Purpose Codes

P0014 Purpose Code (with Examples)

P0014 Purpose Code

According to the RBI, it is for transactions related to “Receipts o/a Non-Resident deposits (FCNRB/NRERA etc.) ADs should report these even if funds are not “swapped” into Rupees.”

P0014 refers to receipts on account of Non-Resident deposits, such as Foreign Currency Non-Resident (Bank), Non-Resident External, or Non-Resident Ordinary accounts. When an NRI sends money to India to be deposited in these special bank accounts, the Indian bank (Authorised Dealer or AD) must report this transaction to the Reserve Bank of India under purpose code P0014. This reporting is mandatory even if the foreign currency is not converted into Indian Rupees (i.e., not “swapped”). The key point is that all such inward remittances meant for NRI deposits, whether maintained in foreign currency or rupees, must be reported using this code.

For Example, a Non-Resident Indian (NRI) transfers foreign currency from their overseas bank account to an Indian bank to deposit the funds into their NRE or FCNR(B) account. The funds are credited directly into the NRI deposit account and are not used immediately for any other purpose, like investment or payment. The Indian bank receiving the funds is required to report this inward remittance to the Reserve Bank of India (RBI) using Purpose Code P0014.

Types of Accounts NRIs Can Open in An Indian AD Bank

Under RBI Purpose Code P0014, an NRI can make the following types of deposits in Indian banks:

  • NRE Account (Non-Resident External Rupee Account) – An NRE Account is a bank account in India where an NRI can deposit income earned abroad. The account is maintained in Indian Rupees, and the funds are transferred from outside India. Both the principal amount and the interest earned are fully repatriable, meaning the NRI can transfer them back abroad without restriction. The interest earned on the NRE account is tax-free in India. This account is commonly used by Non-Resident Indians (NRIs) for savings, fixed deposits, investments, and making local payments within India.
  • FCNR(B) Account (Foreign Currency Non-Resident Bank Account) – It is a type of bank account that NRIs can open in India using foreign income. It is held in foreign currencies like USD, GBP, or EUR, not in Indian rupees. The money in this account can be kept in term deposits ranging from 1 to 5 years, and it helps protect the NRI from exchange rate changes. The interest earned is tax-free in India, and both the principal and interest are fully repatriable, meaning they can be sent back abroad anytime without restrictions.
  • NRO Account (Non-Resident Ordinary Rupee Account) – It is a bank account in Indian Rupees used by NRIs to manage income earned in India, such as rent, pension, dividends, or money received from abroad. It can be used for making payments, handling expenses, or placing funds in fixed deposits within India. Repatriation of funds from this account is allowed up to USD 1 million per financial year, subject to applicable taxes and documentation. Interest earned on the NRO account is taxable in India.
  • Resident Foreign Currency (RFC) Account (For returning NRIs) – It is a special bank account in foreign currency (like USD, EUR, etc.) meant for NRIs who have returned to India and become residents again. It lets them keep their foreign earnings, such as income from abroad, overseas savings, or funds repatriated, without converting them into Indian Rupees (INR). This money in the RFC account can be freely repatriated abroad anytime, making it useful for managing future foreign expenses or investments while living in India.

Reasons for which An NRI Can Deposit Money in The Indian AD Bank

Here’s a breakdown of common reasons/purposes for which an NRI can deposit money in an Indian bank:

  • Savings and Personal Use – Non-Residents often send money to India for savings and personal use. This could be to safely keep their foreign earnings in Indian bank accounts, maintain a banking relationship with their home country, or plan for future needs like retirement or moving back to India. Keeping money in India can also help them manage expenses for their family or investments in the future.
  • Business or Professional Needs – Under P0014, a non-resident can send money to an Indian resident as a loan for business or professional needs. This means the Indian person may use the loan for running their own business, like a shop, consultancy, or any self-employed activity in India. In some cases, the money can also be used to invest in a partnership firm or sole proprietorship, but that may require prior permission from the RBI.
  • Rental or Other Income Management – NRIs often earn money in India from sources like house rent, pensions, dividends from shares, interest on bank deposits, or even from agriculture or royalties. This income is usually deposited into an NRO (Non-Resident Ordinary) account, which is meant for managing income earned in India.

