Export of Services - Remittance recieved on personal Savings account.

[Shrivalli]

Hi everyone,

I have a query regarding RBI/FEMA regulations for software service exports by an independent consultant/sole proprietor.

Is there any RBI rule, Master Direction, FEMA regulation, or circular that specifically mandates a sole proprietor exporting software services to maintain a Current Account for receiving export proceeds?

I would like to understand whether this is an actual RBI/FEMA requirement .

Additionally, I am facing an issue with SBI regarding the purpose code in my FIRC. Since the remitter did not mention the purpose, SBI has selected P1301 (Family Maintenance) instead of the appropriate code P0802. The bank is not agreeing to amend the purpose code.

Could anyone please clarify:

• Whether RBI/FEMA allows correction of an incorrectly reported purpose code in such cases?
• Whether there is any specific RBI notification, Master Direction, or regulation preventing such amendment?
• Whether the Current Account requirement is a regulatory mandate ?

I would appreciate any relevant references or experiences.

Thank you.

[Sanjeev Agarwal]

Based on FEMA, RBI directions, and the available materials:

1. Current Account Requirement: I have not identified any RBI/FEMA provision, Master Direction, or Regulation that specifically mandates a sole proprietor or independent consultant exporting software services to maintain a Current Account for receiving export proceeds. FEMA requires export proceeds to be realized and routed through an Authorized Dealer (AD) bank, but it does not prescribe the type of domestic bank account.

2. Purpose Code Correction: I have not found any FEMA provision or RBI notification that prohibits correction of an incorrectly reported purpose code. Purpose Codes are reporting classifications used by AD banks for FEMA/RBI reporting. If documentary evidence (invoice, contract, etc.) establishes that the remittance relates to software exports, there is no express regulatory bar on correcting a reporting error.

3. SBI Reporting Issue: If the remittance was genuinely for software services but SBI reported P1301 (Family Maintenance) instead of P0802 (Software Services), the issue appears to be a reporting/classification error. Such a mismatch may affect export documentation and compliance. If SBI refuses to amend it, request that they identify the specific RBI/FEMA circular, Master Direction, or Regulation that prohibits correction. If they cannot cite one, you may escalate through SBI's grievance mechanism and, if necessary, the RBI Integrated Ombudsman.

Conclusion: Based on the available statutory materials, there is no express RBI/FEMA mandate requiring a Current Account for software export receipts by a sole proprietor, nor any express RBI/FEMA prohibition on correcting an erroneous purpose code. Any refusal to amend should ideally be supported by a specific regulatory provision rather than internal bank policy.

[Shilpi Jain]

You should have a written communication with the bank asking them specifically to note the correct purpose code and the fact that they have noted a purpose code on their wish since your client had missed to provide the purpose code. Written communication is very important to have in your documentation in the present case.

[Shilpi Jain]

Why are you asking regarding maintenance of current account, has the banker asked you to open a separate current account to get the foreign exchange?

[Shrivalli]

The International Remittance Center at SBI has stated that "The purpose code was not mentioned in the SWIFT message. Accordingly, the purpose code P1301 (Family maintenance) has been captured, as the beneficiary is an individual entity.

However, the purpose code P0802, which denotes export of IT consulting/support services, could not be incorporated in the FIRC since the beneficiary is recorded as an individual."

AI Summary

Export receipt purpose-code correction may be supported by service evidence where banking classification wrongly records family maintenance.
Export proceeds for software services must be realised and routed through an Authorised Dealer bank, but no identified RBI/FEMA provision expressly requires a sole proprietor to use a Current Account. No identified FEMA provision or RBI notification expressly prohibits correction of an erroneous purpose code where supporting evidence establishes that the remittance relates to software export services. A mismatch between family-maintenance and software-services classification may affect export documentation and compliance. The bank should be asked in writing to record the correct purpose and cite any regulatory basis for refusing correction.