S1408 Purpose Code: Remittance of profit by FDI enterprises in India (by branches of foreign companies including bank branches)

Purpose code S1408 is used when an Indian branch of a foreign company or foreign bank pays its foreign head office or parent for remittance of profits earned in India.

What is the S1408 purpose code?

Purpose code S1408 is used when an Indian branch of a foreign company or foreign bank sends money abroad to remit profits earned from its operations in India. It covers periodic or ad hoc remittances of distributable profit from the Indian branch to its foreign head office or parent entity. It does not cover repayment of intra‑group loans, return of capital, or payment for goods or services, which fall under their respective capital or current account codes. Under RBI FEMA guidelines, this outward payment is classified under primary income and reported accordingly.

When to use S1408 purpose code?

Use S1408 when an Indian branch office or branch of a foreign bank is remitting accumulated or current profits to its foreign head office or parent company. It is the correct RBI purpose code for income repatriation by FDI enterprises in branch form, irrespective of the branch’s line of business. S1408 covers profit remittances, not capital repayments or payments for imports or services.

When to use a different code:

• Use the relevant import of goods code when the payment is for merchandise or equipment supplied to the Indian branch
• Use the relevant service import code when the payment is for management, technical or other services from the foreign head office or affiliates
• Use the matching P code when you are receiving money rather than paying

Who typically uses S1408 purpose code?

Branches of foreign companies operating in India that periodically remit their Indian profits to the overseas head office or parent. Branches of foreign banks in India that transfer their net profits to their foreign head office in line with RBI and tax regulations.

Examples of transactions covered

• Annual remittance of net profits by the Indian branch of a foreign bank to its foreign head office.
• Quarterly transfer of distributable profits from the Indian branch office of a foreign engineering company to its parent abroad.
• Remittance of accumulated profits by a foreign company’s Indian liaison‑turned‑branch entity after conversion and commencement of revenue operations.
• Payment of final profit remittance for a financial year by a foreign insurance company’s Indian branch to its overseas parent, after audit and regulatory approvals.

When NOT to use S1408 purpose code

• The payment is for goods or equipment supplied by the foreign head office or affiliate to the Indian branch (use the relevant import of goods code).
• The payment is for management fees, technical services, or other intra‑group service charges (use the relevant service import code).
• The payment is towards repayment of capital, loans, or other capital account items to the foreign parent (use the appropriate capital account purpose code).
• You are receiving money rather than paying (use the matching P code).

Documents required

To send a payment under S1408, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S1408 Purpose Code declared?

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

1. Finalise the profit figure and approvals: Compute distributable profits for the branch, obtain audit sign‑off and internal approvals, and raise a remittance request to the authorised dealer bank.
2. Complete regulatory and tax filings: Ensure applicable tax payments, certificates, and any sectoral or RBI conditions on profit remittance by branches are complied with and documented.
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 S1408 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. Confusing profit remittance with other payments: Tagging capital repayments, intra‑group service fees, or import settlements under S1408 instead of their correct purpose codes.
2. Code and invoice mismatch: Using S1408 when the documentation or computation clearly relates to goods, services, or capital items, 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 profit computation, approvals, tax records, or Form A2, so the bank holds the remittance until provided.
5. Missing PAN or KYC: Incomplete verification for the branch or foreign company stops the bank from releasing the payment.
6. Using an outward code for an inward receipt: Applying S1408 to money coming in instead of the matching P code for profit receipts.

How Skydo helps Indian businesses with cross-border payments

S1408 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.