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Posted on Oct 28, 2025
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If you have ever received shares or stock options from your international employer and later decided to sell them off, you must have received a form from your bank that asks for a purpose code.
One such code is P0021, which is specifically meant for transactions related to Employee Stock Option Plan (ESOPs).
In this blog, we will break down what purpose code p0021 means, when to use it, and how it works under RBI regulations. We will also see how payment platforms like Infinity make it easier for Indian professionals to receive international payments compliantly.
What is Purpose Code P0021?
As defined by the Reserve Bank of India (RBI), Purpose Code P0021 means “Receipts on account of sales of shares acquired under Employee Stock Options Plans (ESOPs)”.
In simple words, if you are an Indian employee of a multinational company and you have been given shares as part of compensation. So, later, when you decide to sell off those shares, you will have to fill out a form requested by the bank to receive the money. One of the sections of that form will ask for a purpose code, and here you have to fill in the “purpose code p0021”.
This ensures that your bank and the RBI correctly classify the inward remittance as proceeds from an ESOP-related transaction, and not a regular export of goods and services.
What is an ESOP? And their relevance to P0021
Employee Stock Options are a popular form of employee benefit where foreign companies allow their employees to own a portion of the company through shares.
For example:
You work for a U.S.-based tech firm from India.
The company offers you 500 stock options as part of your compensation.
After a certain period (called the vesting period), you exercise these options and later sell them on the foreign stock market.
The sale proceeds are sent to your Indian bank account in foreign currency.
At this stage, your bank will ask:
“What is the purpose of this foreign inward remittance?”
The correct answer is: Purpose code P0021 – Sale of shares acquired under ESOPs.
Why are purpose codes important for ESOP-related transactions?
Every inward and outward remittance in India must be reported to the RBI under a specific purpose code, as per the FEMA (Foreign Exchange Management Act) regulations.
Here is the list of reasons why selecting the correct purpose code, like P0021, is important:
• Regulatory compliance: It ensures your inward remittance aligns with RBI and FEMA reporting norms.
Accurate reporting: Helps classify the transaction as a capital account receipt (not a service export).
Hassle-free processing: The bank can clear your funds without unnecessary delays or compliance queries.
Tax clarity: Purpose codes clearly distinguish ESOP proceeds from salary or business income for taxation purposes.
Using the wrong purpose code (like one meant for freelance work or export of services) can cause confusion or even delay fund credit.
When should you use Purpose code P0021?
You should use the Purpose code P0021 in the following cases:
You are or were an employee of a foreign parent company that offered you stock options or restricted stock units (RSUs).
You exercised or sold those shares through a global stock plan.
The sale proceeds (after deductions, if any) are being remitted to your Indian bank account.
The payment comes directly from the foreign employer or its share plan administrator (like Morgan Stanley, Fidelity, E*TRADE, etc.).
If these situations apply to you, P0021 is the correct purpose code for your foreign inward remittance.
What are the documents required for the purpose code P0021?
When you receive ESOP sale proceeds, your Indian bank will typically ask for a few supporting documents to verify the source and nature of the funds.
Here’s what you may need to provide:
Remittance Advice or Statement from your employer or broker detailing the sale of shares.
ESOP Allotment Letter or Grant Note showing that the shares were allotted to you under an employee plan.
Contract Note or Sale Confirmation from the share plan administrator (proof of sale).
Bank’s Inward Remittance Form / Purpose Code Declaration.
PAN Card and ID Proof (for compliance verification).
Submitting these documents ensures your bank can record the correct purpose code (P0021) and report it to RBI without issue.
Where does the purpose code P0021 work?
Let’s say:
You are employed by Google USA, but you work from India.
You were granted 100 RSUs that vested over 4 years.
After vesting, you sell them via the company’s global share plan.
You receive USD 8,000 after tax deductions.
When this amount reaches your Indian account, your bank will tag it with the purpose code P0021 – Sale of shares acquired under ESOPs.
