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Fema Rules for Sending Money Abroad from India 

FEMA and RBI govern the FOREX Transaction Rules of India. RBI AND FEMA provide the guidelines for Sending Money Abroad from India depending on the purpose and nature of remittance. Under the various schemes and regulations of the FEMA Act, the limits of remittance for different entities/ organizations are specified.

The outward remittance (Sending Money Abroad from India) rules post liberalization has been made liberal. Any individual can send or transfer money abroad without taking any prior permission from RBI or FEMA. The purpose of sending money abroad must not fall under any prohibited or illegal schedule. The residents do not need to seek approval up to USD 2,50,000 (Two Lakhs Fifty Thousand US Dollars) per financial year for overseas remittances. Many firms and companies need prior approval from RBI and FEMA for Sending Money Abroad from India. The RBI Guidelines for Sending Money Abroad from India is different for different entities/organizations.

What is Outward Remittance?

The outward remittance is described as a process of transferring money in the form of foreign exchange. A resident does outward remittance in a particular country, say India to any beneficiary who is located outside India (except for Nepal and Bhutan). This act can be done for any purpose that is approved under the Foreign Exchange Management Act (FEMA).

What are the Areas Requiring Sending Money Abroad from India?

The below listed are the situations the may require sending money abroad from India:

  • You need to initial money to join the office abroad.
  • In case the family members want to join you, you will require more money.
  •  A family member or self wants to undergo medical treatment in a foreign country.
  • The resident is visiting another country for personal purposes (Apart from Nepal and Bhutan).
  • The resident is migrating to another country.
  • The resident is shifting to another country for the purpose of further studies.
  • The resident wants to pay for products and services to a resident to a foreign company (apart from the prohibited products mentioned in Schedule I of FEMA).
  • From international markets, the resident wants to buy investment products.

What is the Difference Between Inward Remittance and Outward Remittance?

The outward remittance under the LRS scheme presents sending money from the Indian Account to a foreign account. In contrast, inward remittance means that the foreign currency is remitted to your Indian account.  There is not much fundamental difference between the two.

RBI Rules Related to Forex Transaction

One of the essential functions of the RBI is to maintain record or track of all foreign exchange transactions in India. To manage this, they have drafted rules for the foreign exchange market in India called the Foreign Exchange Management Act (FEMA). The primary foreign exchange rule that applies to individual residents has been drafted under FEMA in the ‘Liberalized Remittance Scheme (LRS).

RBI Guidelines On Money Transfer Abroad or Sending Money Abroad from India

The RBI guidelines on money transfer abroad or sending money abroad from India are explained below:

The maximum amount of money allowed to be transferred abroad by an Indian citizen 

According to the Liberalized Remittance Scheme, a resident individual can transfer money overseas to the limit of USD 2,50,000 (Two Lakhs Fifty Thousand US Dollars) per financial year. This monetary limit can be used in a one-time transaction or through multiple purchases.

Update regarding the LRS scheme

Before, it was not essential to produce PAN card for money transfer transactions in a foreign country up to USD 25,000 (Twenty five Thousand US Dollars) or its equivalent. However, since April 2018, this rule has been amended. Now, it is compulsory to produce the PAN card for all the Sending Money Abroad from India transactions from India to abroad regardless of the amount being transferred. This is done to guarantee that a resident individual is acquiescent to the LRS limit of USD 2, 50,000 in a single financial year.

 

Note: The Liberalized Remittance Scheme is not available to corporates, partnership firms, trusts, etc.

 

Which Institutions have been Approved by RBI for Sending Money Abroad

 The only institutions that have been approved by RBI for transferring money to a foreign country from India are as follows:

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Money changers that have been authorized by RBI for carrying out money changing activities such as money transfer abroad as well as currency exchange.

 

Note: Paypal or any other online payment site is NOT an RBI-approved way of sending money abroad for personal payments. These can be used to pay invoices that are raised by businesses elsewhere for any services or goods received by them from India.

 

What are the Mandatory RBI Requirements for an Individual to Perform when Sending Money Abroad from India ?

The mandatory RBI requirements to be followed by an individual when Sending Money Abroad from India are as follows:

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While sending money abroad, the RBI insisted on revealing or knowing the purpose of remittance and submitting the KYC Documents, with the concerned bank or the money changer, chosen by the respective person for money transfer.

It is important to fulfill these two mentioned conditions for purpose of Sending Money Abroad from India.

List of Popular Purposes of Remittance and their RBI Guidelines Regarding Sending Money Abroad from India

S. No

Purpose of Remittance

KYC Documents

1.

