S1409 Purpose Code: Remittance of dividends by FDI enterprises in India (other than branches) on equity and investment fund shares

Purpose code S1409 is used when an Indian company or FDI enterprise pays its foreign shareholders abroad for dividend income on equity or investment fund shares.

What is the S1409 purpose code?

Purpose code S1409 is used when an Indian FDI enterprise sends money abroad to remit dividends on equity or investment fund shares to non-resident shareholders. It covers outward remittances of declared dividend income on share capital or units held in Indian companies or investment funds with foreign direct investment. It does not apply to repatriation of the original capital, sale proceeds of shares, or interest on loans or debt instruments, which fall under separate capital account or income purpose codes. Under RBI FEMA guidelines, this outward payment is classified under primary income and reported accordingly.

When to use S1409 purpose code?

Use S1409 when you are an Indian FDI enterprise remitting declared dividends on equity shares or investment fund units to your foreign shareholders or overseas fund investors. It is the correct RBI purpose code for distributing dividend income abroad arising from foreign direct investment in an Indian company or investment vehicle. S1409 covers only the dividend income component, not any capital repatriation or share sale consideration.

When to use a different code:

• Use the appropriate capital account code when you are remitting sale proceeds or returning capital on shares to a non-resident investor
• Use the appropriate income code for interest payments on loans, bonds or other debt instruments to non-residents
• Use the matching P code when you are receiving money rather than paying

Who typically uses S1409 purpose code?

Indian companies and FDI enterprises in India that have non-resident shareholders or overseas investors and remit declared dividends on equity or investment fund shares abroad. It applies to private and public limited companies, LLPs where permitted, and investment funds or AIFs in India making dividend distributions to foreign unit holders.

Examples of transactions covered

• Payment of annual dividend declared by an Indian FDI company to its foreign parent company holding equity shares
• Remittance of interim dividend by an Indian subsidiary to multiple non-resident shareholders based in different countries
• Distribution of dividend income by an Indian investment fund to overseas limited partners or unit holders
• Remittance of final dividend by an Indian joint venture company to its foreign strategic investor on its equity stake

When NOT to use S1409 purpose code

• The payment is for repatriation of original capital or share sale proceeds to a non-resident investor (use the appropriate capital account code)
• The payment is for interest on loans, debentures or other debt instruments to a non-resident (use the appropriate income interest code)
• The payment relates to management fees, advisory fees or any service charges to a foreign party (use the relevant service import purpose code)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S1409, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S1409 Purpose Code declared?

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

1. Determine eligible shareholders and dividend: Finalise the dividend amount per share or unit, list the non-resident shareholders or investors and compute the dividend payable to each.
2. Complete regulatory and tax filings: Ensure applicable corporate approvals, withholding tax computation and any required filings or certificates for dividend distribution to non-residents are in place.
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 S1409 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 dividends with capital or interest: Tagging share sale proceeds or interest on shareholder loans as dividend remittance under S1409 instead of the correct capital or interest code.
2. Code and invoice mismatch: The code not matching what your dividend declarations, board resolutions or statements 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 board resolution, dividend computation, shareholder statement or Form A2, so the bank holds the remittance until provided.
5. Missing PAN or KYC: Incomplete verification for the remitting entity stops the bank from releasing the payment.
6. Using an outward code for an inward receipt: Applying an outward S code to money coming in instead of the matching P code.

How Skydo helps Indian businesses with cross-border payments

S1409 covers income repatriation by FDI enterprises, 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.