This identifies your income correctly as capital gains from ESOPs, not as salary or business income.
Difference between P0021 and Other Similar Purpose Codes
There are several purpose codes that seem similar but apply to different cases. Here’s a quick comparison to help you choose correctly:
Purpose Code | Description | Used For |
P0021 | Sale of shares acquired under ESOPs | For ESOP proceeds received from abroad |
P0022 | Sale of other equity investments | For foreign investment sale proceeds not related to ESOPs |
P0801 | Salary income | For salaries/remuneration from foreign employers |
P0805 | Personal remittances | For gifts, donations, or personal transfers |
P0007 | Dividends and profit repatriation | For dividend income from foreign shares |
Tax Implications of ESOP Sale Proceeds
Even though this income is classified under purpose code P0021, it may still be taxable in India depending on your employment and residency status.
At the time of exercise: If the ESOPs are exercised while you are employed, the difference between fair market value and exercise price is treated as a part of your salary and treated accordingly.
At the time of sale: When you sell the shares, any gain or loss is treated as a capital gain, taxable under the Income Tax Act.
Double taxation relief: If taxes were deducted abroad, you can claim relief under DTAA (Double Taxation Avoidance Agreement) between India and the foreign country.
Always maintain proper documentation of ESOP grants, sale confirmations, and foreign tax deductions for compliance and tax filing.
How to declare Purpose code P0021 when receiving money?
If You Receive Funds Directly into Your Bank
Your authorized dealer (AD) bank will ask for:
The source of funds (foreign employer / ESOP plan administrator).
A purpose declaration – where you select P0021.
Supporting documents (as listed earlier).
Once verified, the funds are credited, and you’ll receive an FIRC (Foreign Inward Remittance Certificate) mentioning P0021.
If You Receive Funds Through a Payment Platform (Like Infinity)
Platforms like Infinity simplify this process:
You just choose P0021 as the purpose code while receiving funds.
The platform automatically generates compliant details and shares them with your bank.
You get instant settlement, FIRA certificates, and RBI-compliant records without manual paperwork.
FAQs on Purpose Code P0021
1. What is the purpose code P0021?
P0021 is used when receiving foreign currency proceeds from the sale of shares acquired through Employee Stock Option Plans (ESOPs).
2. Who should use P0021?
Employees or ex-employees of foreign companies who receive payments for selling ESOP or RSU shares.
3. Is P0021 used for dividends or salary?
No. Dividends use P0007 and salaries use P0801. P0021 is only for ESOP share sale proceeds.
4. Do I need to submit any documents for P0021 transactions?
Yes — sale confirmation, grant note, remittance advice, and PAN are typically required.
5. Can I use another code if I’m unsure?
No. Using the wrong code can delay payments or cause compliance issues. Always confirm with your AD bank or payment provider.
6. Will I receive FIRC for P0021 payments?
Yes. Once the transaction is processed, your bank or platform, like Infinity, issues a Foreign Inward Remittance Advice with the correct purpose code.
7. Is income under P0021 taxable in India?
Yes, ESOP sale proceeds are generally taxable as capital gains (and perquisites at exercise), subject to applicable exemptions and DTAA provisions.
Conclusion: Simplify ESOP Proceeds with Infinity
Managing foreign income from ESOPs can be complex — between tax rules, FEMA compliance, and bank documentation, even a small mistake in purpose code selection can cause delays.
That’s why Infinity makes receiving your P0021 payments simple, transparent, and compliant.
With Infinity, you can:
Receive international payments in up to 50+ currencies across the globe.
Use accurate RBI purpose codes (like P0021) automatically.
Convert at live FX rates and zero markup.
Receive FIRAs automatically after every transaction.
Enjoy 24×7 support and 24-hour settlements.
So, whether you’re an Indian professional receiving ESOP proceeds or a global company rewarding its employees in India, Infinity ensures a seamless, RBI-compliant experience.
Receive your ESOP payments the smart way, with Infinity.
