Experience the Cheapest Outward Remittance with Karbon
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Hidden bank fees can eat into your profits when making international money transfer. However, if you're aware of the bank charges for foreign outward remittance, the savings would be substantial.
This guide delves into the fees linked to foreign outward remittance, how they are different in various providers, and how the fintech alternatives offer smarter solutions. Firstly, let’s start with -
FEMA, or the Foreign Exchange Management Act governs the inflow and outflow of money from India to ensure stability in international transactions. FEMA does not directly regulate the charges from banks, but it acts as a basis for the compliance and transparency of outward foreign remittances.
FEMA Key Highlights:
The fees, however, are charged differently by different banks or authorized dealers for remittances. Charges may differ substantially, and therefore, a comparison must be done before starting a transfer.
When making a foreign outward remittance, a business entity generally requires preparing Forms 15CA and 15CB.
15CA: A declaration of remittance details submitted to the Income Tax Department.
15CB - Certificate from a Chartered Accountant stating that tax paid on the transaction is adequate.
Banks do not normally offer this service directly and most businesses rely on external Chartered Accountants. However, fintech solutions like Karbon offer integrated services, including 15CA/CB preparation with no extra charges.
Under the Liberalised Remittance Scheme (LRS), India limits outward remittances. It has an annual limit of USD 250,000 per individual, or around INR 2.04 crores. There is no limit to the amount of transactions within this limit.
Businesses must also ensure they have all the necessary documentation, as FEMA and RBI require.
Banks and financial institutions levy GST on the service fees they charge for facilitating outward remittances. The normal GST rate is 18% and is applicable to the service fee element and not to the principal remittance amount.
Example: If the service charge for a remittance is ₹100, then the GST would be 18% of ₹100, which comes to ₹18.
Another component of taxes levied on outward remittances is TCS. The TCS varies between 0.5 to 20% depending on the amount and nature of transaction. Our article on TCS on outward remittance covers the topic in detail.
Please note that TCS is collected upfront but can be adjusted against the individual's income tax liability.
Now that we have a good understanding of the charges associated with foreign outward remittances, it’s time to compare the different banks in India. Comparing the bank charges for foreign outward remittances will help you choose the ideal finance partner for your business.
YES BANK offers outward remittance services with the following charges:
Foreign Outward Remittance (Non-Import): No charges, inclusive of SWIFT charges.
YES BANK
Foreign Outward Remittance by Wire/TT/SWIFT: ₹250 per transaction.
IDFC Bank outward remittance charges are calculated based on a slab-wise structure, which applies to the converted gross INR amount.
Up to INR 100,000: 1% of the INR value or Rs. 250, whichever is higher.
From INR 100,001 to INR 10,00,000: Rs. 1,000 plus 0.5% on the INR value exceeding Rs. 100,000.
Above INR 10,00,000: Rs. 5,500 plus 0.1% on the INR value exceeding Rs. 10,00,000, subject to a maximum of Rs. 60,000.
SBM Bank India levies the following charges for outward remittances:
Processing Fee: 0.125% of the transaction amount
Flat Fee (Charges to Beneficiary's Account): ₹1,500
Flat Fee (Charges to Our Account): ₹2,000
Axis Bank's charges for outward remittances vary based on the type of account and the mode of transaction. Below is a summary of the applicable fees:
1. Commission Charges:
2. SWIFT Charges:
3. Outward Remittance from FCNR(B)/NRE Accounts:
HSBC India offers outward remittance services with the following charges:
State Bank of India (SBI) offers outward remittance services with the following charges:
HDFC Bank's charges for outward remittances are as follows:
For amounts up to USD 500 (or equivalent): ₹500 + applicable taxes*
For amounts above USD 500 (or equivalent): ₹1,000 + applicable taxes*
* Additional fees may be levied by intermediary banks involved in the transaction.
Kotak Mahindra Bank offers outward remittance services with the following charges:
1. Kotak Insta Remit (Online Remittance via Kotak Mobile Banking or Net Banking):
Note: Kotak Mahindra Bank applies a cross-currency markup of 3.5% on foreign currency transactions carried out on Debit Cards.
2. Kotak Remit (For Non-Kotak Account Holders):
Note: Kotak Remit is available for non-Kotak account holders, with an annual remittance limit of $10,000 USD.
3. Outward Remittances for Corporate Accounts:
ICICI Bank offers outward remittance services with the following charges:
1. Wire Transfer Charges:
2. Online Outward Remittance from NRO Savings Account:
3. Remittance Limits:
Disclaimer: The fees listed are for informational purposes only and may vary based on transfer methods, exchange rates, and taxes.
When making international remittances, businesses should be on the lookout for other hidden fees that can add up to increase the total cost of the transaction. These fees often are not disclosed upfront and can vary depending on the transfer method, provider, and even the countries involved. Below are some common hidden fees businesses should watch out for:
Correspondent banks act as intermediaries when money is transferred between two banks that don't have a direct relationship. Intermediary banks may charge a fee to process the transaction, often passed on to the sender or recipient. These charges can be flat or percent-based on the total transaction amount and add up rather quickly, especially for big or frequent transfers. Because the involvement of correspondent banks is based on the currencies being exchanged and the destination country, fees can vary greatly depending on the banks involved.
Nostro fees are charged when banks have to pay each other in foreign currency. This is an extremely common fee for international payments, particularly if the sender and receiver use banks in different countries or if the banks don't have a direct foreign exchange arrangement. These fees usually cover the service of holding foreign currency accounts called Nostro accounts for settlement purposes.
The sending bank does not charge the fee alone. This is because, most often, the receiving bank can charge the recipient on incoming international transfers. The fees may involve handling fees or processing fees; they are usually withdrawn from the recipient's payment.
Some banks do provide a fee-free inbound remittance service, while others would charge a fixed fee or a percentage amount received. The fees are also determined by the account that the recipient uses-the account is either a personal account or a business one or by the location in the region where it was issued. It's also essential to verify all such charges with the recipient bank prior to the initiation of such services to prevent unwanted shocks.
Remittances processed through older communication means such as telephone, fax, or even telex might incur extra communication fees. These fees are usually added when the remittance is made by non-electronic means, and they differ according to the provider and the means used.
For instance, when transferring money through a traditional bank network that requires manual intervention or use of older technologies, one usually ends up paying more in terms of communication fees compared to digital transactions done through modern platforms. These costs often are not clearly spelled out at the beginning but instead become apparent after completing the transaction.
Tip for Businesses: It should be noted that any fees for upfront or other kinds of correspondent, Nostro, receiver bank, or communication charges need to be included in a comparison of both kinds of fees. One may end up saving lots on international remittance cost if the fintech service provider can clearly present this beforehand.
No, the Government of India charges both GST and TCS on outward remittances.
The basic bank charges for international money transfers include Service Fees, Currency Conversion Charges, Bank NOSTRO Fees, and Mode of Transfer. So in total for a 10,000 USD outward remittance service, banks charges will range between 3-5%. However, in case of fintechs like Karbon, the bank charge for international money transfers will not be more than 1%.
A: Banks typically combine service charges, currency conversion fees, and GST. Additional fees from intermediary banks (NOSTRO charges) will also apply.
The charge for an outward remittance of 500 USD may differ depending upon the bank or service provider. Banks normally charge a fixed amount or percentage on transfer, which might vary from INR 500 to INR 1,500 depending upon the bank and mode of remittance opted. You can refer to the table provided above to calculate the fees charged.
Generally, mandatory fees for 15CA, 15CB, and NOSTRO charges are applicable on all outward remittance transfers. So neobanks like Karbon are a business's best choice if they seek low foreign transaction fees.
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