When a relative abroad sends you money, and it gets deposited into your Indian bank account, it is considered as an inward remittance. Each country has its own set of rules and regulations to regulate such types of foreign remittances. For instance, in India, the FEMA (Foreign Exchange Management Act) under RBI (Reserve Bank of India) outlines the rules and regulations for inward remittances. This blog explains inward remittance and FEMA guidelines for inward remittance to help you safely and swiftly send money to India.
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What is Inward Remittance?
An inward remittance refers to the movement of funds from an overseas bank account to a domestic bank account. This can occur when an individual in India receives money in their bank account from a foreign relative, a domestic startup obtains funding from investors based outside India, or a business receives payment from clients located outside the country.
An Example of Inward Remittance
To illustrate this, let’s take the example of Sameer, who works as an engineer in the UK. He sends a significant portion of his salary to his elderly parents in India every month. When Sameer transfers money to his parents’ bank account in India, it is classified as an outward remittance from the UK. However, for his parents who receive the money, it is an inward remittance in India.
FEMA Guidelines for Inward Remittance
The Reserve Bank of India (RBI) has established certain guidelines for regulating inward remittances, which are as follows:
- Given below are the reasons for inward remittances:
- Medical treatment
- Travel expenses
- Living expenses
- Financial support
- As a gift.
- Each inward remittance must be accompanied by a Foreign Inward Remittance Certificate (FIRC), issued by the recipient’s bank. The FIRC contains information such as the sender and recipient’s names and account numbers, the purpose of the transfer, and the exchange rate used in the transaction, among others.
- There are two ways for individuals in India to receive inward remittances: Rupee Drawing Arrangement (RDA) and Money Transfer Service Scheme (MTSS).
- Under the RDA, there is no limit on the amount of inward remittances for personal purposes.
- Under MTSS, each inward remittance is limited to $2500.
- A beneficiary can receive a maximum of 30 inward remittances in a calendar year under MTSS.
The FEMA guidelines for inward remittance are updated regularly so it is rcommended to visit the official RBI website. You can also consult with your bank to stay up-to-date with the latest inward remittance regulations.
Process of Inward Remittance
Two parties (remitter and remittee) are directly involved in the process of inward remittance:
1. The Remitter
A Remitter can be an investor, a client for the domestic venture, or any individual interested in sending funds to India. The remitter sends the money to a bank of India. In order to remit money to India, the remitter must submit these basic details to the bank:
- Remitter’s name and address
- Details of the Bank branch
- Nationality of the bank
- Bank account number, and
- Bank SWIFT code
2. The Remittee
The Remittee, i.e. the person receiving the money, must provide information to its bank concerning:
- Transaction Contract
- Information of remittance that includes the remitter’s credentials and amount in foreign currency
- The purpose of the transaction
The Remittee must also get the Foreign Inward Remittance Certificate (FIRC) as proof of transfer of funds from abroad to India. In other words, if you are in India and receiving payment in the form of foreign currency, the FIRC document will act as proof of that transfer. The approval of this certificate is essential for obtaining the foreign payment.
Foreign Inward Remittance Limit
- The RDA (Rupee Drawing Arrangement) is a mechanism set up by the RBI (Reserve Bank of India) for the transfer of personal remittances from abroad. The RDA scheme does not impose any upper limit on inward remittances intended for personal purposes in India. However, for commercial remittances, the upper limit cap is set at Rs. 15 lakhs. It is mandatory to transfer the funds directly into an Indian bank account.
- The MTSS (Money Transfer Service Scheme) is an arrangement that operates under the purview of RBI guidelines and facilitates instant payment of cash from overseas to India. The MTSS scheme has a limit on inward remittances in India. Each inward remittance has an upper limit of $2500, and a beneficiary can receive a maximum of 30 MTSS transfers per year. You can use this scheme to send money to India for family expenses, but not for making donations, engaging in commercial activities, investing, purchasing property, or depositing funds in a non-resident external (NRE) account.
Charges for Inward Remittance
The fees for inward foreign remittance may vary among different service providers. Generally, there is no transfer fee, but the intermediary bank may impose a fee for transferring funds to India. Additionally, you might be required to pay foreign currency conversion charges and service tax on remittances. Your bank will provide you with the information on the charges that apply to your specific inward remittance limit in India.
You can get preferential rates on currency conversion and a host of benefits when remitting from overseas to India, or other way around. At SBNRI, we keep an eye on the exchange rate on a regular basis to help NRIs with their remittances and investment. You can download SBNRI App to connect with our experts. They will help you evaluate the optimal time for remitting money to India from Australia.
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A- Liberalised Remittance Scheme (LRS) allows Individuals to remit funds outside India up to USD 250,000 or its equivalent in any freely convertible foreign currency per financial year for making investment in shares, study, gifts, among other things.
Foreign Inward Remittance Certificate (FIRC) is a document that acts as proof of a foreign inward remittance to India. This certificate helps the authorities like DGFT (Directorate General of Foreign Trade) and Customs department to track all the transactions.