S1412 Purpose Code: Remittance of dividends on account of Portfolio Investment in India on equity and investment fund shares

Purpose code S1412 is used when an Indian company or resident investor pays a non-resident investor abroad the dividend income that is due on their portfolio investment in Indian equity or investment fund shares.

What is the S1412 purpose code?

Purpose code S1412 is used when an Indian entity remits dividend income abroad to a non-resident who holds portfolio investments in Indian equity or investment fund shares. It covers outward payments of dividends declared and payable to foreign portfolio investors (FPIs), non-resident individuals, or other overseas holders of listed or unlisted Indian shares and fund units held on a portfolio basis. It does not cover dividends or profit distribution linked to direct investment or control, which are tagged under separate capital account or FDI purpose codes. Under RBI FEMA guidelines, this outward payment is classified under Primary Income and reported accordingly.

When to use S1412 purpose code?

Use S1412 when you are remitting declared dividends from Indian equity or investment fund shares to an overseas portfolio investor. It is the correct RBI purpose code when the underlying holding is a portfolio investment and the payment represents dividend income, regardless of whether the remitter is the Indian company, the fund, or an intermediary making the payout. S1412 covers the income distribution itself, not any related capital gains, buyback proceeds or sale consideration.

When to use a different code:

• Use the adjacent income code for interest payments instead of dividends
• Use the matching capital account code when remitting sale or redemption proceeds on the investment
• Use the matching P code when you are receiving money rather than paying

Who typically uses S1412 purpose code?

Indian companies, AIFs, mutual funds and other investment vehicles that remit dividend distributions on equity or fund units to non-resident portfolio investors. It also applies to resident custodians or intermediaries that handle outward dividend payments on behalf of overseas portfolio investors in Indian securities.

Examples of transactions covered

• Dividend payout by an Indian listed company to foreign portfolio investors holding its shares through a custodian
• Distribution of earnings by an Indian investment fund to non-resident investors on their portfolio units
• Periodic dividend remittance by a registrar and transfer agent to overseas shareholders of an Indian company
• Consolidated outward remittance by a custodian bank of net dividends due to multiple foreign portfolio investors in Indian equities

When NOT to use S1412 purpose code

• The payment is interest income on debt securities or loans rather than dividends (use the adjacent interest income code)
• The payment is capital gains or sale proceeds from disposal of shares or units, not dividend income (use the matching capital account remittance code)
• The payment is profit distribution related to a direct investment or controlling stake, not a portfolio holding (use the relevant FDI income or capital account code)
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S1412, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S1412 Purpose Code declared?

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

1. Identify eligible recipients: Compile the list of non-resident portfolio investors entitled to dividends on Indian equity or fund units, along with the amounts payable.
2. Determine taxability: Establish whether the dividend is chargeable to tax in India and compute any TDS, since that decides which part of Form 145 you file and whether a Form 146 is needed.
3. File Form 145: Submit the declaration before remitting, with Form 146 from your CA where the taxable amount to a recipient exceeds ₹5 lakh in the Tax Year and no specific Assessing Officer certificate is available.
4. Complete Form A2: State the purpose of the outward remittance as S1412 and submit the dividend declaration, holding records and other 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 and tax records for your auditors and compliance team.

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 income type: Tagging interest, capital gains or buyback proceeds under S1412 when they are not dividend income on portfolio equity or fund shares.
2. Code and invoice mismatch: The code not matching what your dividend declaration or payout statement describes, which flags the payment.
3. Assuming a Rule 220(3) exemption: Skipping Form 145 on a dividend remittance that is not on the specified exempt list, which carries a ₹1,00,000 penalty per instance.
4. Incomplete documents: Missing dividend declaration, holder records, Form A2 or tax workings, so the bank holds the remittance until provided.
5. Missing PAN or KYC: Incomplete verification for the remitter or investor stops the bank from releasing the payment.
6. Using an outward code for an inward receipt: Applying an S code to dividend income coming into India instead of using the matching P code.

How Skydo helps Indian businesses with cross-border payments

S1412 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.