Inward Remittance: Meaning, Guidelines & Tax Implication

Inward Remittance: Meaning, Guidelines & Tax Implication

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A Comprehensive Guide on Inward Remittance for NRIs

Did you know that India was reported to be the topmost receiver of remittances last year, with a recorded cash flow of $129 billion? The year before that, meaning in 2023, it was $125 billion, which accounted for 3.5% of the country’s GDP.

Inward remittance is the process of receiving funds from overseas into local accounts. Many people living abroad might need to transfer money to accounts in India. The list includes NRIs, PIOs, and OCIs, among others, sending money to their NRO accounts, Indian residents, and so on. Considering the numbers we just discussed, it is not hard to guess India must have seamless ways to enable inward remittances. Strict regulations are also in place to ensure complete transparency for all these international transactions.

This guide on inward remittance will cover important aspects and insights on guidelines, various methods of fund transfer, tax implications, and more!

In the article, we will talk about:

What guidelines have been set for inward remittances
What are the different ways of sending and the channels of receiving funds
How tax implications are decided on the received funds

Understanding the Guidelines for Inward Remittances

The RBI regulates all inward remittances under the Foreign Exchange Management Act (FEMA), 1999. FEMA governs foreign exchange transactions in India, facilitating smooth trade, payments, and investments. For NRIs, it provides a streamlined framework for managing remittances, investments, and property transactions in India while ensuring legal compliance and ease of repatriation.

What do the Regulations Say?

FEMA guidelines state that inward remittances, irrespective of the value, must be done with the following objectives or purposes only:

For providing financial support to family members
For medical care
For educational purposes
To pay for travel expenses
As investments
As gifts

Additionally, RBI has banned inward remittances towards online gaming and speculative or illegal activities.

How to Execute Inward Remittance?

Here are the many ways one can send money to Indian accounts:

Via Wire Transfers

“Wire the money” - a commonly-heard phrase in many places. It refers to an electronic method of transferring money, often facilitated through the SWIFT network (Society for Worldwide Interbank Financial Telecommunication). For instance, you can send funds in 16 foreign currencies to your Kotak account from an overseas bank. Both online and offline wire transfers are available, and the funds are received in the account within 1 or 2 working days.

To initiate a SWIFT transfer, you need the recipient’s full name, account number or IBAN, bank name, address, SWIFT/BIC code, transfer amount, currency, and purpose of transfer. Ensuring accuracy in details, avoiding special characters, and double-checking the SWIFT/BIC code is crucial to prevent delays or rejections. Additionally, clearly stating the purpose of transfer and verifying currency details enhances compliance and smooth processing.

Via Click2Remit

Click2Remit is an online portal by Kotak Mahindra Bank that facilitates NRIs to send funds to India. You can visit the Kotak website and check if Click2Remit is available in your current country of residence.

Remittance Companies

You can transfer money to India via any Exchange House or Money Transfer Agent. Remittance from exchange houses can be done at economical rates, particularly benefiting Non-Resident Indians (NRIs) in the Middle East.

Tax Implications on NRI Inward Remittance

In India, NRIs are not taxed for inward remittances. While you should always contact your CA for detailed information on taxes, here are a few key points around NRI taxation for inward remittance:

For an NRI Sending Money to NRE and NRO Accounts:
- NRE accounts are tax-free.
- NRO accounts are subject to tax under the Income Tax Act of 1961. While there are lucrative NRO account interest rates, the interest is also subject to TDS.

Wrapping Up!

NRIs and other foreign nationals often find it necessary to send money from abroad to India. It is not only possible, but with online facilities and tailored inward remittance solutions, it is also quite convenient. Visit Kotak today and check out the NRI money transfer services.

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FAQs

1. Is there any limit to what I can send to India?

FEMA and RBI have not levied any maximum limit for inward remittance on individuals.

2. Are there any restrictions regarding inward remittance?

Yes, the RBI has prohibited any inward remittance towards online gaming or any illegal activity.

Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.