S1302 Purpose Code: Remittance towards personal gifts and donations

Purpose code S1302 is used when an Indian resident pays a person or organisation abroad for personal gifts or donations.

What is the S1302 purpose code?

Purpose code S1302 is used when an Indian resident sends money abroad as a personal gift or a personal donation. This covers transfers like sending money as a gift to a friend or relative living overseas, or giving a personal donation to a foreign charity or non profit. It is meant for genuine personal remittances under the Liberalised Remittance Scheme and not for paying commercial invoices or business expenses. Under RBI FEMA guidelines, this outward payment is classified under secondary income and reported accordingly.

When to use S1302 purpose code?

Use S1302 when you are sending a personal gift or personal donation from India to a beneficiary outside India under the Liberalised Remittance Scheme, within the overall USD 250,000 annual limit per resident individual. It is the correct RBI purpose code for non commercial gifts and donations, even if you are otherwise a business owner or professional. S1302 covers personal transfers only, not payments linked to trade or services.

When to use a different code:

• Use the code for business trade payments when the transfer is to settle an import invoice or service fee instead of a gift or donation
• Use the code for education or medical remittances when the money is for tuition, living expenses or treatment costs outside India
• Use the matching P code when you are receiving money rather than paying

Who typically uses S1302 purpose code?

Resident individuals who send money abroad as personal gifts to family or friends, or as personal donations to overseas charities, within the USD 250,000 per financial year LRS limit. It can also apply to resident individuals who are proprietors or partners, provided the remittance is clearly personal and not a business payment.

Examples of transactions covered

• Sending money as a birthday or wedding gift to a close relative living abroad
• Making a personal donation to an overseas charity or relief fund from your individual bank account
• Transferring a small personal gift amount to a friend overseas to support their short term needs
• Donating personally to an international non profit you support, without any business benefit or invoice involved

When NOT to use S1302 purpose code

• The payment is for importing goods or services from a foreign supplier for business or professional use (use the relevant trade or service import code)
• The payment is for tuition fees, living expenses or other education related costs abroad (use the relevant education remittance code)
• The payment is for medical treatment, hospital bills or related healthcare costs outside India (use the relevant medical remittance code)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S1302, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S1302 Purpose Code declared?

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

1. Confirm the purpose and beneficiary: Decide whether the remittance is a genuine personal gift or donation and collect beneficiary details such as name, country and bank account.
2. Check your LRS limit: Make sure the total of your overseas remittances, including this gift or donation, stays within the USD 250,000 per financial year limit under LRS.
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 S1302 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.

Common mistakes to avoid

A few common slips can hold up your payment or cause compliance issues. Here's what to watch for.

1. Mixing personal and business: Tagging a business payment as a personal gift or donation under S1302, which can create FEMA and tax questions later.
2. Code and purpose mismatch: The code not matching what your stated purpose or documents describe, which flags the payment at the bank.
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 LRS declaration, purpose proof 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 an S code to money coming in instead of the matching P code.

How Skydo helps Indian businesses with cross-border payments

S1302 covers personal remittances under the Liberalised Remittance Scheme, which sit outside the PA-CB framework and which Skydo does not process. If you also invoice foreign clients or pay overseas vendors, here is where Skydo fits.

1. Complete onboarding: Share PAN, Aadhaar and business details. Setup is fully online and takes about five minutes.
2. Get virtual account details: Receive from international clients in USD, GBP, EUR and other currencies they already pay in.
3. Pay your overseas vendors: Send payments to foreign suppliers, software platforms and service providers under Skydo's outward approval.
4. Documentation in one place: Your invoices, remittance records and payment proofs stay together for your CA and your AD bank.
5. A rate you can see: The live mid-market rate with a transparent fee, instead of a markup hidden inside the bank's rate.