What is the Inward Remittance Limit in India for Foreign Transactions?

What is Inward Remittance?

Remittance typically means money transfer from one party to another. In reference to this blog, remittance means a transfer of an amount of money across international borders.

If an amount is transferred from India to any other country, it is termed as an ‘outward remittance’. On the other hand, if any amount is transferred from any foreign country and is received in India, it is called an ‘Inward Remittance’. It defines the flow of money in the transaction.

Inward remittances from abroad to India can be both personal and for business purposes.

For instance, if one of your family members is living in Italy and works there, he may send some of his earnings back to you in India. This personal transfer of money from Italy to India is an inward remittance.

Next, say a business is headquartered in India and has its branch in New Your, the branch may send revenue generated in that branch to India. This business transfer of revenue is also an inward remittance

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Benefits of Inward Remittance Limit in India

Every financial transaction incurred with any foreign country brings a lot of benefits for the home country in terms of economic growth, financial inclusion, etc. Let’s understand the benefits Inward Remittance Limit in India in detail:

• Support for Indian Residents:  Foreign inward remittances provide financial assistance and improve the purchasing power of individuals, families, and even businesses. It further promotes the overall well-being of resident individuals.
• Economic Growth: Foreign inward remittances have a positive impact on India’s Gross Domestic Product or GDP and per capita income of individuals. Whenever a remittance is received from abroad, it boosts foreign exchange reserves which ultimately promote economic growth and supports the infrastructure development of India.
• Inclusion in Financial Systems: Transactions like foreign inward remittance help individuals who are unbanked or underbanked to enter into the financial system. Tax free accounts like Non-Resident External (NRE) allows foreign remittances through legal means thereby minimizing the chances of any corruption.

 

RBI Guidelines and FEMA Regulations

Whenever any money transfer is done across international borders, the apex bodies regulate those transactions. Similarly, when a foreign inward remittance is received in India, there are certain RBI guidelines and FEMA regulations that need to be followed. 

Purpose Codes for Inward Remittance: Whenever a foreign transfer of money is conducted, there is a certain code that needs to be mentioned in the documents. This code is termed as ‘purpose code’ which indicates the nature of the transaction.

Foreign Inward Remittance Limit: There are different purposes for receiving money from outside India. Under the Rupee Drawing Arrangement (RDA) and Money Transfer Service Scheme (MTSS), there are certain limits. For trade-related transactions, there’s an upper limit of INR 15 Lakhs. And under MTSS,  there’s a limit of USD 2,500 for individuals, and up to 30 remittances are allowed during a calendar year.

Disposal Instructions: The Reserve Bank of India has issued certain guidelines for the banks that receive inward remittances.  These guidelines specify how and in which manner the funds will be disposed of. The bank may also ask for ‘disposal instructions’ from the recipient under whose name the remittance is received.

Tax Implications: Transactions covering foreign inward remittance in India may be subjected to certain tax implications such as in following cases:

If the remittance is a gift	There’s no tax if the money is received by a relative (children, spouse, parents, siblings, linear descendants or ascendants and siblings of your spouse). However, if the recipient is not related and the amount exceeds INR 50,000, it is liable for taxation.
If the money received is under Inheritance or Will	It is not taxable. However, any income generated out of it like interest will be taxable.

Process of Inward Remittance Limit in India

The process of inward remittance limit in India from abroad is very simple. Below is the series of steps followed in the process:

• It starts with opening a bank account to receive inward remittances if the receiver doesn’t have one. The account type is Non-Resident External (NRE). 
• Then certain specific information is provided to the sender that he requires to initiate the transfer.
• Then the sender conducts the transfer from his end,  by providing necessary details to the bank.
• Once the money transfer is initiated, the receiver needs to produce certain documents like invoices, transaction agreements, the purpose of the transaction, etc.
• The receiver may have to pay certain fees and charges like fees for currency conversion.
• Then the receiver will receive a confirmation of the amount being credited to his account.
• The receiver should also obtain a FIRC or Foreign Inward Remittance Certificate which works as proof of this foreign inward remittance.

