Thrilling, we know. But we promise you'll be better off understanding your tax requirements before sending money to or from India.
28. Oktober 2020 — 4 min read
We know, we know. Not exactly the most thrilling topic to read about. But when you’re sending or receiving money in India, it’s important to understand whether or not your money will be taxed (and by how much) before you make the transfer. Don’t worry—we’ll try to keep it interesting for you!
We’ll start here, since it’s a little simpler. Under FEMA (Foreign Exchange Management Act) regulations, you can only send the equivalent of $250,000 USD abroad per fiscal year. The money must be sent for one of the following reasons:
Supporting relatives in other countries (remittance)
Starting on 1 October, 2020, the Reserve Bank of India amended the Liberalized Remittance Scheme (LRS) to add a 5% tax to amounts over ₹7,000,000 sent outside of India. However, if the transfer is for education-related purposes, you’ll only be taxed 0.5% on any amount above that.
Will your recipient get taxed? That’s a maybe. It depends on where they are. Make sure that you and your recipient are familiar with their country’s tax laws, so you won’t be surprised after the transfer comes through.
This is where it gets a little more complicated. Whether or not you’ll be taxed on your money transfer depends on:
Who you’re sending money to
Where you’re sending money from
Why you’re sending money
How much money you’re sending
Let’s start with the who. If you’re sending money to India to a family member as a gift or as support, the money is tax-free. As we’ve said before, a family member must be one of the following to you:
Your spouse’s sibling
Aunt or uncle (brother or sister of your father or mother)
Lineal ascendant or descendant
Lineal ascendant or descendant of your spouse
Spouse of any of the aforementioned lineal ascendants or descendants.
But what if they’re not a relative listed above? If they receive over ₹ 50,000 in the span of one year from you (a non-relative), the money will be taxed as income.
Don’t worry—there are some exceptions. If you’re sending money to a non-relative in India, it won’t be taxed if you’re sending it for one of the following purposes:
From a recognized fund, foundation, university, educational institution, or medical institution.
Now, what about you? Where are you sending the money from? Will that have any impact? Yes. Always double-check with your country’s tax requirements if you’re not sure. We’ll give you a couple of examples here.
We’ll start with some good news. Gifts to family members in India up to $15,000 USD per year are excluded under the US’s Gift Tax, meaning you’ll be off the hook. However, gifts above that amount will be taxed.
What about the UK? During each fiscal year, you can send up to £3,000 as gifts under the exemption. But that’s just from a general standpoint. If you’re sending money as a wedding or civil ceremony gift, you’ll be exempt for up to £1,000 per person. If the recipient is a child, the amount increases to £5,000, and £2,500 for a grandchild or great-grandchild.
Are you looking for a secure option that will get your money to your recipient quickly (even within minutes), at a favorable exchange rate and with no third-party fees? You've found it.
We facilitate fast, low-cost and secure money transfers to India, and would be happy to help you. Here’s what you can do:
Let us know the currency you want to send, the currency you want your recipient to receive (Indian rupee, in this case), and how much you want to send.
Enter the recipient information detailed above.
Provide your payment information.
Double-check that you’ve entered everything correctly, you’re happy with the exchange rate, and that you understand the timing of your transfer.
Confirm your money transfer!
And you're done!