S1504 Purpose Code: Notional sales when export bills negotiated, purchased or discounted are dishonoured, crystallised or cancelled and reversed from suspense account

Purpose code S1504 is used when an Indian business pays a foreign party in connection with notional sales booked after export bills that were negotiated, purchased or discounted are dishonoured, crystallised or cancelled and reversed from a suspense account.

What is the S1504 purpose code?

Purpose code S1504 is used when an Indian business sends money abroad in relation to export bills that were earlier negotiated, purchased or discounted and have subsequently been dishonoured, crystallised or cancelled. It covers outward payments where those export bill transactions are reversed from a suspense account and treated as notional sales in the books. This code is not meant for regular export proceeds, which are covered under inward P-series export purpose codes, or for standard import or service payments that fall under other S-series codes. Under RBI FEMA guidelines, this outward payment is classified under the "Others" category and reported accordingly.

When to use S1504 purpose code?

Use S1504 when you are paying a foreign party in connection with export bills that were negotiated, purchased or discounted and later dishonoured, crystallised or cancelled and reversed from a suspense account. It is the correct RBI purpose code when your bank or business is regularising such reversed export bill positions through a notional sale entry that results in an outward remittance. S1504 is specific to these notional sales adjustments and should not be used for routine trade payments.

When to use a different code:

• Use the adjacent trade import code when the payment is for importing goods under a standard commercial invoice
• Use the adjacent services import code when the payment is for buying services such as consultancy, professional or technical work
• Use the matching P code when you are receiving money rather than paying

Who typically uses S1504 purpose code

Indian exporters and businesses whose export bills were negotiated, purchased or discounted and later dishonoured, crystallised or cancelled, resulting in notional sales entries and outward adjustments to foreign parties. It is typically used by companies working with banks or financial institutions to regularise such export bill transactions, rather than by individuals under the Liberalised Remittance Scheme.

Examples of transactions covered

• Payment to a foreign buyer or counterparty to regularise an export bill that was negotiated earlier and later dishonoured and reversed from suspense
• Settlement to an overseas bank relating to a discounted export bill that has crystallised into a loss and is booked as a notional sale
• Remittance linked to cancellation of an export bill purchase where the underlying export transaction has failed and the suspense account is being cleared
• Adjustment payment abroad when an earlier export bill transaction is reversed in the books and treated as a notional sale exposure

When NOT to use S1504 purpose code

• The payment is for importing goods under a normal commercial contract and belongs under a standard import of goods code
• The payment is for buying services such as consultancy, IT, legal or professional work from overseas and belongs under a relevant services import code
• The payment relates to routine export proceeds or export advances that should be classified under the appropriate inward export purpose code
• You are receiving money rather than paying (use the matching P code)

Documents required

To send a payment under S1504, keep the following documents ready so your authorised dealer bank can verify the transaction and report it correctly under FEMA.

How is a S1504 Purpose Code declared?

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

1. Identify the export bill transaction: Trace the original export bill that was negotiated, purchased or discounted and is now dishonoured, crystallised or cancelled and reversed from the suspense account.
2. Determine taxability: Establish whether the outward payment linked to this notional sale is 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 of such payments exceeds ₹5 lakh in the Tax Year.
4. Complete Form A2: State the purpose of the outward remittance as S1504 and submit the supporting export bill and reversal 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 Form 145 records for your files.

Common mistakes to avoid

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

1. Using S1504 for normal trade: Tagging a routine import or export payment under S1504 instead of using the correct goods or services trade purpose code.
2. Code and invoice mismatch: The code not matching what your documentation describes, such as using S1504 where there is no dishonoured or cancelled export bill, which flags the payment.
3. Assuming a Rule 220(3) exemption: Skipping Form 145 on a payment that is not on the specified exemption list, which carries a ₹1,00,000 penalty per instance.
4. Incomplete documents: Missing export bill records, reversal note, settlement documentation or Form A2, so the bank holds the remittance until provided.
5. Missing PAN or KYC: Incomplete verification or mismatch in KYC details stops the bank from releasing the payment.
6. Using an outward code for an inward receipt: Applying S1504 to money coming in instead of using the correct inward P-series export purpose code.

How Skydo helps Indian businesses with cross-border payments

S1504 covers capital account transactions, 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.