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Bank Charges for Inward Remittance to India

Whenever a Foreign Inward Remittance is conducted, banks as a medium may charge certain fees which may include:

• Transaction fees
• Currency conversion charges
• Any charges for faster processing of the transfer
• Foreign Inward Remittance Advice or FIRA charges

These fees and charges may vary from bank to bank and according to foreign inward remittance RBI guidelines.

 

What are the Rules for Inward Remittance to India?

Whenever a foreign inward remittance is in question, there are certain fema guidelines for inward remittance that are required to be followed.

These guidelines suggest following rules for both the parties to the remittance i.e. the sender and the receiver. Let’s understand them in detail:

For the Sender:

The sender is required to furnish the following details before initiating the international transfer:

• Sender’s details like name and address
• His bank account number
• Bank branch details like name and address of the branch
• Swift code of the bank

For the Receiver:

Once the remittance has been initiated from the sender’s bank, the remitter sends a Foreign Inward Remittance Advice or FIRA to notify the beneficiary about the transfer.

The receiver of the remittance needs to provide certain information like the remittance details, invoice number (if applicable), and a code dedicated to the purpose of remittance.

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What are the Different Kinds of Foreign Inward Remittance Certificates in India?

When an inward remittance is received with a bank as a medium, the bank issues a certificate known as a Foreign Inward Remittance Certificate or FIRC. It acts as a proof of international transfers. This certificate includes details about the amount of transfer in Indian currency, foreign currency, and the source of transfer.

There are generally two kinds of Foreign Inward Remittance Certificates- Physical FIRC and Electronic FIRC

Physical FIRC: This is the physical or paper form of FIRC. Though it was discontinued in the year 2016, the remitter bank issues a statement to the home bank requesting to issue an electronic or e-FIRC.

e-FIRC: It is an electronic form of the physical FIRC or a digital version of FIRC. Since 2016, except in some rare cases, only e-FIRC has been issued for inward remittances to India from abroad. 

Things to Avoid While Conducting an Inward Remittance to India

While conducting an inward remittance to India, there are certain things that require consideration. These things include:

• Right Service Provider: It is very important to choose a service provider that aligns with your intentions. Also, always make sure that the service provider is trustworthy. 
• Government Rules and Regulations: Always ensure that all applicable government and FEMA guidelines for inward remittance are checked and followed.
• Any Fees and Charges: Although inward remittance is zero fees transfer, there are certain charges that may be applicable like bank charges, currency conversion charges, etc.
• Transfer Speed: Some transfers can be urgent. Always choose a service provider that adheres to the urgency requirements. Some methods take 2 to 5 days and may not be suitable for urgent situations.

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Fees & Charges for Inward Remittance

Generally, fees and charges for inward remittance depend upon the medium of transfer and service provider. Although it is zero fee transfer, there can be some charges like:

• Intermediary banks may charge fees for service for money transfers.
• You may have to pay foreign currency conversion charges
• Any tax for receiving money from overseas in India, etc.

It is advisable to check with your service provider for any levied fees and charges.

Conclusion

Foreign Inward Remittance is more than just a financial transaction. It involves different national economies and impacts both individuals and businesses of the nation.

It is thus important to consider all the aspects related to an inward remittance, the government rules and regulations governing the remittance, tax for receiving money from overseas in India, etc. Understanding all factors will ultimately help you in making informed decisions related to any foreign inward remittance that you may receive to avoid any legal circumstances.

FAQs of Inward Remittance Limit in India

References:

https://www.rbi.org.in/commonman/English/scripts/FAQs.aspx?Id=1692. Accessed 24th September 2024

https://www.rbi.org.in/upload/notification/pdfs/52220.pdf. Accessed 24th September 2024