S1402 Purpose Code: Remittance towards interest on Non-Resident deposits (FCNR(B), NR(E)RA, etc.)

Purpose code S1402 is used when an Indian bank or authorised dealer pays a non-resident account holder interest on eligible foreign currency or non-resident rupee deposits held in India.

What is the S1402 purpose code?

Purpose code S1402 is used when an Indian bank or authorised dealer remits interest payable on non-resident deposits such as FCNR(B), NR(E)RA and similar accounts to the non-resident holder abroad. It covers outward remittances of interest income that has accrued on these deposits when the funds are sent outside India or credited to an overseas account. It does not apply to the principal amount of the deposit itself, which is reported under separate capital account codes. Under RBI FEMA guidelines, this outward payment is classified under Primary Income and reported accordingly.

When to use S1402 purpose code?

Use S1402 when you, as an Indian bank or authorised dealer, are remitting interest on eligible non-resident deposits to the account holder outside India or to an overseas account they nominate. It is the correct RBI purpose code for outward payments that represent interest income earned by non-residents on FCNR(B), NR(E)RA and similar deposit products. S1402 covers only the interest component, not the initial deposit or its repayment.

When to use a different code:

• Use the appropriate capital account purpose code when the payment relates to the principal on a non-resident deposit or its repatriation
• Use the matching goods or services import code when the outward remittance is for trade or service payments rather than interest income
• Use the matching P code when you are receiving money rather than paying

Who typically uses S1402 purpose code?

S1402 is typically used by Indian banks and authorised dealer branches handling non-resident deposit accounts and sending interest payouts abroad. It applies when these regulated entities remit interest income to non-resident individuals or entities holding FCNR(B), NR(E)RA or similar deposits in India.

Examples of transactions covered

• Quarterly interest remittance from an Indian bank to an NRI's overseas account for an FCNR(B) deposit held in India
• Annual interest payout on an NR(E)RA deposit transferred by the bank to the non-resident's bank account outside India
• Monthly interest credited from an Indian authorised dealer to a foreign corporate's overseas account against its non-resident term deposit
• Cumulative interest on a matured non-resident deposit remitted abroad while the principal is rolled over into a new deposit in India

When NOT to use S1402 purpose code

• The payment relates to the principal amount of a non-resident deposit or its repatriation (use the appropriate capital account purpose code)
• The payment is for import of goods or services and not for interest on a deposit (use the relevant trade or service import purpose code)
• The payment is interest on an external commercial borrowing or other loan, not on a non-resident deposit (use the relevant loan interest purpose code)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S1402, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S1402 Purpose Code declared?

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

1. Confirm the interest payout: Establish the exact amount and period of interest on the non-resident deposit that you are remitting abroad, and prepare the interest advice or statement.
2. Determine taxability: Establish whether the interest being paid is chargeable to tax in India, since that decides which part of Form 145 you file and whether any tax is to be deducted.
3. File Form 145: Submit the declaration before remitting, with Form 146 from your CA where the taxable amount of interest exceeds ₹5 lakh in the Tax Year and no Assessing Officer certificate is available.
4. Complete Form A2: State the purpose of the outward remittance as S1402 and submit the supporting deposit and interest documents to your bank.
5. Get your MT103: Once the payment is sent, request the SWIFT MT103 as proof and retain your Form A2 and tax records for your compliance files.

Common mistakes to avoid

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

1. Misclassifying the payment: Tagging principal repayment or deposit closure under S1402 instead of using the correct capital account or deposit-related code.
2. Code and invoice mismatch: The selected code not matching what your internal interest advice or statement describes, which can flag the payment.
3. Assuming a Rule 220(3) exemption: Skipping Form 145 on an interest remittance that is not on the specified exempt list, which carries a ₹1,00,000 penalty per instance.
4. Incomplete documents: Missing deposit statement, interest computation, Form A2 or tax declaration, so the bank holds the remittance until provided.
5. Missing PAN or KYC: Incomplete verification for the remitter prevents the bank from releasing the payment.
6. Using an outward code for an inward receipt: Applying S1402 to interest coming into India instead of the matching P code for inward flows.

How Skydo helps Indian businesses with cross-border payments

S1402 covers income repatriation, 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.