Overseas Education

a) Indian Passport Copy of the sender

b) Sender’s PAN Card Copy

c) Sender’s  Indian Passport or Voter ID or Aadhar Card or other Govt. Issued Photo ID Card

d) Purpose proof (University Letter or Prospectus)

e) Bank account statement (if required)

f)  Maintenance of Close Relative Abroad

 

2.

Living expense of student studying abroad

a) Indian Passport or Voter ID or Aadhar Card or other Govt. Issued Photo ID Card

b) PAN Card Copy

c)  Relationship Proof

d) Beneficiary Passport Copy

e) Bank Account Statement

3.

Maintenance of Close Relative Abroad

a) Indian Passport or Voter ID or Aadhar Card or other Govt. Issued Photo ID Card

b) PAN Card Copy

c) Relationship Proof (only blood relative specified by RBI)

· Spouse of the person

· Brother or sister of the resident individual

· Brother or sister of the spouse

· Brother or sister of the parents of the concerned person

· Any lineal ascendant or descendant of the involved person

· Any lineal ascendant or descendant of the spouse of the relevant individual

d) Beneficiary Passport Copy

e) Bank account statement

4.

Gift Remittance

a) Indian Passport or Voter ID or Aadhar Card or other Govt. Issued Photo ID Cardor  PAN Card Copy

b) Beneficiary’s Passport Copy

c) Bank account statement

5.

Emigration

a) Indian Passport or Voter ID or Aadhar Card or other Govt. Issued Photo ID Card

b) PAN Card Copy

c) Beneficiary’s Passport Copy (If required by money changers)

d) Bank account statement (if required)

 

Tour Remittance

a)      Invoice copy for the Hotel Booking or any Travel arrangement done

b)      Passport Copy

c)      PAN Card copy

d)     Bank account statement (if required

 

Medical Treatment Abroad

 

a)      Indian Passport Copy

b)      Visa Copy or Confirmed Air Ticket Copy

c)      PAN Card Copy

d)      Purpose proof (Letter from Overseas Hospital

 

Participation in Global Conference / Training

a)      Invitation letter or invoice from overseas

b)      Passport or Voters ID or Aadhar Card or Government Issued other photo ID Cards

c)      PAN Card Copy

 

Business Travel Abroad

a)      Company Incorporation Certificate Copy

b)      Company PAN Card Copy

c)      GST Certificate Copy

d)      Two address-proof Copies (Govt approved – BSNL/Shop Est Certificate/Govt License Copy etc.)

e)      A letter requesting for releasing foreign exchange in company letterhead with seal (Format prescribed by authorised dealer)

f)        Passenger’s Passport, Visa & Air Ticket Copy

g)       Filled A2 Form with company seal (Format prescribed by authorised dealer)

h)      An ID Proof of authorized official signing the request letter.

 

Private Visit Abroad

a)      Indian Passport

b)      Confirmed Air Ticket showing travel within 60 days

c)      PAN Card

d)     Valid Visa (Mandatory for some countries)

e)      Aadhar Card (If required)

 

 

What are the Banned Transactions Under LRS Scheme for Sending Money Abroad from India?

The transaction that is restricted under the LRS Scheme for Sending Money Abroad from India is explained below:

  • Remittances related to the purchase of lottery tickets, sweepstakes, banned magazines, etc., or any other item that is restricted under Schedule 2 of the Foreign Exchange Management Rule 2000 are prohibited under LRS.
  • Remittance for purchase of trading in foreign exchange and purchase of FCCB issued by an Indian Company in the overseas secondary market are not allowed under the LRS.
  • Capital account remittances to specified countries that are identified as “non-cooperative countries and territories by the Financial Action Task Force, are also prohibited or limited under the LRS.
  • Remittances made to entities that are identified as a significant risk of committing acts of terrorism are also banned in the LRS Scheme by the Reserve Bank of India.

What are the Methods Approved by RBI for Transfer of Money?

The methods approved by RBI for Sending Money Abroad from India are as follows:

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  • In the case of money transfer, the RBI mandates that the funds to be transferred must be sent to the bank, or the chosen money changers account only by way of online bank transfer (NEFT/RTGS/Payment Gateway).

    No cash, cheque, or card payment is permitted.

  • The money transferred must be initiated from the individual personal savings account (Resident Indian).

What are the Account Details Required of Beneficiary when Sending Money Abroad from India?

The following are the bank details required to process the money transfer or when Sending Money Abroad from India 

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For all countries SWIFT code is mandatory, and the following code is needed for different countries:
1. The Middle East & Europe – IBAN

2. The UK – Sort Code
3. Australia -BSB code
4. USA – Routing Number
5. Canada – Transit code

What are the Intermediary Bank Charges Charged when Sending Money Abroad from India?

