, organisations and institutions that hold 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 or other eligible business entity, as long as the claim settlement is being paid to a foreign life insurance provider.

Examples of transactions covered

• Remittance to an overseas life insurance company for settling a group life insurance claim for an employee who was covered under an international policy
• Payment to a foreign insurer to reimburse a life insurance claim amount that your business is contractually obliged to pass on
• Transfer of funds to an overseas life insurance provider to close a maturity claim or death benefit under a policy issued abroad
• Settlement payment to an international insurance broker or administrator who is handling life insurance claim payouts on behalf of a foreign insurer

When NOT to use S0608 purpose code

• The payment is for life insurance premiums rather than a claim settlement (use the appropriate life insurance services code for premiums)
• The payment is for general, health, motor or other non life insurance services (use the relevant non life insurance services code)
• The payment relates to pension contributions or pension fund services instead of life insurance (use the appropriate pension services code)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S0608, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S0608 Purpose Code declared?

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

1. Receive the claim settlement advice: Your overseas life insurance company or broker issues a claim note or settlement advice describing the policy, claim and amount payable.
2. Determine taxability: Establish whether the remittance 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 S0608 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 a life insurance premium remittance as a claim settlement under S0608 when it belongs under the relevant premium code.
2. Code and invoice mismatch: The purpose code not matching what your insurer's invoice or claim note 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 policy document, claim settlement advice, invoice 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 S0608 to money coming in instead of using the matching P code for claim receipts.

How Skydo helps with payments under S0608 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 S0608 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.