Purpose Code S1502 - Reversal of wrong entries, refunds of amount remitted for non-exports

The S1502 purpose code is used to send back money that came into India by mistake, or to refund an inward payment that was not for an export. Check when it applies, the documents, and how to apply it.

Purpose code S1502 is used when money that came into India has to go back, and the original receipt was not payment for an export. The RBI description reads "Reversal of wrong entries, refunds of amount remitted for non-exports". The S1502 purpose code covers two cases. The first is a wrong entry: a foreign payer sent money to the wrong account, sent it twice, or sent the wrong amount. The second is a refund of a non-export receipt, such as a deposit or advance from a non-resident for something that did not go ahead. It is a current account transaction that undoes an earlier inward remittance. If the original money was export income, use S1501 instead.

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:

• Duplicate inward payments - A foreign sender paid the same amount twice and you are returning the extra one.
• Wrong beneficiary credits - Money meant for someone else landed in your account and must go back.
• Excess amounts - The sender transferred more than intended on a non-export payment.
• Refunds of deposits or advances - Returning a booking deposit or advance from a non-resident when the deal was cancelled and it was not export income.
• Refunds of donations not accepted - An NGO or institution returning a foreign contribution it cannot accept.

Do not use this code when:

• Refunding a foreign buyer on goods or services you exported (use S1501 instead)
• Returning a foreign investor's money for shares that were not issued (check the FDI repatriation codes, such as S0006, with your bank)
• Sending a gift to a person abroad (use S1302 instead)
• Recording a dishonoured or cancelled export bill (use S1504 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 "S1502 – Reversal of wrong entries, refunds of amount remitted for non-exports" on Form A2 or the bank's remittance form
2. Upload the inward credit advice or FIRC for the original payment
3. Add the sender's refund request, or a note explaining the error or cancellation
4. The bank checks the documents and sends the outward remittance, usually back to the original sender

Additional Notes:

• Refund the same foreign sender where possible; sending the money to a different person or account will raise questions.
• Act quickly on wrong credits: your bank may also be able to return the funds through the original payment channel.

• 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