S1005 Purpose Code: Accounting, auditing, book-keeping services

Purpose code S1005 is used when an Indian business pays a foreign vendor for accounting, auditing or bookkeeping services.

What is the S1005 purpose code?

Purpose code S1005 is used when an Indian business sends money abroad to pay for accounting, auditing or bookkeeping services provided by a foreign firm or professional. This covers work like statutory or internal audits performed by an overseas auditor, outsourced bookkeeping to an international service provider, and specialist accounting advisory delivered from outside India. It is meant for professional financial reporting and assurance services, not for software tools or other unrelated business support. Under RBI FEMA guidelines, this outward payment is classified under other business services and reported accordingly.

When to use S1005 purpose code?

Use S1005 when you are paying an overseas accounting, audit or bookkeeping provider for professional services delivered to your business in India. It is the correct RBI purpose code for fees to foreign auditors, accountants, or back-office bookkeeping teams, whatever your business structure. S1005 covers the professional service, not any software product or financial platform you may also be using.

When to use a different code:

• Use an information technology consulting services code when the payment is for IT or systems consulting rather than accounting work
• Use a legal services code when the payment is for legal, compliance or advisory services from a foreign law firm
• Use the matching P code when you are receiving money rather than paying

Who typically uses S1005 purpose code?

Indian companies, startups and firms that hire overseas auditors, accounting specialists or bookkeeping providers, including businesses paying foreign Big Four affiliates or niche accounting boutiques. It applies whether you pay as a private limited company, an LLP, a partnership or a proprietorship, as long as the accounting, audit or bookkeeping service comes from outside India.

Examples of transactions covered

• Payment of audit fees to an overseas audit firm for reviewing the India entity’s financial statements as part of a global group audit
• Fees to a foreign accounting firm for preparing consolidated group accounts and advisory on international financial reporting standards
• Monthly retainer to an offshore bookkeeping provider for maintaining the company’s accounting records in the group’s ERP system
• One-time payment to a specialist overseas accountant for technical advisory on complex accounting treatment or restatement

When NOT to use S1005 purpose code

• The payment is for IT or systems consulting such as ERP implementation or software setup rather than accounting work (use an information technology consulting services code)
• The payment is for tax consultancy or compliance services that fall under a dedicated tax services category (use the appropriate tax-related services code)
• The payment is for legal, company secretarial or regulatory advisory provided by a foreign law or CS firm (use a legal services code)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S1005, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S1005 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 accounting or audit partner bills you, clearly describing the professional services delivered and the billing period.
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 S1005 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 accounting with other services: Tagging legal, tax consultancy or IT implementation work under S1005 when it belongs under a different specialised services code.
2. Code and invoice mismatch: The purpose 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 exempt 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 the documents are provided.
5. Missing PAN or KYC: Incomplete KYC or incorrect PAN details can stop the bank from releasing the payment.
6. Using an outward code for an inward receipt: Applying S1005 to money coming in instead of using the matching P code for inward remittances.

How Skydo helps with payments under S1005 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 S1005 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.