According to the RBI, it is for transactions related to “Realisation of export bills (in respect of goods) sent on collection (full invoice value).”
This code is used when an Indian exporter sends goods to a foreign buyer and waits to get paid through the buyer’s bank. Instead of getting the money in advance or asking their own bank for early payment, the exporter sends the shipping documents (like the invoice and transport papers) to the buyer’s bank. The buyer gets these documents only after making the payment. Once the exporter in India receives the full payment in their bank account, it is reported under P0102.
For Example, an Indian company exports machinery worth $50,000 to a German buyer and sends the shipping and payment documents to the buyer’s bank under a “Documents Against Payment” (D/P) arrangement. The buyer pays their bank, which then transfers the funds to the Indian company’s bank. Once the full amount is received, the Indian bank reports it under P0102.
Types of Entities Involved in Using Code P0102 for Transactions
The following entities are typically involved in transactions reported under P0102:
- Exporter (Indian Seller) – The exporter refers to the Indian company or individual who sells goods to a buyer outside India. This exporter starts the process by shipping the goods overseas and preparing all necessary export documents like the invoice, packing list, and shipping bill. They are the ones who receive payment from the foreign buyer, and the money received is reported under this code when it comes into India through an authorised bank.
- Importer (Foreign Buyer) – The importer refers to a person or company located outside India who has purchased goods from an Indian exporter. This foreign buyer is responsible for making the payment to the Indian seller once they receive the required shipping documents (like the bill of lading or invoice). These documents act as proof that the goods have been shipped, and the payment is typically made through a bank under a letter of credit, collection arrangement, or direct transfer.
- Indian Authorised Dealer (AD) Bank – Once the foreign buyer’s bank releases the payment, the AD bank in India receives the money on behalf of the exporter. It also handles the export documents and ensures that everything is in order. After receiving the payment, the bank reports the transaction to the Reserve Bank of India (RBI) through a system called the Export Data Processing and Monitoring System (EDPMS). This helps the RBI keep track of export earnings and compliance.
- Foreign Bank (Importer’s Bank) – It is the bank located in the buyer’s country that handles export documents sent by the Indian exporter’s bank. These documents usually include the bill of lading, invoice, and shipping details. The foreign bank keeps these documents safely and only hands them over to the buyer (importer) when the full payment for the goods has been made. This process helps ensure that the Indian exporter gets paid before the buyer takes control of the goods.
Methods for Collecting Full Payment by the Indian Exporter
These methods are not advance payments or payments against discounted bills but are made after shipment and based on the collection of documents. The main types of payments under P0102 include:
- Documents Against Payment (D/P) – Under this method, the exporter sends the shipping and export documents to the buyer’s bank, with clear instructions that the documents should be handed over to the buyer only after full payment is made. This is commonly called a “sight collection” method. The buyer’s bank collects the payment from the buyer first, and only then releases the documents needed to take delivery of the goods. This ensures that the exporter gets paid before the buyer can access the shipment.
- Documents Against Acceptance (D/A) – Herein, the exporter ships goods to a foreign buyer and sends the shipping documents through a bank. However, the documents are given to the buyer only after the buyer accepts a bill of exchange, promising to pay later on a fixed date. This means the exporter does not receive payment immediately but only after the buyer makes the payment on the agreed due date. It’s a form of credit sale where the buyer gets the goods first and pays later.
- Clean Collection – Clean Collection is used for collecting payments from overseas when only a financial document, like a bill of exchange or invoice, is sent to the buyer, without any shipping documents like a bill of lading. This method is usually used when there is already strong trust between the exporter and importer, or when the goods are already with the buyer (such as in ongoing business arrangements). Even though the shipping documents are not involved, the payment is still collected through the normal banking system. Clean collection is less common compared to regular documentary collection methods.
- Direct Collection via Bank – In this method, an exporter sends goods overseas and directly asks their bank to collect the payment from the buyer’s bank, without using a bill of exchange or taking a loan against the invoice. Even though there’s no formal bill or advance payment, this still counts as a “collection” method because the exporter waits to receive the payment after shipping the goods, and does not get the money upfront or through discounting. The bank acts as a channel to collect the payment on behalf of the exporter.
