Inward remittances, also known as money transfers from abroad, play a vital role in supporting families, funding education, and contributing to India's economic growth. For individuals sending money to India from abroad or receiving remittances from family and friends, understanding the process and associated requirements is essential for a smooth and hassle-free experience. This guide will walk you through the RBI guidelines, tax implications, and how Wise can help streamline money transfers to India.

What is Inward Remittance?

Inward remittances are funds transferred from a foreign bank account to a beneficiary's account in India. These transfers can be initiated by Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), or foreign citizens. Remittances can be made for various purposes, including family support, education, medical expenses, and property investments.

Benefits of Inward Remittances

Inward remittances offer several benefits to individuals and the Indian economy:

1. Support for Families: Remittances provide financial assistance to families in India, helping them meet basic needs, access education and healthcare, and improve their overall well-being.
2. Economic Contribution: Remittances contribute significantly to India's GDP, boosting foreign exchange reserves, promoting economic growth, and supporting infrastructure development.
3. Financial Inclusion: Remittances encourage financial inclusion, bringing unbanked and underbanked individuals into the formal financial system.

RBI Guidelines and FEMA Regulations

The Reserve Bank of India (RBI) and the Foreign Exchange Management Act (FEMA) set forth specific guidelines for inward remittances. These include:

Purpose Codes for Inward Remittance:

Each remittance must be accompanied by a purpose code, indicating the nature of the transaction. You can find the list of remittance purpose codes on RBI's website.

Foreign Inward Remittance Limit

The Rupee Drawing Arrangement (RDA) and Money Transfer Service Scheme (MTSS) are the most common arrangements under which remittances are received in India. Under RDA, there is no limit on the inward remittance amount for personal transfers. For trade-related transactions, there is an upper limit of INR 15,00,000. MTSS has an upper limit of up to USD 2,500.

Disposal Instructions

Guidelines on how the receiving bank in India should handle the funds are also specified under RBI regulations. To meet this requirement, the receiving bank may request "Disposal Instructions" from the recipient.

Tax Implications

Understanding the tax implications, including income tax on any earnings from abroad, is essential. Our guide on tax on international money transfers with India discusses this further.

Methods of Sending Inward Remittances

Inward remittances to India can be sent through various channels:

1. International Bank Transfers is the most common and secure method, involving an international transfer between the sender's bank account and the recipient's bank account in India. However, this method is usually the most expensive because of the high transfer fees and markups on the currency conversion rate.

2. Online money transfer providers such as Wise can help you save with a low, transparent fee and mid-market exchange rate on a currency conversion, which is the same rate you see on Google.

3. Foreign Currency Demand Drafts (FCDDs): FCDDs are foreign currency instruments drawn by a foreign bank on its correspondent bank in India. The recipient can redeem the FCDD at the correspondent bank or encash it at a designated branch.

Step by Step Guide to Sending Remittance to India 👉

Bank Charges for Inward Remittance

Banks in India charge varying fees for processing inward remittances. Finding the best bank for inward remittance in India depends on factors like transaction fees, exchange rates, and processing speed.

Meet Wise: a convenient alternative.

Make international remittances to India easier with Wise, which uses smart tech to make international transfers safe, secure - and cheap. Wise can help you save with a transparent, low transfer fee and the mid-market exchange rate, which is the same as the one you see on Google.

Business and Freelancers in India: Meet Wise Business

Wise Business Account provides businesses and freelancers in India with a convenient alternative to get paid from abroad. When you sign up for Wise Business Account, you get local account details in 8 foreign currencies. This means your international customers can pay you with a local transfer in those currencies.

Wise converts the received amount to INR at the mid-market rate and transfers it to your bank account in India - plus, you get the FIRC in your inbox. All this convenience comes with a transparent upfront fee without any hidden markups.

Get Started with Wise Business account 🚀

And if you're living abroad, check out the Wise multi-currency account available for residents living in supported countries. Enjoy an account as worldly as you are and spend just like a local when you travel abroad with a linked debit card, while also paying less in fees.

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