Remittances — RBI Guidelines To Send Money Abroad

Remittance

Remittances — RBI Guidelines To Send Money Abroad

By Jupiter Team · · 5 min read

Every country has laws that control inward and outward remittances. In India, this is under the supervision of the Reserve Bank of India. If you want to exchange currencies in India or send money abroad from India, you must be aware of the guidelines set by the Reserve Bank of India (RBI). Let's look at the RBI guidelines for sending money abroad and how to use foreign exchange services in India.

The RBI has existing rules for forex transactions. If you want to make a transaction, you must follow the rules established by the Reserve Bank of India:

  • According to RBI regulations, remittances of up to USD 25,000 (INR 20,42,200) are allowed per calendar year.
  • Earlier, PAN cards were not required for abroad money transfers up to USD 25,000 or equal. But, this law was changed in April 2018.
  • For each approved transaction, you may send it in a foreign currency.
  • Indian citizens may buy FOREX up to USD 25,000.
  • You must declare FOREX that you bring into India more than the allowed limits.
  • You are only allowed to hold up to $2,000 (INR 1,63,357) or it's equal in cash or traveller's checks.

RBI Guidelines on Money Transfer Abroad/Outward Remittance

You should be aware of the mandate and the importance of KYC in addition to outward remittances. But, first, let’s explore the meaning of outward remittance:

What is an outward remittance?

The process of sending money abroad in the form of foreign currency is known as “outward remittance." A resident sends money abroad, say, from India to any beneficiary who lives outside of India (except for Nepal and Bhutan). The Foreign Exchange Management Act (FEMA) allows this action to be taken for any authorized reason.

Key guidelines to consider

Outward remittance from India has certain rules and regulations set by the RBI. The two key guidelines are as followed:

The most amount of money that can be sent abroad

An individual is allowed to send up to USD 2,50,000 (INR 20,420,774) abroad per fiscal year under the Liberalised Remittance Scheme (LRS). This spending limit can be applied to a single purchase or a series of purchases.

KYC documents

You must follow RBI rules to make successful FOREX transactions under the RBI's foreign exchange transaction guidelines. You must provide the Know Your Customer (KYC) documents and send money according to the RBI-approved purposes.

Mandatory RBI Requirements to Perform Outward Remittance

To perform outward remittance from India, one is required to submit certain documents, depending on the person/job/organisation. Here’s all you need to know from this table below:

Purpose Documents Required
For Overseas Education - Sender’s Indian Passport Copy
- Sender’s Indian Passport or Voter ID or Aadhar Card (Government issued)
- Sender’s PAN Card Copy
- Purpose proof (University Letter)
- Bank account statement (if required)
- Support of close relatives abroad
For Business Travel - Company Incorporation Certificate Copy
- Two address-proof copies (Government approved)
- Company PAN Card Copy
- A letter on company letterhead with a seal requesting the release of foreign exchange (authorized dealer format)
- Visa & Air Ticket Copy, Passenger’s Passport,
- GST Certificate Copy
- Filled A2 Form with company seal (authorized dealer format)
- An ID Proof of authorized officials signing the request letter.
For Private Visit - Aadhar Card
- Indian Passport
- Confirmed airline ticket with a departure date within 60 days
- PAN Card Copy
- Visa Copy
For Medical Treatment - Medical Purpose proof (Letter from abroad hospital)
- Indian Passport Copy
- PAN Card Copy
- Visa Copy/Confirmed Air Ticket Copy
For Tour - Copy of the hotel booking or travel arrangement invoice
- Passport Copy
- PAN Card copy
- Bank account statement

Inward and Outward Remittance

Inward remittances are defined as transfers made from abroad to domestic banks. The most that can be sent in a year is thirty remittances. The financial institution you use may charge you for inward remittances. On the other hand, the LRS scheme's outward remittance involves transferring money from an Indian account to a foreign account.

MTSS (Money Transfer Service Scheme) for Inward Remittance

Let's Look at MTSS (Money Transfer Service Scheme) for a Better Understanding of Inward Remittance

The Money Transfer Service Scheme (MTSS) makes it quick and simple to send money from overseas to receivers in India. Only personal transfers, such as those that benefit foreign visitors to India or go toward family support, are allowed.

The method entails a partnership between reputed international money transfer companies and Indian agents, who would transfer the funds to the recipients at the going exchange rates. Under this scheme, only cross-border personal transfers are permitted, such as transfers for family support and transfers in support of foreign visitors to India.

Through this arrangement, it is not permitted to make gifts or contributions to non-profit organisations or trusts, trade-related payments, payments for the purchase of property, investments, or credits to NRE Accounts.

Under the scheme, each remittance is limited to USD 2,500 (INR 204,244). A single beneficiary under the scheme is also allowed to receive thirty remittances in a single calendar year.

Institutions Approved by the RBI for Sending Money Abroad

The institutions with RBI approval that allow Indian residents to send money abroad are:

  • Authorized Dealer Category I- Bank
  • Authorized Dealer Category II- Money changers.

RBI has allowed money changers in the AD-II category to conduct operations, including currency exchange and money transfers abroad.

For Full-Fledged Money Changers (FFMCs), the money exchange for both business and personal trips is allowed.

The RBI limits the use of PayPal and similar online payment services to send money abroad for private transactions. They can be used to settle bills sent to you by foreign businesses for any services or goods you received in India. LRS (Liberalised Remittance Scheme) does not apply, as these payments are for business purposes.

Key Takeaways

Indian foreign currency laws are strict, so it's important to be aware of them while sending money abroad. Individuals and companies need to be aware of the rules and regulations. The Reserve Bank of India (RBI), a regulating body for foreign exchange transactions, has established guidelines for sending money abroad.

The paperwork and regulations required to complete these transactions can make it difficult for SMEs to send and receive money from abroad and accept international payments. Therefore, be sure to pick a bank that relieves you of this burden.

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