A purpose code is the RBI code that tells your bank why you are sending money abroad under the Liberalised Remittance Scheme (LRS). You declare it on Form A2 for every remittance. For example, S0001 is for buying foreign shares, S0305 for education and S1301 for supporting a close relative.
The code matters because it decides your TCS rate and how the RBI records the transfer. Below is the full list for LRS, the right code for the most common remittances, and what to do if you picked the wrong one.
Table of contents
- What is an LRS purpose code?
- What are all the LRS purpose codes?
- Which purpose code should you use?
- What happens if you use the wrong purpose code?
What is an LRS purpose code?
An LRS purpose code is a five-character code, starting with S, that classifies an outward remittance by its purpose. Banks report every foreign exchange transaction to the RBI with one of these codes.
In its circular of 11 February 2016, the RBI fixed which codes banks may use for LRS remittances, so that similar transfers are always reported under the same code. The same circular revised Form A2, the form you sign for each remittance, which is where the code is recorded.
You usually pick the purpose on your bank's form or app, and the bank maps it to the code. It is still worth checking the code on your Form A2, because it decides how the transfer is treated.
What are all the LRS purpose codes?
These are the codes the RBI allows for LRS remittances, as listed in its 2016 circular. The TCS column shows the rate above ₹10 lakh a year under section 394.
| LRS purpose | Purpose codes | TCS above ₹10 lakh |
|---|---|---|
| Opening a foreign currency account abroad with a bank | S0023 | 20% |
| Buying property abroad | S0005 | 20% |
| Investing in shares, debt, a joint venture or wholly owned subsidiary, ESOPs or IDRs | S0001, S0002, S0003, S0004, S0021, S0022 | 20% |
| Gifts | S1302 | 20% |
| Donations to religious and charitable institutions abroad | S1303 | 20% |
| Business travel | S0301 | 20% |
| Pilgrimage | S0303 | 20% |
| Travel for medical treatment | S0304 | 2% |
| Travel for education, including fees and hostel expenses | S0305 | 2% (nil if funded by an education loan) |
| Personal travel | S0306 | 20% |
| Maintenance of close relatives | S1301 | 20% |
| Medical treatment | S1108 | 2% |
| Studies abroad | S1107 | 2% (nil if funded by an education loan) |
| Emigration | S1307 | 20% |
| Others, such as a loan to an NRI close relative or health insurance | S0011, S0603 | 20% |
For most investors, the code that matters is S0001. It covers shares, including stocks and ETFs bought through a global brokerage account, and S0002 covers debt such as bonds. The LRS for investments guide explains which investment needs which code.
Note: Tour packages bought from a tour operator are different. The operator collects a flat 2% TCS on the price, with no ₹10 lakh threshold. See the TCS on LRS guide for how each rate works.
Which purpose code should you use?
Pick the code for what the money will actually be used for, not for who receives it. These are the codes for the remittances people ask about most:
| What you are doing | Purpose code | Documents banks usually ask for |
|---|---|---|
| Funding a global brokerage account to buy US or other foreign stocks and ETFs | S0001 | Form A2, PAN, broker account details |
| Buying foreign bonds | S0002 | Form A2, PAN, account details |
| Moving money to your own bank account abroad | S0023 | Form A2, PAN, foreign account details |
| Paying university fees, hostel charges and a student's living costs | S0305 | Admission letter, fee schedule, student's passport and visa |
| Paying a hospital abroad for treatment | S0304 | Hospital estimate or invoice, admission letter |
| Sending regular support to a child, spouse, parent or sibling abroad | S1301 | Proof of relationship, self-declaration |
| Giving a one-off gift to anyone abroad | S1302 | Gift declaration |
| Paying for a flat or house abroad | S0005 | Sale and purchase agreement |
| Flights, hotels and forex for a holiday | S0306 | Ticket or booking details |
Example. Suppose your daughter is studying in Boston. Her fees and hostel charges, paid against the admission letter and fee schedule, go under S0305 at the 2% education rate. Her rent and living costs can go under S0305 too, if your bank has the university's cost estimate. Money you send her with no university documents at all goes under S1301 as maintenance, which is a 20% purpose.
What happens if you use the wrong purpose code?
A wrong code usually changes two things: the TCS you pay, and how the transfer sits in the RBI's records.
- TCS: if tuition goes out under maintenance, the bank collects 20% above ₹10 lakh instead of 2%. The extra is still credited to your PAN, so you get it back when you file your return, but it is locked up until then.
- Your FEMA records: investments and property are capital account transactions, which the RBI tracks as assets you hold abroad. If money for a flat abroad goes out under a gift or investment code, the purchase does not match the remittance on record, which can cause questions when you later sell or bring the money back.
If you notice the mistake, tell your bank as soon as you can, with the documents for the right purpose, and ask whether it can correct how the transfer was reported. For future remittances, check the code on your Form A2 before you sign it.
Note: Sending money under one code and using it for another purpose abroad is not a coding slip. Moving funds sent as a gift into a property purchase, for example, is a contravention of FEMA.
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