Rules for Transactions under P0102
Transactions under P0102 must follow several key rules and regulations to ensure compliance with Indian foreign exchange laws. Here are the main rules explained in simple terms:
- Export Must Be of Goods – P0102 is a purpose code used for reporting transactions related specifically to the export of physical goods from India. It applies when an Indian exporter sells and ships tangible products, like textiles, machinery, or food items, to a buyer in another country. This code is not used for exports of services, software, or intangible items such as consulting, IT development, or digital products.
- Documents Sent on Collection Basis – The exporter in India must send export documents like the invoice, bill of lading, and packing list through their bank, which then forwards them to the buyer’s bank abroad. This process is used when the exporter does not want to discount or negotiate the bill with the bank, but instead wants to collect the full payment directly from the foreign buyer. The exporter gets paid only when the buyer makes the payment, and the documents are released after that.
- Full Invoice Value Realised – The Indian exporter must receive the entire invoice amount in foreign currency before reporting the transaction under this code. This means the full payment for the goods or services exported should be credited first. Part payments, advance payments, or incomplete settlements are not allowed under this code. Transactions are reported using P0102 only when the full value stated in the export invoice is realised all at once.
- Payment Should Be Through the Banking Channel – Under P0102, the payment must come through proper banking channels. This means the money should be sent directly from the buyer’s foreign bank account to the Indian exporter’s bank account. Payments made in cash, through hawala, or any informal or non-banking methods are not allowed and will not be considered valid for reporting under this code.
- Approved Methods for Payment – Under P0102, the RBI has prescribed several methods for transferring money while using the mentioned purpose code. Some of the popular methods are – SWIFT (Society for Worldwide Interbank Financial Telecommunication), Nostro Accounts Electronic Transfers, Rupee Drawing Arrangement (RDA) – for certain countries, Asian Clearing Union (ACU) Mechanism, and International Payment Gateways (via Bank Integration).
- Reporting by Authorised Dealer (AD) Bank – The AD Bank is responsible for reporting the inward remittance received against an export in the EDPMS system of the RBI. The bank must ensure that the payment received from abroad is correctly linked to the corresponding shipping bill submitted by the exporter.
- Within the Prescribed Realisation Period – Indian exporters must receive payment for goods or services sold abroad within the timeframe specified by the Reserve Bank of India (RBI). As of July 2025, the prescribed timeline is 9 months from the date of shipment, or 15 months for status holders and approved overseas warehouses. In certain cases, this period may be extended if valid reasons are provided and approval is obtained from the bank or the RBI.
- No Advance, Discounted, or Purchased Bills – P0102 is only used when an Indian exporter sends goods abroad and waits for payment without taking any advance or getting the bill discounted, purchased, or negotiated by the bank. In this case, the bank simply collects the payment from the foreign buyer when it is due and credits it to the exporter’s account. This is called a collection-based settlement.
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 you 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?
Taxation under P0102 relates to the income an Indian exporter earns from the sale of goods or services abroad. Here’s how it works in simple terms:
- Income Tax Applicability – Under P0102, the money received is considered business income under the Income Tax Act, 1961, and is taxed like regular earnings from export activities. Exporters must report this income properly and pay tax on it. However, certain tax benefits may apply. For example, exporters located in Special Economic Zones (SEZs) can claim exemptions under Section 10AA. Small exporters may also opt for presumptive taxation under Section 44AD or 44ADA, which simplifies tax filing by assuming a fixed profit rate.
- GST (Goods and Services Tax) Treatment – Under P0102, exports are not taxed under GST and are called zero-rated supplies. Exporters have two options: they can either export goods without paying GST by using a Letter of Undertaking (LUT) and later claim a refund of the GST they paid on purchases (called Input Tax Credit), or they can pay GST on the export and then claim a refund of that amount.
- Export Incentives and Rebates – Under P0102, Indian exporters receive government benefits like RoDTEP (Remission of Duties and Taxes on Exported Products) for unrefunded taxes, and RoSCTL (Rebate of State and Central Taxes and Levies) mainly for textile and apparel exports. These incentives are processed through DGFT (Directorate General of Foreign Trade) and customs, and require full export realisation and proper compliance.