Types of Investments an NRI Can Make After Sending Funds to An Indian Bank

Investments are not done directly; however, once the funds are deposited into these accounts, they can be used for a variety of permitted investments in India, depending on the account type. Here are the types of investments an NRI can indirectly make using funds remitted under P0014:

  • Equity Shares on Repatriation Basis – An NRI can invest in equity shares of Indian companies on a repatriation basis using funds from their NRE or FCNR(B) account under the Portfolio Investment Scheme (PIS). This allows the NRI to buy shares through a registered broker on the stock exchange, and both the investment and any returns, such as dividends or capital gains, are fully repatriable.
  • Mutual Funds – NRIs can invest in mutual fund schemes offered by SEBI-registered Asset Management Companies (AMCs) using either repatriable or non-repatriable funds. Investments made through NRE or FCNR accounts are considered repatriable, meaning the principal and returns can be taken back abroad. On the other hand, investments made through NRO accounts are non-repatriable beyond a certain limit, meaning the funds generally have to remain in India. This flexibility allows NRIs to choose the investment route that best suits their financial and repatriation goals.
  • Bank Fixed Deposits – NRI bank fixed deposits come in different types with varying tax and repatriation rules. NRE fixed deposits are fully repatriable, and the interest earned is tax-free in India, making them a popular choice for NRIs. FCNR(B) fixed deposits are held in foreign currencies, are also fully repatriable, and the interest is tax-free as well. In contrast, NRO fixed deposits are meant for income earned in India, and while the principal can be repatriated up to USD 1 million per financial year, the interest is taxable in India.
  • Government Bonds and Treasury Bills – NRIs are allowed to invest in Government Bonds and Treasury Bills in India through designated channels such as the RBI Retail Direct portal. These investments can be made using NRE or NRO accounts, depending on the repatriability preference.
  • Real Estate (Except Agricultural Land) – An NRI can use funds from their NRO account to purchase residential or commercial property in India, but not agricultural land, plantation property, or farmhouses. These transactions are allowed under FEMA guidelines. However, funds from an NRE account cannot be used directly for real estate purchases. If an NRI wishes to use NRE funds, they must first transfer the amount to their NRO account, pay applicable taxes, and then use it for the purchase.
  • Initial Public Offerings (IPOs) – NRIs can invest in Initial Public Offerings (IPOs) in India using funds held in their NRE or FCNR accounts under the repatriable route. This means the investment and any returns, such as dividends or capital gains, can be freely taken back abroad. The application for the IPO must be made in Indian rupees, and the funds should be routed through the NRI’s NRE or FCNR account to qualify as repatriable.
  • National Pension System (NPS) – NRIs are eligible to invest in the National Pension System (NPS) Tier I account, which is a government-regulated, long-term retirement savings scheme. As per the guidelines issued by the Pension Fund Regulatory and Development Authority (PFRDA), NRIs can contribute to NPS using funds from their NRO or NRE accounts. While the investment enjoys similar tax benefits and rules applicable to resident subscribers, NRIs must ensure that contributions are made in Indian Rupees and routed through permissible banking channels. Upon maturity, the withdrawal proceeds are also subject to NPS exit and taxation norms applicable at the time.
  • Illegal Investments – Under P0014, certain transactions are not allowed for NRIs. These include direct foreign direct investment (FDI), which must be reported under the purpose code P0002 instead. NRIs also cannot use P0014 to route commercial loans or provide business capital. Also, investments made through corporate entities, trusts, or similar structures are not permitted under this code.

