S1004 Purpose Code: Legal services

Purpose code S1004 is used when an Indian business pays a foreign law firm or legal professional for legal services.

What is the S1004 purpose code?

Purpose code S1004 is used when an Indian business sends money abroad to pay for legal services provided by a foreign law firm or legal professional. This covers work like legal opinions, contract drafting, dispute advisory, regulatory advisory, representation in foreign courts or arbitrations, and other professional legal services bought from outside India. It applies to legal service fees only and does not cover settlement of damages, compensation or fines, which may fall under different RBI purpose codes. Under RBI FEMA guidelines, this outward payment is classified under other business services and reported accordingly.

When to use S1004 purpose code?

Use S1004 when you are paying an overseas law firm, attorney or legal consultant for professional legal services delivered to your business in India or for your matters overseas. It is the correct RBI purpose code for cross-border legal advisory, documentation or representation work that you purchase from a foreign legal service provider. S1004 covers the service fee component of the engagement.

When to use a different code:

• Use the appropriate service import code when the payment is for non-legal consulting or professional services
• Use the appropriate code for settlements, damages or compensation payments under a court order or arbitration award
• Use the matching P code when you are receiving money rather than paying

Who typically uses S1004 purpose code?

Indian companies, startups, exporters and professional firms that engage overseas law firms or legal consultants for opinions, deal documentation or dispute-related work. It applies whether you pay as a private limited company, LLP, partnership or proprietorship, as long as the legal service provider is outside India.

Examples of transactions covered

• Fees to a foreign law firm for drafting and negotiating an international share purchase agreement
• Payment to an overseas attorney for representing your company in a foreign court or arbitration proceeding
• Advisory fees to a foreign legal consultant for cross-border regulatory, tax or compliance opinions
• Retainer payment to an international law firm for ongoing legal support on global contracts and disputes

When NOT to use S1004 purpose code

• The payment is for non-legal management, technical or business consulting services (use the appropriate consulting service import code)
• The payment is for settlement of damages, compensation or an arbitration award rather than legal fees (use the appropriate settlement or indemnity-related code)
• The payment is for court fees, government filing fees or statutory charges payable directly to a foreign authority (use the appropriate government or statutory payment code)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S1004, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S1004 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 legal service provider bills you, clearly describing the advisory, documentation or representation work delivered.
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 S1004 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 legal fees with settlements: Tagging settlement of damages, compensation or awards as legal service fees under S1004 when a different code is more accurate.
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, engagement letter 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 S1004 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 S1004 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.