Purpose Code P0109 - Exports to Nepal and Bhutan

The P0109 purpose code is for payments Indian exporters receive for goods shipped to buyers in Nepal or Bhutan. Check when it applies, how it differs from other export codes, the GST points, and the documents for this inward remittance.

The P0109 purpose code is used when an Indian exporter receives payment for goods shipped from India to a buyer in Nepal or Bhutan. The RBI description is "export realisation on account of exports to Nepal and Bhutan, if any". India has special trade arrangements with both countries, and much of this trade can be paid in Indian rupees. When the payment needs a purpose code, the country of the buyer decides it. Exports to Nepal or Bhutan go under P0109, not the general export codes. It is a current account transaction in the goods export group.

This Purpose Code should be used only where the transaction fits its defined regulatory scope. Here's when you should and shouldn't use this code:

You should use this code when:

• Goods sent by road to Nepal - Payment for goods cleared through a land customs station, such as Raxaul, to a Nepali buyer.
• Goods exported to Bhutan - Payment for building materials, machinery parts or consumer goods sold to a Bhutanese buyer.
• Advance from a buyer in Nepal or Bhutan - Payment received before the goods are shipped.
• Payment under a letter of credit - Bills settled under an LC opened by a bank in Nepal or Bhutan.
• Project supplies - Equipment supplied to a hydropower or road project in Bhutan or Nepal.

Do not use this code when:

• Goods are exported to any other country (use P0101, P0102 or P0103 instead).
• You provide services, such as IT or consulting, to clients in Nepal or Bhutan (use the matching service code, such as P0802, instead).
• Goods are bought abroad and sold to a Nepal buyer without entering India (use P0108 instead).
• The money is a family transfer from a relative working in Nepal (use P1301 instead).

RBI purpose codes are mandatory under FEMA to classify the nature of cross-border transactions entering or leaving India. They allow banks and regulators to accurately track foreign exchange flows and apply the correct regulatory, tax, and reporting treatment.

For individuals, businesses and institutions, correct purpose code usage:

• Ensures transactions are classified correctly under FEMA.
• Enables accurate reporting to the RBI and other regulators.
• Reduces delays caused by compliance checks or misclassification.
• Supports clean audit trails and tax reconciliation.

Bottom-line:

Using the correct purpose code helps ensure smooth processing, regulatory compliance, and faster credit of funds.

1. Select "P0109 – Export realisation on account of exports to Nepal and Bhutan" when your bank asks for the purpose of the inward remittance.
2. Share the invoice and the shipping bill or export declaration for the shipment.
3. Give the FEMA declaration your bank asks for, linking the payment to the export.
4. The bank checks the documents, credits the funds and closes the entry in EDPMS (the export data system).

Additional Notes:

• Agree the currency in the contract, INR or foreign currency, within what RBI allows for these two countries.
• Some export benefits for Nepal and Bhutan depend on how payment is received, so check scheme conditions before agreeing terms.
• Proceeds must be realised within the time limit RBI sets, and the eBRC is generated on the DGFT platform.

• Using a generic or incorrect purpose code instead of the exact RBI-prescribed purpose code can lead to misclassification of the transaction under FEMA and trigger additional compliance checks by the bank.
• Mismatch between purpose code, invoice, and remittance narration may place the transaction on hold until clarification is provided.
• Submitting unclear or incomplete supporting documents that do not clearly describe the nature of the transaction often result in delays, as banks rely on documentation to validate FEMA compliance.
• Missing mandatory PAN or incomplete KYC documentation can prevent banks from releasing funds until verification is completed.
• Using service-related purpose codes for non-service transactions like capital receipts, investments, gifts, or refunds can result in incorrect regulatory treatment and potential reporting issues.
• Assuming small or recurring transactions do not require accuracy and repeated misclassification can attract regulatory scrutiny over time.

Cross-border payments require accurate purpose code selection and complete compliance documentation. Xflow helps businesses and individuals receive international payments while staying aligned with RBI and FEMA requirements.

With Xflow, you can:

• Select the correct purpose code with clarity
• Organize and maintain supporting documents
• Reduce compliance back-and-forth with banks
• Support FEMA compliant inward remittances