While sending the money abroad from India, the money is routed through intermediary banks before it finally reaches abroad to its beneficiary. These intermediary banks generally charge a certain amount of money for this service called the intermediary bank charges. This is one of perfect reasons why many people prefer cryptocurrencies such as Bitcoin, Litecoin, Ripple, Doge coin, Uniswap, etc to transfer funds across border.

The intermediary bank charges for different countries are as follows:

CNYIntermediary Bank Charge
US DollarUp to 20 to 25 USD
Australian DollarUp to 25 AUD
EuroUp to 25 Euros
British PoundUp to 18 to 20 GBP
New Zealand DollarUp to 28 to 30 NZD
UAE DirhamUp to 110 AED
Canadian DollarUp to 38 to 40 CAD
Swiss FrancUp to 28 to 30 CHF
Hong Kong DollarUp to 240 to 250 HKD
Japanese YenUp to 5500 JPY
Saudi RiyalUp to SAR 40
Singapore DollarUp to 28 to 30 SGD
South African RandUp to 450 to 500 ZAR
Swedish KronaUp to 90 to 100 SEK
Norwegian KroneUp to 110 NOK
Danish KroneUp to 110 DKK

How can one Grant Loan to NRI/PIO Close Relative under the Liberalized Remittance Scheme? 

A resident individual is permitted to lend money to a Non-Resident Indian (NRI) or Person of Indian Origin (PIO). Close relative here means relative defined under Section 6 of the Indian Companies Act, 2013. The transfer can be done by way of crossed cheque or electronic transfer subject to the following conditions:

  • The loan must be free of interest, and the minimum maturity of the loan must be of one year.
  • The loan amount must be within the limit under the Liberalized Remittance Scheme of USD 2,50,000 (Two Lakhs Fifty Thousand US Dollars) per financial year that is available for resident individuals. It is the general responsibility of the lender to ensure that the amount of the loan is within the Liberalized Remittance Scheme limit of USD 2,50,000 (Two Lakhs Fifty Thousand US Dollars) during a financial year.
  • The loan must be utilized for meeting the personal requirements of the borrower for his business purpose.
  • The loan must not be used in any of the prohibited activities listed below:
    • The chit fund business,
    • Nidhi Company
    • Agricultural, plantation activities, Real estate business, or construction of farmhouses.
    • Trading in Transferable Development Rights (TDRs).

Note 1: For the purpose of Real Estate business, it shall not include townships, construction of residential or commercial premises, bridges or roads.

Note 2: It is also unclear whether purchase of crypocurrencies on foreign exchanges such as Binance, Coinbase, Bittrex etc are allowed. Many traders and investors are using these foreign exchanges for buying cryptocurrencies such as Bitcoin, Litecoin, Ripple, Doge coin, Uniswap, etc. One may recall that In April 2018, RBI banned banks and other regulated entities from supporting crypto transactions after digital currencies were used for frauds. In March 2020, the Supreme Court struck down the ban as unconstitutional. One of the reasons it gave was that cryptocurrencies, though unregulated, were not illegal in India

  • The loan amount must be credited to the NRO A/c of the NRI or PIO. The Credit of such loan amount must be treated as an eligible credit to the NRO A/c.
  • The loan amount must not be remitted outside India.
  • The repayment of the loan must be made through inward remittances by way of regular banking channels or by debit to the Non-resident Ordinary (NRO) or Non- resident External (NRE) or Foreign Currency Non-resident (FCNR) account of the borrower or out of the sale proceeds of securities or shares or immovable property with regard to which the loan was granted.

Conclusion

There have been reports on transfers being made outside India that have faced the issues with the tax and regulatory authorities for a long time. Indian foreign exchange regulations are stringent, and it is essential to be aware of these regulations while making any transfers or sending money abroad from India.

The Reserve Bank of India (RBI), the apex bank in India, and the regulator of foreign exchange dealings have laid down guidelines on Sending Money Abroad from India. There are separate guidelines for residents and non-residents. And individuals and companies must be aware of the policies and guidelines that is where we can help you. 


DISCLAIMER

The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that we are not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. CA Mitesh and Associates is Mumbai's leading Cryptocurrency Taxation Firm which is committed to helping people navigate complex tax laws and banking regulations. Our main aim is to assist the individuals with applicable laws & regulations compliance and providing support at each & every level to make sure that they stay compliant and grow continuously. For any query, help or feedback you may get in touch here - Appointment with CA

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