Transfer Money Abroad: Know the Options
Before we proceed to understand options for sending money abroad, it is important to note that overseas money transfers come under the administration of the Reserve Bank of India (RBI) via the Liberalised Remittance Scheme (LRS). This scheme is applicable to all Indian residents and permits them to send a maximum of USD 2,50,000 in a single financial year.
Now let’s know more about the different options available for sending money abroad:
1. Online Money Transfer
Online money transfer systems have changed the way of sending and receiving money across borders. HiWiPay is one such platform that allows you to transfer money abroad through a seamless and complete online process. Online transfers typically take place within 24-48 hours.
These services usually provide real-time exchange rates, transparent fee structure, and the convenience of transferring money from the comfort of your home. With their robust security measures, online money transfers have become a preferred method for many.
One point to note is that some online money transfer services may have a limit on the amount that can be transferred.
2. Forex Card
A forex card is a prepaid card that can be loaded with foreign currency and used just like a debit or credit card. It’s an excellent option for those traveling abroad as it provides a secure and convenient way to carry money.
These cards can be reloaded with the desired amount of money and are generally accepted at ATMs and merchants worldwide. Strong security and monitoring of these cards have increased their usage.
Forex cards often come with unfavorable exchange rates and multiple fees compared to regular debit or credit cards.
3. Wire Transfers from the Bank Branch
Traditional wire transfers or electronic funds transfers (EFT) from bank branches are a reliable and secure way to send money abroad where you can transfer money using SWIFT transfer if you have a savings account.
While they might not be as fast as online transfers, they are well-suited if you want to send a larger amount of money.
To initiate a wire transfer, you need to visit your bank, provide the recipient’s banking details, and authorize the transfer. Banks usually charge a fee for this service, and the exchange rates may not be as competitive as those offered by online transfer services.
4. Cross-Border Unified Payments Interface (UPI) Payments
Unified Payments Interface or UPI is a real-time payment system developed by the National Payments Corporation of India (NPCI). The international arm of NPCI is now extending its services for cross-border payments. This method allows users to transfer money internationally using their mobile devices.
UPI is known for its ease of use, instant transfer capabilities, and minimal transaction fees. With the expansion of UPI to cross-border payments, users can enjoy a seamless and cost-effective way to send money abroad directly from their bank accounts.
5. Foreign Currency Demand Draft (FCDD)
A foreign currency demand draft (FCDD) is a paper draft issued in a foreign currency, drawn on a bank abroad. It is a secure method for sending money, especially for educational payments or large transactions. The recipient can deposit the demand draft into their bank account, and the funds will be credited to their local currency.
While FCDDs may take longer to process compared to electronic transfers and may not be suitable for urgent situations, they are less prone to fraud and provide a safer alternative for transferring your hard-earned money.
Tax Implications of Sending Money Abroad from India
While making international transfers, taxation in the form of TCS i.e., Tax Collected at Source comes into the picture. Always make informed decisions as they have an important impact on educational expenses and related remittances that you make.
TCS or tax collected at source is a charge levied when a resident sends money overseas. The threshold limit and rate for TCS are mentioned under the Liberalised Remittance Scheme or LRS as also mentioned above.
Under the LRS, the TCS rate has been increased from 5% to 20%, effective from October 1, 2023. However, this amendment excludes sending money from India to abroad for educational and medical purposes. All expenses that are not directly related to education like personal expenses will attract 20% TCS.
The below-mentioned TCS rates are applicable when you send money from India abroad for International students:
Amount of Remittance | Purpose | TCS Rate |
Below INR 7 Lakhs | Education | NIL |
INR 7 Lakhs or more | Education (Not through Education Loan) | 5% |
INR 7 Lakhs or more | Education (through education loan) | 0.5% |
Below INR 7 Lakhs | Other than Education and Medical Purposes | NIL |
INR 7 Lakhs or more | Other than Education and Medical Purposes | 20% |
What to Consider When Sending Money Abroad
Before choosing any method to transfer money from India to abroad, it is essential to consider a few things. Let’s have a look at which factors should be considered before transferring money to foreign countries.
