Purpose Code S0022 - Investment in Indian Depository Receipts (IDRs)

The S0022 purpose code is for investments in Indian Depository Receipts, which represent shares of a foreign company. Learn what IDRs are, when this code applies to an outward remittance, and why it is rarely used today.

The S0022 purpose code is used for investments in Indian Depository Receipts (IDRs). An IDR is a receipt listed on an Indian stock exchange that stands for shares of a foreign company. An overseas custodian bank holds the actual shares, and a domestic depository issues the IDRs. Because the investment ends up in a foreign company's shares, it is a capital account transaction. Banks list S0022 with other investment-abroad items on the Form A2 cum LRS declaration. Most IDR purchases on Indian exchanges are paid in rupees and need no outward remittance at all. The purpose code S0022 matters only where money actually goes abroad, such as an issue or conversion handled through the foreign company's register.

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:

• IDR issues with a foreign leg - Paying for IDRs in an issue where funds pass to the foreign issuer abroad.
• Converting shares into IDRs - Steps under a two-way fungibility scheme (a scheme letting holders swap between shares and IDRs) where money moves abroad.
• Fees under an IDR programme - Charges payable abroad as part of the IDR investment itself, where the bank treats them as part of the investment.
• Institutional IDR subscriptions - Banks or institutions reporting their IDR investments through FETERS (the RBI's foreign exchange reporting system).

Do not use this code when:

• You buy shares listed abroad directly (use S0001 instead).
• You buy shares of your foreign employer under an ESOP (use S0021 instead).
• You buy foreign bonds or debt funds (use S0002 instead).
• You only buy or sell IDRs on an Indian exchange in rupees (no purpose code is needed, as no money leaves India).

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 "S0022 – Investment in Indian Depository Receipts" on Form A2 cum LRS declaration or the bank's outward remittance form.
2. Attach the issue or conversion documents and the depository's payment instructions.
3. Give your PAN and LRS declaration if you are an individual. Form 145 (earlier Form 15CA) is generally not needed for an individual's LRS remittance.
4. The bank checks the documents, collects TCS where due and sends the funds.

Additional Notes:

• Very few IDRs have ever been issued in India, and the best-known programme was delisted in 2020. Confirm with your bank that a live IDR programme is involved before using S0022.
• Dividends and sale proceeds from IDRs come back as inward receipts, not under this code.
• Keep the depository statements, as they prove the IDR holding.

• 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