Important Rules for Depositing Money in India

  • Investment Must Be Lawful – This means that the investor must follow the guidelines outlined under the Foreign Exchange Management Act (FEMA), as laid down by the RBI.
  • Use of Proper Banking Channels – NRIs must transfer funds through proper banking channels. The remittance must go through an Authorised Dealer (AD) bank in India to ensure transparency and compliance with RBI and FEMA rules. Failure to adhere to these rules may result in the seizure of the FOREX bank account.
  • Applicable for Inward Remittances Only – This code is used only when money is being sent from outside India to be deposited into an NRI account. It means the foreign currency being sent is meant to be added into the NRI’s bank account in India, and not for any other purpose, like giving a gift.
  • No End-Use Restrictions – There are generally no restrictions on how the funds transferred to an NRE (Non-Resident External) account can be used. After transferring money from an NRO (Non-Resident Ordinary) account to an NRE account, following the payment of applicable taxes and proper documentation, the NRI (Non-Resident Indian) can freely repatriate the funds abroad, invest, or save them. The bank reports this transaction under the purpose code P0014. The RBI imposes no restrictions on the use of funds after the transfer, provided that the initial source in the NRO account was legitimate and tax-paid.
  • Reporting Compliance and Time Limit – The transactions under P0014 must be reported by Authorised Dealer (AD) banks to the Reserve Bank of India through the FETERS system. The reporting is done every month, and banks are required to submit the data within 5 calendar days from the end of the month in which the transaction occurred. While this reporting responsibility lies with the bank, NRIS need to specify the purpose of remittance at the time of transfer to ensure the transaction is correctly coded and reported on time.
  • Limit/Cap – For NRE and FCNR(B) accounts, funds must come from abroad in freely convertible foreign currency, and there is no restriction on the deposit amount or repatriation. For NRO accounts, deposits can come from both foreign income and income earned in India (like rent or dividends), and while there is no limit on how much can be deposited, repatriation of funds from this account is restricted to USD 1 million per financial year.
  • Repatriation Convenience – NRIs can use NRE or FCNR(B) accounts to keep foreign income in India in a fully repatriable form, meaning both the principal and interest can be sent back abroad anytime. These accounts are tax-free in India (in most cases) and offer flexibility with easy fund transfer.
  • Restricted Activities – Depositing money in India without following the proper rules can lead to serious trouble. For example, if someone deposits income earned from illegal activities, it is a violation of Indian laws. Similarly, if an NRI sends money to a resident Indian account without declaring their NRI status or hides their identity, it can be flagged as suspicious. Also, mixing personal and business funds without clear records or reporting can raise red flags with tax and financial authorities, as it becomes hard to trace the source and purpose of the money.
  • Obtaining a Tax Residency Certificate (TRC) – A Tax Residency Certificate (TRC) is an official document issued by the tax authority of a country confirming that a person or entity is a tax resident of that country for a specific period. Non-residents need to claim benefits under the Double Taxation Avoidance Agreement (DTAA) when they earn income from India. An NRI can submit a TRC issued by their home country’s tax authority to claim lower TDS or exemption on that income. This helps avoid paying tax twice, once in India and again abroad.
  • Income Routing Prohibition – Routing funds through tax-favourable jurisdictions is not relevant or permitted under P0014, as this code is strictly for individual NRI deposits into personal NRI accounts. All transfers must come directly from the NRI’s overseas bank account, and transparency of source is critical for compliance with the RBI and tax laws.

How to Report the Purpose of The Transaction to The RBI by Giving the Purpose Code:

A non-resident must file several forms before starting the process of depositing funds in an Indian AD Bank. Usually, the transactions are via bank transfers, and your bank will ask you to provide a purpose code by giving a form to fill out. If you have any doubts or questions, feel free to reach out to us via email – support@bankerpanda.com, and we will try our best to help you out.

Tax or No Tax?

The Reserve Bank of India (RBI) does not levy tax on the amount being sent into an Indian AD Bank by an NRI. However, in certain cases, it can, there, the tax treatment depends on the type of account the funds are deposited into:

  • NRE Account – The money deposited in this account is not taxed in India, and even the interest earned is completely tax-free. An NRI can freely send the money back abroad (repatriate) without any restrictions. However, to open and maintain this account, the person must be officially classified as an NRI under the Indian Income Tax Act.
  • FCNR(B) Account – It is mainly used for fixed deposits with a term of 1 to 5 years. The biggest advantage is that both the money and interest earned are fully repatriable (can be sent back abroad), and the interest is completely tax-free in India. The money in the bank does not change its value based on the value of the rupee, as it is in foreign currency.
  • NRO Account – Interest earned by an NRI on NRO savings or fixed deposits is fully taxable in India. It is taxed at a flat rate of 30% plus applicable surcharge and cess. The bank automatically deducts TDS (Tax Deducted at Source) before crediting the interest to the NRI’s account, so the amount received is after tax deduction.

Let us have a look at the taxation laws for NRO Accounts

  • Tax Deducted at Source (TDS) – The Reserve Bank of India (RBI) does not impose TDS on income deposited or repatriated through NRE or FCNR(B) accounts. However, TDS may apply to Non-Resident Ordinary (NRO) accounts. While there is no TDS on the amount an NRI deposits into NRO accounts, the interest earned on the account balance is taxable. Banks typically deduct TDS at a rate of 30% plus applicable surcharges and cess, resulting in an effective tax rate of around 31.2%. This tax applies regardless of the amount, unless the NRI claims relief under a Double Taxation Avoidance Agreement (DTAA).
  • Double Taxation Avoidance Agreement (DTAA)– If the non-resident is from a country that has a Double Taxation Avoidance Agreement (DTAA) with India, they can benefit from a lower TDS rate, often 10% or 15% instead of the standard 30%. To claim this, they must submit a Tax Residency Certificate (TRC), Form 10F, and a self-declaration. They may also be able to claim credit or a refund for the tax paid in India when filing their tax return in their home country, helping to avoid paying tax on the same income twice. India has DTAA with 90+ countries, including the US, UK, Canada, Japan, China, Germany, and Australia. To learn more about the countries with which India has DTAA, click here.
  • Requesting Lower TDS Limit (Form 13) – If the NRI expects their actual tax liability in India to be lower, they can apply for a Lower or Nil TDS Certificate by submitting Form 13 through the Income Tax Department’s e-filing portal. Once approved, this certificate allows the bank to deduct TDS at a reduced rate or not at all, ensuring the NRI isn’t overtaxed upfront and avoiding the need to later claim a refund.
  • Foreign Tax Credit (FTC) – FTC is generally not applicable under RBI Purpose Code P0014, because this code relates only to depositing foreign currency into NRI accounts like NRE, NRO, or FCNR(B). Since this is merely a transfer of funds and not an instance of income being taxed both in India and abroad, no double taxation arises at this stage, and hence, FTC does not apply. However, if the money deposited into an NRO account represents foreign income that is taxed abroad and in India (e.g., interest or rental income), FTC may be claimed on the income.
  • Use of Forms 15CA/CB – Form 15CB is a certificate issued by a Chartered Accountant (CA) confirming that the funds being repatriated have been taxed properly or are exempt. Based on this, the NRI then files Form 15CA online on the Income Tax Portal, declaring the remittance details. 15CA/CB becomes necessary only at the time of outward remittance from the NRO account, especially if the amount exceeds Rs. 5 lakh in a financial year.

