Sending Money To India: A Guide For International Students

International students from India studying in a foreign country may need to send or receive money for various reasons, including tuition and living expenses. There are several ways to do this, including wire transfers, foreign exchange, and demand drafts. It is important to be aware of the rules and regulations surrounding money transfers, including the Liberalised Remittance Scheme, which allows individuals to remit up to $250,000 per financial year. Additionally, students should be cautious of potential scams and ensure they are using a secure and reputable method to send or receive funds.

Wire transfers

International students can send money to India for various purposes and through different channels. One of the most common ways is through wire transfers, which are known for being safe, secure, and fast. This makes it ideal for sending large amounts of money to cover expenses such as tuition and housing.

There are several companies that offer wire transfer services for international students sending money to India. One popular option is Instarem, which offers fast transactions, no hidden fees, low currency exchange rates, and an easy-to-use mobile app. Another option is TorFX, which provides fast, free transfers at excellent exchange rates, and allows users to arrange transfers online, over the phone, or through their app. Western Union is another well-known company that offers money transfers to India, with nearly 200 banks available, including State Bank of India, ICICI Bank Limited, and HDFC Bank.

In addition to wire transfer companies, there are other methods that international students can use to send money to India. For example, ICICI Bank offers a student forex card that can be loaded with money and used to make purchases or withdraw cash in foreign currency from ATMs. Another option is to use a platform like BookMyForex, which offers zero transfer fees and low exchange rates for transfers from India to the USA.

Remittance rules

Fee Remittance:

There is no limit on the amount that can be remitted towards tuition fees for studies abroad. The RBI regulation states that students can remit up to $100,000 per academic year or the total cost of the institution's fees, whichever is higher. This fee can be remitted from India or carried as a demand draft when travelling.

Living Expenses:

Students can carry up to $10,000 for incidental expenses when travelling, of which up to $3,000 can be in foreign currency. Additionally, under the Liberalised Remittance Scheme (LRS), residents of India can send up to $250,000 abroad per year for various purposes, including education.

Receiving Money:

Students studying abroad are considered Non-Resident Indians (NRIs) under FEMA from the day they leave India. As NRIs, students can receive remittances from close relatives in India of up to $200,000 per financial year for maintenance or studies, in addition to the remittance limit for fees.

Declaration Requirements:

When carrying cash, cheques, or traveller's cheques into India, if the aggregate value exceeds $10,000, or if the value of foreign currency alone exceeds $5,000, it must be declared to the Customs Authorities using a Currency Declaration Form (CDF) upon arrival in India.

Tax Implications:

Remittances may be subject to Tax Collected at Source (TCS), which is an additional amount withheld from foreign transfers above a specified threshold. TCS rates may vary depending on the purpose of the transfer, with remittances for education or medical treatment potentially having lower rates. Any TCS paid can be used to offset tax liability when filing tax returns.

Transfer Methods:

Various banks in India, such as ICICI Bank, offer digital platforms and wire transfer services that facilitate secure money transfers to international bank accounts. Physical demand drafts, such as the Foreign Currency Demand Draft (FCDD), are also available from banks and can be presented by the beneficiary at their bank overseas.

Foreign exchange

Sending Money Abroad from India

The Reserve Bank of India (RBI) has set guidelines under the Liberalised Remittance Scheme (LRS), which allows all resident individuals, including students, to freely remit up to $250,000 per financial year (April-March). This limit can be used for tuition fees and living expenses. It is recommended to book a rate for the transaction due to fluctuations in currency exchange rates. Additionally, intermediary banks may impose transaction charges, which can be paid in Indian currency in advance.

Receiving Money in India

Students travelling abroad from India are considered Non-Resident Indians (NRIs) under the Foreign Exchange Management Act (FEMA) from the day they leave the country. This status allows them to open bank accounts abroad and avail of various facilities, such as opening NRE or NRO accounts in India. There is no limit on the amount of foreign exchange that can be carried when travelling to India. However, if the aggregate value of cash, cheques, and traveller's cheques exceeds $10,000, or if the value of foreign currency alone exceeds $5,000, it must be declared to the Customs Authorities using a Currency Declaration Form (CDF).

Transfer Methods

Wire transfers, or money transfers, are a common method of sending money internationally. They are secure, fast, and accessible, but they may come with fees ranging from $15 to $50, depending on the bank. It is important to research and compare different banks or money transfer services to find the best exchange rates and lowest fees. Additionally, students can use services like TorFX, which provides free transfers with excellent exchange rates.

GIC accounts

International students can send money to India, and there are various ways to do so. One method is through a GIC account, which stands for Guaranteed Investment Certificate. GIC accounts are investment accounts offered by Canadian banks, primarily for international students pursuing the Study Direct Stream (SDS) program. This program allows students to easily apply to Canadian universities and facilitates their visa processing.

To transfer money to a GIC account from India, you can approach your bank in India where you hold a savings account. Place a request for a "Money Transfer" to the GIC account, submit KYC document copies, and initiate the fund transfer. The exchange rate is fixed by your bank and is usually higher than the rate seen on Google.

Alternatively, you can use a service like ExTravelMoney, which facilitates money transfers to Canada from India and offers competitive exchange rates. Third-party transfers to GIC accounts are possible, but prior authorization from the student must be submitted to the bank. It is important to check the rules provided by the bank where you hold your GIC account, as some may require the first transfer to be made directly from the student's account.

Tax implications

International students can send money to India through various options, including online money transfer services, wire transfers, cross-border UPI, IMO, and FCC/FCDD. However, it's important to be aware of the tax implications involved in sending and receiving money across borders. Here are some key points to consider regarding the tax implications of sending money to India:

Tax Residency Status:

The tax residency status of both the sender and the recipient is crucial in determining the tax implications. Non-Resident Indians (NRIs) are taxed differently from residents. As per the Foreign Exchange Management Act (FEMA), students going abroad for studies are considered NRIs from the day they leave India. This NRI status provides certain benefits and eligibility for specific facilities related to remittances.

When sending money from certain countries, such as the US, the relationship between the sender and the recipient may not be a factor in determining tax liability. In such cases, there is usually a maximum tax-free amount that can be sent annually without incurring gift tax for the sender. For example, in the US, the tax-free limit is $14,000 per year. Sending larger amounts may attract gift tax implications for the sender.

In India, receiving money as a gift from close relatives abroad is generally considered non-taxable income. However, if the recipient receives money from someone who is not a close relative, the amount may be subject to tax. For example, if an NRI transfers more than Rs 50,000 in a year to someone who is not a relative, the amount may be added to the recipient's taxable income.

Compliance and Documentation:

It is essential to comply with FEMA guidelines and provide all the necessary details to the authorised dealer or bank. The beneficiary receiving the inward remittance should obtain a Foreign Inward Remittance Certificate/Statement (FIRC/FIRS) from their bank in India. This document serves as proof of receipt and is essential for filing accurate Income Tax Returns (ITR) in India. Proper documentation ensures compliance with tax regulations and helps avoid any legal issues.

Remittance Limits and Purpose:

Inward remittances to India are regulated by the Reserve Bank of India (RBI) under FEMA. While there may not be a ceiling on the amount an NRI can send to India, there are specific remittance limits and purposes that must be adhered to. For example, remittances for education purposes may have different limits compared to those for maintenance or living expenses. It is important to understand these limits and the specific purposes allowed for remittances to ensure compliance with regulations.

Frequently asked questions