S1502 Purpose Code: Reversal of wrong entries, refunds of amount remitted for non-exports

Purpose code S1502 is used when an Indian business pays a foreign party and later needs to reverse a wrong entry or get a refund for an amount earlier remitted for non-exports.

What is the S1502 purpose code?

Purpose code S1502 is used when an Indian business sends money abroad to correct a past remittance that was wrongly booked, or to process a refund related to an earlier non-export payment. It covers outward adjustments such as reversing an incorrect transfer, settling a reconciliation difference with an overseas counterparty, or handling a refund that relates to a previous non-export remittance. It does not apply to refunds or reversals that relate to export proceeds, which follow separate export-related purpose codes and processes. Under RBI FEMA guidelines, this outward payment is classified under the "Others" category and reported accordingly.

When to use S1502 purpose code?

Use S1502 when you are making an outward remittance to reverse a wrong entry or clear a refund related to a previous non-export payment to a foreign party. It is the correct RBI purpose code for clean-up or rectification payments where the underlying transaction is not an export of goods or services. S1502 covers adjustments and refunds linked to non-export remittances only.

When to use a different code:

• Use the specific import of goods or services purpose code when the payment is for a fresh underlying transaction
• Use the matching refund or chargeback process your bank prescribes when the card network or payment gateway is reversing the original transaction
• Use the matching P code when you are receiving money rather than paying

Who typically uses S1502 purpose code?

Indian companies, LLPs, partnerships and proprietorships that need to correct earlier outward remittances or handle refunds of non-export payments to overseas parties. It applies across sectors whenever a business must regularise an earlier non-export remittance under RBI reporting.

Examples of transactions covered

• Payment sent to an overseas beneficiary to square off a reconciliation difference arising from a wrongly posted earlier remittance
• Outward remittance to adjust an overpaid non-export invoice that cannot be netted in the regular billing cycle
• Settlement payment to correct a misclassified earlier transfer that was booked under the wrong RBI purpose code
• Adjustment remittance linked to a refund of fees previously paid abroad for a non-export transaction after final reconciliation

When NOT to use S1502 purpose code

• The payment is for a fresh import of goods and should be classified under the relevant import purpose code
• The payment is for a fresh import of services and should be tagged under the correct service purpose code
• The reversal or refund relates to export proceeds rather than a non-export remittance and must follow export reporting rules
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S1502, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S1502 Purpose Code declared?

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

1. Identify the original remittance: Trace the earlier non-export payment, collect its invoice, SWIFT details and any credit note or agreement showing why a reversal or refund is due.
2. Determine taxability: Establish whether the reversal or adjustment still involves an amount 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 S1502 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.
6. With a traditional bank you handle each step of the payment journey. But with a platform built for cross-border payments, you can preselect a default purpose code so the payments go out smooth.

Common mistakes to avoid

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

1. Using S1502 for new payments: Tagging a fresh import of goods or services as a reversal or refund instead of using the correct import purpose code.
2. Code and invoice mismatch: The code not matching what your vendor documents and 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 original remittance details, credit note, contract 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 with payments under S1502 Purpose Code

With a bank, you fill a fresh Form A2 and chase documents for every single vendor payment. With Skydo, your outward payments run on the same account you already collect into.

1. One account, both directions: Receive from international clients and pay overseas vendors from a single onboarded account, with one KYC.
2. Purpose code applied consistently: Set S1502 as your default for these correction or refund-related payments so every remittance is tagged the same way.
3. Documentation in one place: Your invoices, Form A2 records and payment proofs stay together, ready for your CA and your AD bank.
4. A rate you can see: You get the live mid-market rate with a transparent fee, instead of a markup hidden inside the bank's rate.
5. Payments that go out on schedule: Your vendor gets paid without a branch visit or a week of back and forth.