Your Complete Guide to Sending Money Outside India: Process, LRS, and Tax Rules
A step-by-step guide on how to legally send money outside India, covering the RBI's LRS scheme, mandatory documentation (PAN/Form A2), best money transfer methods, and the crucial TCS implications for international remittances.
The Ultimate Guide: How to Send Money Abroad from India Legally
If you are an Indian resident looking to send money overseas—be it for your child's university fees, medical treatment, or a gift to a relative—navigating the regulatory framework set by the Reserve Bank of India (RBI) can feel overwhelming.
Don't worry. This article breaks down the entire legal process for international money transfers, ensuring you stay compliant with the Liberalised Remittance Scheme (LRS) and understand the critical Tax Collected at Source (TCS) rules.
1. Understanding the Foundation: The LRS Limit
The RBI's Liberalised Remittance Scheme (LRS) governs all resident Indians (excluding corporations, firms, etc.) sending money abroad.
Key Rule: You are permitted to remit a maximum of USD $250,000 (or its equivalent in other currencies) per financial year (April 1 to March 31).
Your First Step: Always verify that your intended transaction falls within this LRS limit and is for a permissible purpose (e.g., education, travel, maintenance of a close relative, medical care, or investment).
2. The 4-Step Process for International Remittance
The process is straightforward, provided you choose an Authorized Dealer (AD) approved by the RBI, such as a commercial bank or a registered Foreign Exchange dealer.
Step 1: Choose Your Authorized Provider
You have three main options, each with trade-offs in rate and speed:
|
Method |
Best For |
Typical Cost & Speed |
|---|---|---|
|
Commercial Bank (e.g., HDFC, SBI) |
High security, large amounts, existing customers. |
Higher fixed fees, poorer exchange rate margin. 2–5 working days. |
|
AD II Category (e.g., BookMyForex, Unimoni) |
Better exchange rates, flexibility for travel. |
Lower fixed fee, exchange rate closer to the mid-market rate. 1–3 working days. |
|
Online Money Transfer Platforms (e.g., Wise, Remitly) |
Best exchange rate, speed, transparency. |
Zero or low fixed fees, near real-time exchange rate. Minutes to 1 day. |
Step 2: Collect Essential Documentation
Regardless of the provider, you must furnish the following documents:
- PAN Card: Mandatory identification.
- Form A2-cum-LRS Declaration: A form declaring the purpose of the remittance and confirming that the total amount is within your LRS limit.
-
Specific Purpose Proof:
- Education: University offer letter and fee invoice.
- Medical: Hospital invoice/treatment estimate.
- Gift: A simple signed declaration of the gift amount and relation.
Step 3: Execute the Transfer
You must pay the INR amount from your own bank account (via NEFT/RTGS) to the provider. Cash payments are not allowed for international remittances.
Provide the recipient's details (full name, address, bank name, account number, and the recipient bank's SWIFT/BIC code).
Step 4: Track and Confirm
Once the transfer is initiated, the provider will give you a tracking number. Your money is converted from INR to the foreign currency at the live rate (plus the provider's margin) and wired to the overseas account.
🛑 Do's and Don'ts: Compliance & Cost-Saving Tips
An international transfer is a regulated financial transaction. Avoiding simple mistakes can save you from penalties and high costs.
✅ Do’s (Compliance and Savings)
- Do Compare the Total Cost: Focus on the Exchange Rate provided, not just the fixed fee. A service with a high fee but an excellent exchange rate (close to the live mid-market rate) is often cheaper overall.
- Do Keep Track of Your TCS: Understand the Tax Collected at Source (TCS) rule. For remittances exceeding ₹7 lakhs in a financial year, you must pay TCS, which varies by purpose (e.g., 5\% for education, 20\% for general purposes). This is a tax collected upfront, which you can claim back as a credit when you file your Income Tax Return.
- Do State the Purpose Clearly: Misstating the purpose (e.g., calling an investment a "gift") is a violation of FEMA regulations.
- Do Use Banking Hours: Foreign exchange markets are most active during weekdays. Initiate large transfers during these times for the best available rates. (As of today, the USD/INR rate is around 89.89-90.15 for general transactions.)
❌ Don'ts (FEMA Prohibitions)
-
DON'T Remit for Prohibited Activities: The RBI strictly bans outward remittance for certain transactions, including:
- The purchase of Foreign Currency Convertible Bonds (FCCBs) issued in India.
- Sending funds for lottery winnings or betting.
- Remittance to countries identified as non-cooperative by the Financial Action Task Force (FATF).
- DON'T Use Unauthorized Channels (Hawala): Never use informal, unregulated channels (like Hawala) to send money. This is illegal, punishable by law, and puts your funds at risk.
- DON'T Pay with Cash: All remittances must be traceable and paid from a bank account in your name.
Key Takeaway
Sending money outside India is a regulated, but routine, procedure. By sticking to the LRS limit, being honest about your purpose on Form A2, and choosing an RBI-authorized dealer with transparent exchange rates, you can ensure a smooth, cost-effective, and fully compliant transfer every time.
Disclaimer: This information is for general guidance. Consult a tax professional for specific advice regarding your LRS and TCS obligations.