P0017 Purpose Code (with Examples)

According to the RBI, it is for transactions related to “Sale of intangible assets like patents, copyrights, trade marks, etc. by Indian companies.”

This code is used for money received by Indian companies when they sell non-physical assets like patents, copyrights, trademarks, designs, or technical know-how to foreign buyers. These are valuable rights or intellectual property that a company creates, such as a logo, a song, a software license, or a patented invention. When an Indian company transfers or licenses these rights to someone outside India, and earns money (like royalty or a lump sum).

For Example, an Indian IT company develops a unique software product and holds the copyright for it. A US-based tech firm wants to use this software and purchases the copyright from the Indian company for $500,000. Since this is the sale of an intangible asset (copyright) to a foreign entity, the Indian company reports this transaction under P0017 with the RBI.

Entities Allowed By The RBI to Purchase Intangible Indian Assets

Under P0017, the foreign buyers to whom an Indian company can sell intangible assets (like patents, copyrights, trademarks, etc.) can include:

• Foreign Companies – Under purpose code P0017, foreign companies, including multinational corporations or smaller foreign businesses, may remit funds to India to purchase or acquire Indian intangible assets such as intellectual property rights. For example, a foreign tech firm may buy software licenses, patents, trademarks, or design rights developed by an Indian company.

• Foreign Individuals – Foreign individuals, such as independent creators, artists, or inventors based outside India, may purchase or license copyrighted works, designs, or other intellectual property from Indian companies. For example, a foreign artist may acquire the rights to use an Indian graphic design or music track for commercial use abroad.

• Foreign Governments or Institutions – Under purpose code P0017, a government body or a public research institution abroad may purchase or license patented technology, proprietary software, or other intellectual property from an Indian company for public use, national infrastructure projects, or research and development.

• Overseas Branches or Subsidiaries – If an Indian company sells or transfers intangible assets such as patents, trademarks, software, or copyrights to its overseas branch or subsidiary, the transaction can still be reported under this code. Even though the transfer is within the same group or company structure, it is considered a valid cross-border transaction involving the sale of intangible assets.

• International Agencies or NGOs – Indian firms can receive payments from international agencies or NGOs for the sale of non-physical assets such as research reports, proprietary software tools, data sets, or digital content. These organisations, which operate globally in sectors like development, education, or healthcare, often purchase such intangible products or services for their internal use or projects.

Rules to be Followed While Reporting P0017

When an Indian company sells intangible assets under P0017, there are certain rules and regulations that must be followed, mainly governed by the RBI (Foreign Exchange Management Act – FEMA) and tax laws. Here’s a simple breakdown:

• Sale and Purchase Must Be Lawful – The investment or payment received by the Indian entity must be lawful and compliant with the rules set by the Foreign Exchange Management Act (FEMA). This means that any sale of intangible assets like patents, copyrights, digital products, or proprietary tools to a foreign buyer must follow FEMA guidelines, ensuring the transaction is legitimate, transparent, and properly reported.

• Use of Proper Banking Channels – Banks must transfer funds through proper channels. The remittance must go through an Authorised Dealer (AD) bank in India to ensure transparency and compliance with RBI and FEMA rules.

• Buyer Must Be Non-Resident – This means the sale must be made to a party located outside India who qualifies as a non-resident under FEMA regulations. The transaction should involve the transfer of ownership or rights in the intangible asset from an Indian entity or resident to a foreign party.

• Valuation of the Intangible Asset – The value must be fairly assessed to ensure compliance with FEMA and tax regulations. In high-value transactions or related-party deals, a formal valuation report from a certified valuer or chartered accountant may be required by the bank or regulatory authorities to justify the sale price. This helps ensure the transaction reflects an arm’s length value and avoids underreporting or overstatement of income.

• Reporting Compliance and Time Limit – When an Indian company receives payment from a foreign buyer, it must promptly report the transaction to its Authorised Dealer (AD) Bank, which is usually the bank handling the foreign exchange. Ideally, the reporting should be done at the time of receiving the remittance or within 30 days of the transaction. The AD bank is then responsible for reporting the details to the Reserve Bank of India (RBI) using electronic systems like EDPMS (Export Data Processing and Monitoring System) or XBRL, depending on the nature of the transaction. This ensures compliance with FEMA and RBI regulations for export-related inflows.