- Managing Double Taxation and Claiming Foreign Tax Credit (FTC) – The provisions mentioned under the FTC and DTAA can be applied in transactions reported under P0102 if the exporter is taxed in the foreign country on the export proceeds. Moreover, if India has a DTAA with the importing country, it helps avoid double taxation either through exemption or tax credit methods, and may also provide for lower withholding tax rates. India has DTAAs with 94 countries, including the US, UK, Canada, Japan, China, Germany, and Australia. Know more about the countries with which India has a DTAA here.
- Carry Forward and Loss Adjustment – If an exporter incurs a loss in connection with the export activity, such as operational losses, exchange losses, or damaged goods, the loss can be set off against other business income in the same year. If not fully adjusted, it can be carried forward for up to 8 assessment years and set off against future business profits. However, to avail this benefit, the exporter must file the income tax return within the prescribed due date and maintain proper records.
P0102 Purpose Code Use Case Examples:
Here are some real-life examples where the RBI’s Purpose Code P0102 would be used to report transactions in India-
- Export of Industrial Machinery on Collection Basis:-
An Indian manufacturer based in Ahmedabad exports a custom-designed packaging machine worth $95,000 to a food processing company in Brazil. Since the machine was built to the buyer’s specifications, the exporter did not want to risk early payment disputes. Instead of advance or discounted billing, the exporter sends the shipping and payment documents to the buyer’s bank in Brazil under Documents Against Payment (D/P) terms. The buyer makes the full payment after verifying the documents, and the funds are remitted through SWIFT to the exporter’s Indian bank account. The AD Bank records the inward remittance under P0102 as it was a full realisation on a collection basis.
- Garment Export to Europe Using D/A Terms:-
A textile exporter in Tiruppur ships a consignment of garments worth €50,000 to a buyer in France under Documents Against Acceptance (D/A) terms, where the buyer agrees to pay after 60 days. The documents are sent to the buyer’s bank, and upon the due date, the French buyer remits the full amount. Once the Indian exporter’s bank receives the funds, it reports the transaction under P0102 since the payment was received in full on a collection basis.
- Export of Chemicals with Post-Shipment Collection:-
An Indian chemical company exports industrial chemicals to a buyer in Malaysia and sends the export documents through its AD bank to the buyer’s bank for collection. The Malaysian buyer clears the invoice of $30,000 within 45 days of shipment, and the funds are credited to the exporter’s account. As the bill was neither discounted nor advanced against, the AD bank records this remittance under P0102.
- Automotive Parts Export via Clean Collection:-
An exporter of automobile parts based in Pune sends goods worth $20,000 to a long-standing buyer in the UAE. Since there is a high level of trust, the exporter sends only the bill of exchange (without shipping documents) directly to the buyer’s bank—a method known as clean collection. After the buyer makes full payment, the funds are received in India, and the AD bank reports the transaction under P0102.
- FMCG Product Shipment with Deferred Payment:-
A company in Punjab exports a bulk order of agricultural tractors to a government-backed farming initiative in Nigeria, under a Documents Against Acceptance (D/A) arrangement with a 120-day credit term. The documents are routed through both governments’ approved banking channels under the collection process. After the Nigerian entity honours the bill of exchange at maturity, the full payment is remitted through the Asian Clearing Union (ACU) mechanism into the Indian exporter’s AD Bank account. Since the export was on a collection basis and fully realised, the transaction is reported under P0102.
- Export of Handicrafts to a Boutique Chain in Japan:-
An artisan cooperative based in Rajasthan exports handcrafted home décor items worth $18,000 to a boutique retail chain in Tokyo. Since the buyer is a regular client with a strong payment history, the exporter chooses a direct collection arrangement, sending the invoice and shipping documents to the buyer’s bank without involving any bill of exchange or advance payment. The Japanese buyer remits the full amount through their bank 30 days after receiving the documents. The Indian exporter’s bank receives the payment and reports it under P0102, as it was a post-shipment realisation on a collection basis.
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