1. Exchange Rates:
Money exchange rates may vary from method to method. It is crucial to double-check the exchange rates before going with any specific method.
2.Transfer Fees:
It is crucial to compare the transfer fees before choosing a money transfer service. You must know that this fee can vary with huge differences. Therefore, be mindful before choosing any certain services to transfer money.
3.Speed of Transfer:
When transferring money from India to abroad, you must consider the speed of transfer. Depending on the urgency of the transfer, you need to analyze first which method will be best for you. Usually, every money transfer method takes more than 72 hours, but with Hiwipay, you will be able to transfer money within 48 hours at the maximum.
4. Security & Reliability:
Whenever you go to transfer money, it is crucial that you look out for safety measures. There are several money transfer services that offer immense security in terms of transferring money.
The Maximum Amount You Can Send Abroad from India
The Liberalized Remittance Scheme (LRS) was introduced by the RBI in 2004 to simplify and streamline the process of remitting money abroad. Under this scheme, Indian residents, including minors, are allowed to remit a specific amount of money during a financial year.
Under the Liberalized Remittance Scheme (LRS) of the Reserve Bank of India (RBI), Indian residents can send up to USD 250,000 per financial year for various purposes, including education.
This limit applies to all remittances made by an individual. Please note that LRS is not applicable to corporations, partnerships, firms, trusts, HUFs, etc.
It’s important to keep track of the total amount sent to ensure compliance with RBI regulations since this limit is an aggregate of multiple transfers that can be made in a financial year.
Special Considerations for Sending Money Abroad under LRS
- Minor Accounts: Remittances for minors must be managed by their natural or legal guardians.
- Joint Accounts: In the case of joint accounts, the remittance limit applies individually to each account holder.
- Aggregate Limit: The USD 250,000 limit is an aggregate for all permissible purposes in a financial year.
How to Transfer Money Abroad from India under LRS
Transferring money under LRS is not as complicated as it seems. Follow these steps to securely transfer money without any hassle:
- Choose a Method: Decide on the most suitable method for your needs, whether it’s a bank wire transfer, an online transfer service, cross-border UPI, FCDD, or a prepaid card.
- Complete Documentation: Fill out the necessary forms, such as the A2 form, which is required by the RBI for remittances under the LRS.
- Provide Identification: Submit your PAN card and other identification documents as required by your bank or service provider.
- Declare Purpose: Clearly state the purpose of the remittance, which in this case would be education.
- Transfer Funds: Initiate the transfer through your chosen method. Ensure that you have all the required information, such as the recipient’s bank details or card information.
Also Read : Way to Transfer Money From India to the USA
Conclusion
Send money to your kid studying abroad doesn’t have to be complicated. By understanding the different methods available and the regulations under the LRS, you can choose the most efficient and cost-effective way to support your child’s educational journey. Whether you prefer traditional bank transfers or modern online services, ensuring that the process is secure and timely will give you peace of mind and allow your child to focus on their studies.
FAQ of Send Money to Your Kid Studying Abroad
How much money can I send to my son abroad?
Under LRS issued by RBI, Indian residents can send a maximum of USD 2,50,000 abroad in one financial year including all transfers.
What is the cheapest way to transfer money internationally from India?
Online wire transfers are one of the most convenient and cheapest ways to transfer money internationally from India.
How much money can be sent as a gift abroad from India?
The Liberalized Remittance Scheme (LRS) allows Indian residents to internationally remit a maximum of USD 2,50,000. The mentioned limit includes gifts also.
How can I send my son money?
There are multiple ways to transfer money internationally including online money transfers, forex cards, wire transfers from branches, cross-border UPI payments, and foreign currency demand drafts.