• Agreements and Documentation – When an Indian company sells intellectual property (IP) or technology-based services to a foreign buyer, a formal agreement must be signed between both parties. This agreement should clearly outline the terms of sale, the specific IP rights being transferred, payment conditions, and any licensing or usage clauses. These records are important for regulatory compliance, FEMA requirements, and in case of audits by tax or export authorities.

• Adherence to Sector-Specific Rules – If the IP being transferred relates to sensitive sectors such as defence, telecommunications, or atomic energy, the transaction may require prior approval from the respective regulatory bodies or ministries. This is because these sectors are strategically important and may have national security implications. Even if the outward remittance is otherwise permissible under FEMA rules, the Indian seller must ensure compliance with any additional restrictions or clearance requirements applicable to the specific sector involved before proceeding with the transaction.

• No Violation of IPR or FEMA – This means the export should not involve unauthorised use or sale of patented, copyrighted, or trademarked material that violates Indian or international IPR laws. The transaction must be genuine and transparent, not used as a method to route funds, evade taxes, or engage in money laundering. Any violation of these laws could lead to penalties, rejection of export remittance, or investigation by enforcement authorities.

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

Those involved in such transactions must file several forms before starting the process. 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?

When an Indian company sells intangible assets to a foreign buyer under P0017, the income earned is taxable in India as per the Income Tax Act, 1961. Here’s how it works in simple terms:

• No Profit, No Tax – If no profit is earned from the sale of intangible assets under P0017, meaning the Indian company either breaks even or incurs a loss, then no income tax is payable in India, as tax is levied only on net income or profit, not on the total amount received. However, the company must still report the transaction to its authorised dealer (AD) bank and file the details in its income tax return.

• Tax Treatment and Loss Adjustment for Sale of Intangible Assets Under P0017 – When an Indian company sells intangible assets like patents, copyrights, or software under P0017, the tax treatment depends on how the asset was held. If the asset was created or used as part of the company’s regular business operations (like developing software for clients), the income is considered business income and taxed accordingly. In case of a business loss, it can be set off against other business income in the same year or carried forward for up to 8 years for future set-off. However, if the intangible asset was held as an investment, for example, a patent or design retained for long-term strategic sale, the income from its sale is treated as capital gains. The tax rate will depend on whether the gain is short-term or long-term, based on the holding period. A short-term capital loss can be adjusted against both short- and long-term capital gains, while a long-term capital loss can be adjusted only against long-term gains. Capital losses, like business losses, can also be carried forward for 8 years, provided the company files its income tax return within the due date.

• Managing Double Taxation and Claiming Foreign Tax Credit (FTC) – When an Indian company sells intangible assets under P0017 and the foreign buyer deducts tax at source, it may lead to double taxation. To avoid this, India’s Double Taxation Avoidance Agreements (DTAAs) with over 90 countries, including the US, UK, Germany, and Japan, allow Indian exporters to either claim an FTC or benefit from a reduced withholding tax rate. These provisions ensure the Indian company is not taxed twice on the same income and remains compliant with international tax rules. To learn more about the countries with which India has DTAA, click here.

• Reducing Tax through the Tax Residency Certificate (TRC) – The TRC is essential for claiming tax relief under DTAA. If the foreign buyer deducts tax at source, the Indian company may be eligible for a reduced tax rate or an FTC, but only if it proves it is a resident of India for tax purposes. The TRC, issued by the Indian Income Tax Department, serves as official proof of this residency. Without a TRC, the Indian exporter may lose the benefit of reduced tax rates under DTAA or be unable to claim FTC, resulting in a higher tax burden and potential double taxation on the same income.

• Transfer Pricing Rules (for related parties) – If an Indian company sells goods or services to a related foreign party (such as a foreign subsidiary, parent company, or group entity), the transaction must comply with transfer pricing regulations. This means that the company must use this fair market price to make sure the company is not lowering or increasing the price just to save tax. To prove this, the company may need to prepare a Transfer Pricing Report and file Form 3CEB with tax authorities.

• Filing and Disclosure – Under P0017, when an Indian company sells intangible assets to a foreign buyer, the income earned from the sale must be properly disclosed in the company’s Income Tax Return (ITR). If the remittance related to the sale (such as receipt of sale proceeds) exceeds the prescribed threshold, the company must file Form 15CA and, in some cases, Form 15CB (a certificate from a Chartered Accountant) before receiving the funds.

