When money is being transferred from abroad to India, surely there are tax implications to consider. If you are the one sending money, naturally you’d think about how much tax you need to pay in the country of your residence for remitting money to India. On the other hand, if you are a resident Indian and receiving money from abroad, you’ll want to know if you are liable to pay tax on the amount received. In this post, we’ll examine both these questions and more.
How much tax is applicable to the sender, on money transfer from abroad to India?
No tax is applicable on the money being transferred from abroad to India. None at all.
This is because you’d have already paid tax on the income you are earning in the country abroad.
India has signed the Double Taxation Avoidance Agreement with 85 other countries.
|1. Armenia||16. Estonia||31. Kazakhstan||46. Mozambique||61. Serbia||76. Turkmenistan|
|2. Australia||17. Ethiopia||32. Kenya||47. Myanmar||62. Singapore||77. UAE|
|3. Austria||18. Finland||33. South Korea||48. Namibia||63. Slovenia||78. UAR|
|4. Bangladesh||19. France||34. Kuwait||49. Nepal||64. South Africa||79. Uganda|
|5. Belarus||20. Georgia||35. Kyrgyzstan||50. Netherlands||65. Spain||80. UK|
|6. Belgium||21. Germany||36. Libya||51. New
|66. Sri Lanka||81. Ukraine|
|7. Botswana||22. Greece||37. Lithuania||52. Norway||67. Sudan||82. USA|
|8. Brazil||23. Jordan||38. Luxembourg||53. Oman||68. Sweden||83. Uzbekistan|
|9. Bulgaria||24. Hungary||39. Malaysia||54. Philippines||69. Switzerland||84. Vietnam|
|10. Canada||25. Iceland||40. Malta||55. Poland||70. Syria||85. Zambia|
|11. China||26. Indonesia||41. Mauritius||56. Portugal||71. Tajikistan|
|12. Cyprus||27. Ireland||42. Mexico||57. Qatar||72. Tanzania|
|28. Israel||43. Mongolia||58. Romania||73. Thailand|
|14. Denmark||29. Italy||44. Montenegro||59. Russia||74. Trinidad
|15. Egypt||30. Japan||45. Morocco||60. Saudi
As per the Double Taxation Avoidance Agreement between India and any one of the foreign countries mentioned above, if you have already paid tax on the income earned abroad, then you need not pay tax when transferring that money back to India.
The only tax you’d be required to pay is the service tax (negligible amount) and the transaction charges when you transfer money to India using any foreign exchange or money transfer services.
So if you are thinking of transferring funds from overseas to your parents or close relatives for their personal expenses, you should just directly transfer it to their savings account in India. There won’t be any further tax applicable on that amount.
So how much money can you send to India in a year?
Theoretically speaking, there is no limit to the amount of money you can send back to India in a year. All governments welcome funds from foreign countries as it bolsters the economy. India has not sent any limits on receiving funds from abroad.
However, the foreign country you are in might have regulations that limit the amount of money you can send abroad. These regulations differ from country to country.
For ex : In the USA, you are allowed to send back unlimited amount of money back to India.
If you are sending the money to your NRE/NRO account or to the bank account of your close relatives, then it is tax-free.
As per US law, a close relative of an individual is defined as ;
- A current or former spouse;
- A father, mother, guardian, brother, sister, son, daughter; or
- A father-in-law, mother-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law.
However, if you want to send money to your friend in India, then you can send money, tax-free, only up to US$ 14,000 per person per year. Beyond this amount, you’d have to pay a gift tax in the US.
How much tax is applicable to the receiver, on money received from abroad to India?
No tax to be paid if the sender is your close relative.
As per RBI rules, the remittance money received from persons abroad, who are your close relatives, is treated as a tax-free gift.
Close relatives are defined as ;
- Spouse of the individual
- Brother or sister of the individual
- Brother or sister of the spouse of the individual
- Brother or sister of either of the parents of the individual
- Any lineal ascendant or descendant of the individual
- Any lineal ascendant or descendant of spouse of the individual
However, if you are receiving money from abroad and the sender is not related to you, then any amount over Rs. 50,000 (about US$ 700) will be liable to be taxed as your income. You’d have to pay income tax on the excess amount.
For ex : If your friend from the US sends you US$ 10,000 as a gift (around Rs. 7,00,000 at today’s US Dollar rate in India). You’d have to add the excess Rs. 6,50,000 to your income and pay tax on it.
If the gift amount exceeds US$ 14,000, your friend in the US would have to pay the gift tax there and you would have to pay the income tax on the excess amount above Rs. 50,000 in India.
Frequently Asked Questions
1. If I send money from abroad to a normal Indian savings account, will it be taxable?
If you are sending money to your close relative, it won’t be taxable. However, if you are sending money to your friend or acquaintance in India and the amount is above Rs. 50,000, then it is taxable. The excess amount above Rs. 50,000 would be treated as income and the receiver of the funds would have to pay income tax on it in India.
2. What are the tax implications for transferring money from India to the USA?
The Tax implications on sending money from India to the USA are dependent on the amount of money you are sending.
You’d have to pay GST on forex transactions in India.
|Tax on money transfer from India to any country|
|Money Transfer Slab||Minimum Tax – Maximum Tax|
|Slab 1 [Up to Rs 1 lakh]||Rs. 45 – Rs. 180|
|Slab 2 [Rs 1 lakh to Rs. 10 lakh]||Rs. 180 – Rs. 990|
|Slab 3 [Above Rs. 10 lakh]||Rs. 990 – Rs. 60,000|
|The maximum GST for forex transactions is capped at Rs. 60,000|
3. Do I need to pay taxes on foreign money transferred to my account?
If the money is sent by your close relative abroad, then you don’t have to pay taxes.
However, if the money has been sent by someone who is not your close relative, then up to Rs. 50,000 the money is considered as a tax-free gift. If the money received in your account is above Rs. 50,000, then you’d have to add the excess amount to your income and pay income tax.
4. How much money can I send abroad from India in a year?
As per the rules of Liberalized Remittance Scheme (LRS) of RBI, a resident Indian can remit abroad up to US$ 2,50,000 in a single financial year (Apr 1 to Mar 31).