S1022 Purpose Code: Operational leasing services (other than financial leasing) without operating crew, including charter hire, Shipping companies

Purpose code S1022 is used when an Indian business pays a foreign lessor for operational leasing services or charter hire of ships without operating crew.

What is the S1022 purpose code?

Purpose code S1022 is used when an Indian business sends money abroad to pay for operational leasing services or charter hire of vessels without operating crew. This covers lease rentals or hire charges paid to a foreign lessor for ships or similar equipment used in your shipping or logistics operations, where the asset is provided without any crew or operational staff. It applies only to operational leasing, not to financial leasing structures that are closer to asset financing and may fall under separate capital account codes. Under RBI FEMA guidelines, this outward payment is classified under other business services and reported accordingly.

When to use S1022 purpose code?

Use S1022 when you are paying an overseas lessor for operational leasing or charter hire of ships or similar assets without crew, for use in your business activities in or from India. It is the correct RBI purpose code for lease rentals or hire charges paid to a foreign shipping company or asset owner, whatever your business structure. S1022 covers operational leasing services, not financial leasing or outright asset purchase.

When to use a different code:

• Use the appropriate code for outright import of the vessel or equipment as goods
• Use the appropriate financial leasing or loan code when the lease is effectively asset financing rather than an operating lease
• Use the matching P code when you are receiving money rather than paying

Who typically uses S1022 purpose code?

Indian shipping companies, freight forwarders and logistics operators that lease or charter vessels without crew from overseas lessors. It also applies to Indian importers and manufacturers that take ships or similar transport assets on operational lease from foreign owners for their own trade and cargo movement.

Examples of transactions covered

• Lease rental payment to a foreign ship owner for an operational lease of a cargo vessel without crew.
• Charter hire paid to an overseas shipping company for time charter of a vessel deployed on India related trade routes.
• Periodic hire charges to a foreign lessor for leasing specialized marine equipment without any operating staff.
• Settlement of outstanding charter hire invoices under a long term operational lease agreement with an international ship owner.

When NOT to use S1022 purpose code

• The payment is for importing a ship or equipment as a capital good rather than leasing it (use the relevant import of goods code under S01xx).
• The payment is under a financial lease or loan structure that is effectively asset financing (use the applicable capital account or external commercial borrowing code).
• The payment is for crew services, manning, technical management or other shipping related services instead of bare operational leasing (use the relevant shipping or business services code).
• You are receiving money rather than paying (use the matching P code).

Documents required

To send a payment under S1022, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S1022 Purpose Code declared?

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

1. Receive the lease invoice: Your overseas lessor or shipping company bills you for operational lease rentals or charter hire, clearly describing the vessel and 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 S1022 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 lease type: Tagging a financial lease or outright vessel purchase as an operational lease under S1022 when it belongs under import of goods or a capital account code.
2. Code and invoice mismatch: The code not matching what your vendor invoice or charter party 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, lease 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 S1022 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 S1022 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.