P0017 Purpose Code Use Case Examples:

Here are some real-life examples where the RBI’s Purpose Code P0017 would be used to report transactions in India-

• Sale of Software Copyright to a US Company:-
  An Indian IT company develops a custom AI-based analytics software and holds the copyright. A U.S. healthcare firm wants exclusive rights to use this software in North America and agrees to buy the copyright for $1 million. The Indian company transfers ownership and receives the payment in foreign currency. The transaction is reported under P0017 since it involves the sale of an intangible asset (copyright) to a foreign buyer.

• Licensing of Trademark to a UK Brand:-
  An Indian fashion company owns a popular brand name and trademark in India. A UK-based retail chain enters into a licensing agreement to use this trademark in the European market and agrees to pay an annual royalty of €200,000. Since the Indian company is earning income from the licensing of a trademark to a foreign entity, this recurring royalty income is classified and reported under P0017.

• Transfer of Technical Know-How to a Middle East Firm:-
  An Indian engineering firm has developed unique manufacturing techniques for eco-friendly construction materials. A company based in the UAE purchases the technical know-how and training modules for setting up a similar facility. The Indian firm receives a lump-sum fee in USD. This transfer of intangible knowledge and related rights to a non-resident is treated as a sale of intangible assets and is reported under P0017.

• Assignment of Music Rights to a Streaming Platform:-
  An Indian music production company owns the copyright to a catalogue of original soundtracks. A Singapore-based music streaming platform acquires global rights to distribute this content for a fixed price. The transaction, involving a sale of copyright to a foreign platform, is categorised under P0017, and the inflow is reported through the Indian company’s AD bank.

• Sale of Patent to a European Pharma Company:-
  An Indian biotech startup holds a registered patent for a novel drug delivery system. A German pharmaceutical company finds the innovation promising and purchases full ownership of the patent for €500,000. The Indian startup receives the payment in foreign currency and reports this transaction under P0017, as it is a direct sale of an intellectual property right to a foreign party.

• Sale of Animation Film Rights to a Japanese Studio:-
  An Indian animation studio creates an original animated film and owns the full copyright. A well-known Japanese entertainment company wants to distribute and dub the film for the East Asian market and purchases the international distribution rights for $300,000. This cross-border sale of copyright qualifies as a transaction under P0017, as it involves the sale of an intangible creative asset.

• Transfer of Agricultural Genetic Data to a US Research Lab:-
  An Indian agri-tech firm develops a proprietary database of high-yield crop genetics, including AI-driven soil and climate matching algorithms. A U.S.-based agricultural research lab licenses this data set and the underlying algorithm for exclusive research use, paying a one-time license fee. Since this involves the transfer of proprietary intellectual content (data and algorithm rights) to a foreign party, the transaction is reported under P0017.

• Sale of Industrial Design Rights to a European Furniture Brand:-
  An Indian design company creates a unique ergonomic chair design and registers it under the Designs Act. A furniture brand based in Sweden offers to buy the design rights for manufacturing and marketing the chair in the EU. Once the rights are transferred and payment is received in euros, the Indian company reports this as a sale of an intangible asset under P0017, as it pertains to industrial design rights sold abroad.

• Transfer of Defence Design Technology to an Allied Country:-
  An Indian aerospace and defence company develops proprietary drone navigation software and flight control algorithms used in military-grade unmanned aerial vehicles (UAVs). A government-backed defence agency in a friendly country (e.g., France or Israel) expresses interest in using this software for integration into their surveillance systems. After obtaining the required approvals from the Indian Ministry of Defence and complying with export control norms, the Indian company licenses the software and related IP to the foreign agency for a one-time fee of $2 million. Since this involves the transfer of technical know-how and copyrighted software related to the defence sector to a foreign non-resident entity, the Indian company reports this foreign exchange earning under Purpose Code P0017.

These examples show that P0017 covers a wide range of intellectual property types, not just software or patents—everything from media rights to data and design innovations can fall under it if sold to a foreign entity.

Rohan Nautiyal

A content writer, editor, and proofreader with over three years of experience in producing well-researched, user-friendly content that simplifies complex information for readers, helping brands to enhance their online presence.