Purpose Code S0608 - Life insurance claim settlements

The S0608 purpose code is for an Indian life insurer paying a life insurance claim, such as a maturity or death benefit, to someone abroad. Check when it applies, how it differs from S0607, and the tax points for this outward remittance.

The S0608 purpose code is used when an Indian life insurer pays a life insurance claim to a person outside India. The RBI description is simply "Life Insurance Claim Settlements". In practice it covers life policies with a savings part, like endowment, money-back, whole-life and unit-linked plans. Claims on pure term policies, and all non-life claims, go under S0607 instead. The usual payees are NRI policyholders and nominees living abroad. It is a current account transaction in the RBI group for insurance and pension services. The insurer makes the payment, and the policyholder or nominee receives it.

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:

• Maturity proceeds - The payout at the end of an endowment or unit-linked policy to an NRI policyholder.
• Survival benefits - Regular money-back instalments due during the policy term to a policyholder abroad.
• Death claims on savings plans - The sum assured plus bonuses paid to a nominee living outside India.
• Surrender value - The amount paid when an NRI policyholder ends a savings life policy early.
• Partial withdrawals - Money taken out of a unit-linked life policy by a policyholder now living abroad.

Do not use this code when:

• The claim is on a pure term life policy (use S0607 instead).
• The claim is on a health, travel, motor or other general policy (use S0607 instead).
• You are refunding a premium paid in error, not settling a claim (use S1502 instead).
• An Indian pension fund is paying a regular pension (use S0611 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 "S0608 – Life Insurance Claim Settlements" on the insurer's outward remittance request.
2. Upload the claim discharge form, the policy, and the payee's KYC and overseas bank details.
3. Work out any TDS on the taxable part, then file Form 145 (earlier Form 15CA), with a CA's Form 146 (earlier Form 15CB) where needed.
4. The bank checks the documents and sends the payment abroad.

Additional Notes:

• Death benefits are generally not taxable. Maturity amounts can be taxable when the policy does not meet the exemption conditions, such as a high premium compared with the sum assured.
• Banks may ask how premiums were paid. Policies issued in foreign currency or paid from NRE or overseas funds are easier to settle abroad.
• If the policy was paid from NRO funds, the insurer may credit an NRO account instead of sending money abroad.

• 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