P0014 Purpose Code Use Case Examples:

Here are some real-life examples where the RBI’s Purpose Code P0014 would be used to report transactions in India:-

  • FCNR(B) Term Deposit from the US:-
    An NRI living in New York remits USD 50,000 from his U.S. bank account to open a 1-year FCNR(B) deposit in USD with his bank in India. Since the deposit is being made in foreign currency into a non-resident account, the Indian bank reports this inward remittance under the purpose code P0014. This code is specifically used when funds are credited to non-resident deposit accounts like FCNR(B), NRE, or NRERA, regardless of whether the funds are converted into rupees or not.
  • Monthly Savings into NRE Account:-
    An NRI working in Dubai sends AED 5,000 every month to her NRE savings account in India to support her parents and make investments. Each time the funds are remitted from abroad, her Indian bank classifies the inward transfer under purpose code P0014, as the money is being deposited into an NRE account by a non-resident. This classification helps the bank report the transaction correctly to the Reserve Bank of India under the non-resident deposit category.
  • Investment Transfer into NRE Fixed Deposit:-
    An NRI residing in the UK transfers GBP 20,000 from his UK bank account into his NRE fixed deposit in India for a tenure of 3 years. Since the money is being transferred from abroad into an NRE account, which is designated for non-resident deposits, the Indian bank reports this transaction under purpose code P0014.
  • Foreign Currency Brought to India and Deposited in FCNR(B):-
    An NRI returns to India from Singapore with SGD 10,000 in cash and deposits the amount directly into the FCNR(B) account without converting it into Indian Rupees. Since the money is being deposited into a non-resident foreign currency account, the Indian bank handling the transaction must report it under purpose code P0014. Even though the funds weren’t swapped into rupees, the transaction qualifies as a foreign currency receipt on account of a non-resident deposit and must be reported accordingly to the RBI.
  • Transfer from Overseas Account to Open NRE RD (Recurring Deposit):-
    An NRI based in Canada opens a recurring deposit (RD) in their NRE account in India and transfers CAD 1,000 every month from their overseas bank account. Since the funds are being regularly deposited into an NRE account, each monthly transfer is treated as a non-resident deposit and is reported under purpose code P0014 by the bank. This reflects recurring inward remittances from an NRI for maintaining NRE deposits.
  • Reinvestment of Maturing FCNR Deposit:-
    When an FCNR(B) deposit held by an NRI matures and the funds are reinvested into a new term deposit, the transaction is considered a fresh deposit, even though it is an internal transfer. In such cases, the reinvested amount may still be reported under purpose code P0014, as it continues to represent a receipt on account of a non-resident deposit in India.
  • Proceeds from Sale of Overseas Property Credited to NRE:-
    An NRI sells a property in Australia and remits a portion of the sale proceeds, say AUD 40,000, to their NRE account in India. Since the funds originate from a foreign source and are being deposited into a non-resident external (NRE) account, this transaction is reported under purpose code P0014. It qualifies as a foreign deposit made by a non-resident, and hence is treated as a receipt on account of non-resident deposits.
  • Overseas Gift from Another NRI:-
    An NRI receives a gift of USD 10,000 from his brother, who is also an NRI residing in Canada. He deposits this gift into his own NRE account in India. Since the money is from a foreign source and is being credited to a non-resident account, it falls under P0014.
  • Insurance Maturity Proceeds from Abroad:-
    An NRI receives maturity proceeds from a life insurance policy issued by a U.K.-based insurance company and transfers the funds to their NRE account in India. Since the money originates from a foreign source and is being credited to a non-resident deposit account, the Indian bank reports the inward remittance under purpose code P0014.

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