Sending money abroad from India? Know the outward remittance limits www.deekpay.com

existIndiaWhen investing and conducting cross-border business, remittances from India to foreign countries are an important concern for investors. In this article, we will take an in-depth look at the impact of India's annual remittance limit on companies' cross-border business.

What is an outward remittance

Foreign remittance is a way of transferring money from one country to another. In India, there may be a variety of business payment methods available. These include bank transfers, online money transfer services and mobile wallets. Inward remittance involves transferring funds to India while outward remittance involves transactions. In order to track the outflow of funds through remittancesReserve Bank of India(RBI) has set strict ceilings on the maximum amount that can be remitted out of the country in each financial year. These limits are known as Foreign Inward Remittance Limit (FIRL) and Foreign Outward Remittance Limit (FORL).

Inward remittances from abroad

Foreign inward remittances are funds sent to India from foreign countries. Inward remittances are divided into two categories: personal and non-personal.

Inward personal remittances are remittances made by individuals for personal use. It includes medical expenses, educational expenses or family maintenance expenses. In order to monitor the outflow of funds through remittances, the Reserve Bank of India (RBI) imposes a limit on the maximum amount that can be remitted from the country in each financial year.

Overseas Remittance Limit

Outbound remittance is the process of transacting money from India to another country and can be categorised into personal outbound remittance and non-personal outbound remittance.

Personal outward remittances are transfers of funds by individuals for personal use. This may include medical expenses, educational expenses or family support costs.

Non-personal outward remittances are transfers of funds abroad by Indian companies or organisations. This may include transactions related to business investments, charitable donations or foreign aid.

Outward Remittance Limit to/from India

In order to regulate the transfer of funds to and from India, the Reserve Bank of India (RBI) has imposed restrictions on outward remittances by specifying the maximum amount that can be remitted in a single financial year.

For FY 2020-21, the limit is $250,000 (INR 2.04) per person, including personal and non-personal remittances.

What is the Liberalised Remittance Scheme under the Outward Remittance Limit?

Back in 2004, the Reserve Bank of India (RBI) introduced the Liberalised Remittance Scheme (LRS). This is basically a way for Indians to make current or capital account transactions of up to USD 2,50,000 (INR 2.04L) per financial year. Indians can even open and maintain foreign currency accounts in banks outside India to handle all these transactions. This specifically includes:

Payments for trade in goods and services. Investments in permissible capital instruments outside India Remittances abroad (up to a maximum of US$ 2,50,000 (INR 2.04L) per financial year. Medical expenses abroad (up to US$ 2,50,000 (INR 2.04L) per financial year).

In addition, a tax at source (TCS) of 5% is levied on all transactions above the threshold of Rs. 7 lakh.

concluding remarks

Understanding foreign inward and outward remittance restrictions is critical for individuals and businesses operating in India. These restrictions play a vital role in regulating the flow of funds in and out of India and have a significant impact on the value of currencies and exchange rates.

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