Purpose Code P0807 - Off-site software exports

The P0807 purpose code is for payments an Indian software firm receives from foreign clients for software built in India and delivered online. Check when it applies, how it differs from P0802, the export declaration and GST points, and how to report this inward remittance.

The P0807 purpose code is used when an Indian business receives inward remittance for software exported "off-site". Off-site means the software is built in India and delivered to the foreign client over the internet, with no one working at the client's location. Until 30 September 2026, these exports were declared on the SOFTEX form. From 1 October 2026, RBI's new export regulations replace SOFTEX with a single Export Declaration Form (EDF), filed within 30 days of the end of the invoice month and certified by your AD bank, STPI or the SEZ office. It is a current account transaction in the computer and information services group. P0807 is the RBI purpose code most software product and offshore development firms use.

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:

• Custom software built in India - Code written by your team in India and delivered online to a client in the US, UK or EU.
• Software product licences - Licence fees from foreign buyers for software your company owns.
• SaaS revenue - Monthly or annual fees from foreign customers for your cloud software, where your bank treats it as a software export.
• Offshore development centre billing - Monthly bills for a dedicated team working from India for a foreign client.
• Software upgrades and new versions - Fees for new releases and modules delivered online.

Do not use this code when:

• The work is software consultancy or implementation, not off-site software delivery (use P0802 instead).
• You earn fees for data processing, hosting or database services (use P0803 instead).
• The receipt is for hardware consultancy (use P0801 instead).
• Software is shipped on physical media through customs (use a goods export code, such as P0102, 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 "P0807 – Off-site software exports" when your bank asks for the payment purpose.
2. Share the invoice and the contract, SOW (statement of work) or licence agreement with the foreign client.
3. Link the receipt to the SOFTEX form or export declaration filed for that invoice.
4. The bank checks the documents, credits the funds and issues the FIRC or e-FIRA.

Additional Notes:

• The invoice value, the declared value and the amount received should match. Explain any charges deducted abroad.
• Proceeds must be realised within the time limit RBI sets. Banks track open declarations in EDPMS (the export data system).
• The eBRC for the export is generated on the DGFT platform from bank data and supports GST refunds and export benefits.

• 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