S0702 Purpose Code: Investment banking, brokerage, underwriting commission etc.

Purpose code S0702 is used when an Indian business pays a foreign investment bank or broker for investment banking, brokerage, underwriting commission or related financial services.

What is the S0702 purpose code?

Purpose code S0702 is used when an Indian business sends money abroad to pay for investment banking, brokerage, underwriting commission and similar financial intermediary services. This covers payments like advisory fees to a foreign investment bank, brokerage charged by an overseas securities firm, underwriting commission to an international underwriter, and related financial services bought from outside India. It applies to the service component and associated fees, not to the underlying purchase of securities or capital instruments, which follow the relevant capital account regulations and filings. Under RBI FEMA guidelines, this outward payment is classified under financial services and reported accordingly.

When to use S0702 purpose code?

Use S0702 when you are paying an overseas investment bank, broker, underwriter or similar intermediary for investment banking, brokerage, underwriting commission or related financial services delivered to your business in India. It is the correct RBI purpose code for these financial service fees paid to a foreign counterparty, whatever your business structure. S0702 covers the service fee, not the underlying security or capital transaction.

When to use a different code:

• Use a trade-related services code when the payment is for inspection, logistics or other trade services linked directly to import of goods
• Use a general business consultancy services code when the payment is for strategic consulting not tied to investment banking or brokerage
• Use the matching P code when you are receiving money rather than paying

Who typically uses S0702 purpose code?

Indian companies, financial institutions and startups that pay overseas investment banks, brokers, arrangers or underwriters for capital raising, deal advisory, or brokerage services. It applies whether you pay as a private limited company, LLP, NBFC or other eligible business entity, as long as the financial service comes from outside India.

Examples of transactions covered

• Advisory fees to an overseas investment bank for arranging an international bond issue
• Brokerage charges paid to a foreign securities firm for executing trades on an overseas exchange
• Underwriting commission paid to an international underwriter for a share or debt offering
• Success fee to a foreign investment bank for advising on a cross-border M&A or capital raising transaction

When NOT to use S0702 purpose code

• The payment is for inspection, freight, clearing or other trade services linked to import of goods (use an import trade services code instead)
• The payment is for general management or business consultancy that is not investment banking or brokerage (use a broader professional or management services code)
• The payment relates to the purchase price of shares, bonds or other capital instruments rather than the service fee (use the relevant capital account or investment code)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S0702, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S0702 Purpose Code declared?

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

1. Receive the vendor invoice: Your overseas investment bank, broker or underwriter bills you, clearly describing the financial services provided and the applicable fee or commission.
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 S0702 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 service fee with investment amount: Tagging the purchase of shares or bonds under S0702 when this code is meant for investment banking, brokerage or underwriting service fees.
2. Code and invoice mismatch: The code not matching what your vendor invoice 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 invoice, 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 with payments under S0702 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 S0702 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.