S1304 Purpose Code: Remittance towards grants and donations to other governments and charitable institutions established by the governments

Purpose code S1304 is used when an Indian resident pays a foreign government or a charitable institution established by a foreign government as a grant or donation.

What is the S1304 purpose code?

Purpose code S1304 is used when an Indian resident sends money abroad as a grant or donation to a foreign government or to a charitable institution set up by that government. It covers support payments like official aid, disaster relief contributions, or government-backed charity funding paid to eligible foreign public bodies. It does not apply to donations to private foreign NGOs or non government charities, which normally fall under other remittance categories. Under RBI FEMA guidelines, this outward payment is classified under secondary income and reported accordingly.

When to use S1304 purpose code?

Use S1304 when you are paying an overseas government or a charitable institution that has been formally established by that government, and the payment is clearly a grant or donation. It is the correct RBI purpose code for government-to-government aid, public sector contributions, or institutional donations made to such foreign public bodies. S1304 covers grants and donations, not payments for services or purchases.

When to use a different code:

• Use the specific outward purpose code for buying goods or services from abroad when the payment is a commercial transaction rather than a grant or donation
• Use the relevant outward purpose code for donations to private foreign charities or NGOs that are not established by a government
• Use the matching P code when you are receiving money rather than paying

Who typically uses S1304 purpose code?

Indian government departments, public sector undertakings, and large institutions that send official grants or donations to foreign governments or to charitable bodies set up by those governments. It can also apply to other Indian entities remitting such government-approved grants or donations, as long as the beneficiary is a foreign government or its established charitable institution.

Examples of transactions covered

• Grant from an Indian public body to a foreign government for a joint social welfare programme
• Donation to a charitable foundation established by a foreign government to support disaster relief in that country
• Annual contribution from an Indian institution to a foreign government-run educational charity
• One-time aid payment from an Indian organisation to a foreign government humanitarian fund

When NOT to use S1304 purpose code

• The payment is a commercial purchase of goods or services from a foreign supplier, not a grant or donation
• The payment is a donation to a private foreign NGO or charity that is not established by a government
• The payment is for membership fees, subscriptions or sponsorships rather than a pure grant or donation
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S1304, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S1304 Purpose Code declared?

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

1. Receive the request or agreement: The foreign government or its established charitable institution issues a formal request, agreement or acknowledgement setting out the grant or donation details.
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 S1304 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. Donating to the wrong category: Tagging a donation to a private foreign NGO under S1304 when it is not a government-established charitable institution.
2. Code and invoice mismatch: The code not matching what your approval letters or beneficiary confirmations describe, 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 beneficiary confirmation, internal approval 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 Indian businesses with cross-border payments

S1304 covers capital account transactions, 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.