Under the RBI’s Liberalised Remittance Scheme (LRS), which falls under the Foreign Exchange Management Act 1999, you can send money abroad –be it for your child’s higher education or a relative’s medical treatment. Here are the answers to all the questions you may have for outward remittance.
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The amount
There are no restrictions on the frequency of sending money abroad. A resident individual can remit up to $2.5 lakh in a financial year through multiple transactions for any permissible current or capital account transaction, or a combination of both. However, NRIs with an NRO account can remit $10 lakh in a financial year, while those with NRE and FCNR accounts have no limits.
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Reasons
You can send money for private visits abroad (except Nepal, Bhutan); gift or donation; employment; emigration; maintenance of close relatives; travelling for business, attending a conference or specialised training; for medical expenses or check-up, or accompanying a patient for medical treatment/check-up; studies abroad; or any other current account transaction not covered under the definition of current account in FEMA 1999.
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Taxation
Since 1 October 2020, tax cleared at source (TCS) has been applicable on outward foreign remittance. If you are sending more than Rs.7 lakh, 5% TCS will apply. If you are repaying a loan for foreign education, 0.5% TCS will be levied on amounts more than Rs.7 lakh. If you fail to furnish PAN details, you will have to pay 10% and 5% tax, respectively for the above categories. In case of an NRI, a surcharge, and education and health cess will also apply.
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Depending on whether you pick online or offline options, banks or money transfer companies, the costs will vary. The charges will usually include transfer fees, intermediary or correspondent bank fees, currency spread (exchange rate), courier charges, and GST. For online transfers, both banks and transfer agents have a mix of flat fee and percentage of amount being sent, along with taxes.
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Documents needed
You will have to submit the Permanent Account Number (PAN), identity and address proofs, and A2 cum LRS declaration form. Depending on the purpose of remittance, you may also have to provide specific documents, such as passport, visa, ticket, invoices from travel agency, or as specified by the bank or transferring agency. If you are sending money to a non-resident individual or a foreign company, you will also need to submit Form 15CA, and in some cases, Form 15CB, which is a certificate from a chartered accountant verifying the tax paid.
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Timeline
It can be transferred within 24 hours or take up to 30 days, depending on the option you choose to remit money.
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Remittance
You can either send money online or offline (demand drafts), both services typically offered by banks and private money transfer/exchange companies. If it is online wire transfer via money transfer or exchange companies then it is the fastest option and cheaper than transfer through banks. These companies also route the money via their network of banks and you can use their sites or apps to complete the process digitally. Some of these include BookMyForex, Wise, Western Union, ExTravelMoney, etc. If you want to send $1,000 to the US, you will typically pay Rs.750-2,500*.For online wire transfer via banks, it is an expensive, though reliable, method of sending money overseas. You can remit through your bank via Net banking or by going to the bank branch and initiating the transfer. For sending $1,000 to the US, you will easily end up paying around Rs.2,000-4,000* .By paying through bank demand draft/ cashier’s cheque one must keep in mind that foreign currency demand drafts are delivered physically via courier or mail. Despite low cost and high reliability, it is not the preferred option as it takes a long time. If time is not crucial for you, this could be a good way to transfer funds. In case of international money order, it is an outdated option but India Post and very few banks offer this service.* Costs are indicative and may vary.
