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Every year, a large amount of money is transferred from businesses and NRIs outside India into bank accounts within India.
Bank transactions usually take a long time.
It may be a few days at the very least.
However individual or business inward remittances don't take a long time if done through the right service provider.
In this blog post we delve into the depths of inward remittance meaning, what are the benefits of inward remittances and so much more.
Read on…
Let us explain the meaning of inward remittance with an example. To say it in very simple terms if someone working or staying abroad seeks to send money to India, it qualifies as an inward remittance for the receiving party.
As per the FEMA guidelines of the government, taxes on these remittances may be charged according to the purpose it serves.
Generally, medical and educational inward remittances do not attract extra transfer costs. However, business inward remittances, gifts, travel, etc most definitely attract a higher charge.
Even if the money is invested across borders, it could be as inward remittance or outward remittance, the investment will be taxed.
Under the guidelines of the Reserve Bank of India (RBI) and FEMA for inward remittances, the following individuals can receive money without being taxed
The Reserve Bank of India (RBI) has come up with certain guidelines to regulate inward remittances effectively:
Inward remittances are permitted so long as their purposes serve a right cause. No money laundering is tolerated in the name of education expenses, medical treatment, travel expenses, investments, donations, living expenses, etc.
Every single inward remittance needs a document called a Foreign Inward Remittance Certificate (FIRC) issued by the receiver’s bank.
The RBI also makes mention of the two ways inward remittances can be facilitated:-
They may receive inward remittances through two methods: Rupee Drawing Arrangement (RDA) or Money Transfer Service Scheme (MTSS).
For personal purposes, you may make a limitless number of inward remittances under the RDA.
Under the MTSS, each inward remittance has a maximum cap of $2500.There is another aspect that needs to be considered. One specific recipient can receive a maximum of 30 inward remittances in one year under the MTSS.
It is a pretty well-known fact that India stands as one of the largest recipients of foreign remittances,
It could be NRIs or even businesses that have contributed to inward remittances of about $89 billion and above in 2022-23 alone. Inward remittances play a super important role when it comes to payments regarding foreign exchange reserves.
Receiving money online through a remittance is a simple process. To ensure the transaction gets through, you will need to provide specific details to the sender.
Details may include:-
*Make Note: Purpose of remittance is very important as the GST taxes on inward remittances you are liable to pay for the transaction will depend on the purpose of remittance that you mention.
The sender needs to have the following details before initiating an inward remittance or outward remittance.
Once the transaction is finalized, the sender's bank provides an update. This can be in the form of an SMS or bank app alert.
The tracking is usually done on the user dashboard provided by the bank to the account holder.
The receiver of the funds upon receiving the funds, will NOT get access to the funds immediately.
In fact, as a double safety measure, the remittee's bank holds them temporarily to conduct compliance checks.
The remittee is responsible for contacting their bank and providing any necessary documents, to then complete the transaction.
Details that are generally asked at this stage of the transaction include:
The receiver will need to maintain proper record-keeping for future reference. This is not just the responsibility of the sender.
Pro Tip: Obtain a copy of the FIRC from your bank for documentation purposes. This helps in validating every transaction.
The fees are very subjective. But in general, some of the fees applicable for inward payments are:-
Corporate inward remittance refers to funds that businesses from other countries send to India. This could be for things like payment for consultancy services, investing in Indian companies, or capital injections to grow a business. Knowing how these money transfers work is important for companies that do business internationally.
For instance, when a foreign company pays an Indian firm for consulting services, this transaction is classified as corporate inward remittance. When an investor puts money into an Indian startup, it gives a boost to the local economy. Companies need to know the rules for these transactions to follow laws and avoid delays.
Corporate inward remittances are taxed depending on the type of transaction. Taxes could include Goods and Services Tax (GST) and income tax.
For example, if a foreign entity pays for services in India, the Indian company might need to pay GST. If it’s an investment, there might be different taxes, like capital gains tax.
Businesses should keep detailed records like contracts and invoices to make tax reporting easier. Working with tax experts can help companies understand their duties and maybe find ways to reduce taxes when dealing with corporate inward remittances.
Receiving international payments as a freelancer in India involves selecting an appropriate payment method and furnishing the requisite details to your clients. Here's a step-by-step guide:
Make Note: Don't stress about getting a FIRC (Foreign Inward Remittance Certificate) as a freelancer or a private limited company. Just share your PAN number and provide the invoice for the services you've provided. Freelancers will receive their international payments in their savings accounts post-processing.
Yes. A FIRC is mandatory for all inward remittance processes. However, do remember that the issuance of the FIRC is handled exclusively by the processing bank. In the case of Karbon Forex, JP Morgan issues the FIRC.
Make note: If you're freelancing from India and using Karbon Forex for international payments, you won't need a bunch of documents. Just give us your PAN number, name, address, and a quick note about the type of service you're offering – and you're good to go!
An inward payment or inward remittance is a financial transaction where funds are moved or received into a specific account within a particular country. This term is frequently employed in the realm of international transactions or remittances.
For instance, if an individual from a foreign country sends money to a person or business in your country, that transaction is categorized as an inward payment. In the context of business or trade, inward payments encompass payments for goods or services, investments, or other financial transactions entering a country.
Inward payments stand in contrast to outward payments, which involve funds departing from a country or account. These terms are widely utilized in the field of international finance and are crucial for comprehending the flow of funds in cross-border transactions.
Recipients in India have the option to receive cross-border inbound remittances through both banking and postal channels. Banks possess general authorization to establish partnerships with other banks for the facilitation of remittance transactions.
When selecting an inward remittance method, it is crucial to examine the service fees charged by the provider.
More than anything else, it is important for you to check the currency exchange rates at the time of transfer and consider the processing time required for the transaction.
Sending money to countries that handle a larger volume of remittances may result in lower costs due to economies of scale. This just means, that if we took India for example, a large number of inward and outward remittances occur. This is why the handling fees and costs will be relatively lower.
So choose your payment provider wisely to make the best use of cheap markup fees.
If you have more questions on the documentation required, or the minimum time taken to do forex inward remittance, feel free to get in touch!
There are two types of remittances - inward remittance and outward remittance.
Inbound remittance refers to receiving funds into your account, whether from another domestic account or from an account situated outside India. Conversely, outbound remittance involves the transfer of funds in the form of foreign exchange by an account holder in India to a recipient located outside the country.
Inward remittance can be obtained through:-
Salaried Worker: If you are a salaried worker receiving your compensation in foreign currency, you are eligible to receive inward remittance. This applies to individuals who work abroad and receive their salary in a currency other than the local currency.
Freelancers: Freelancers who receive payments in foreign currency for their services are also eligible to receive inward remittance. This includes professionals working in fields such as writing, design, programming, and more.
E-commerce Shop Owners: If you run an e-commerce shop and receive payments in foreign currency for the products or services you sell online, you can obtain inward remittance. This applies to businesses engaged in cross-border trade.
Transferring money internationally can often be a daunting task. However, you can ensure the safety and security of your payments by selecting a reputable service provider. It is essential to carefully choose a reliable provider to handle your transaction.
Additionally, before initiating the transfer, make sure you have all the necessary details of the recipient. Having accurate and complete information about the recipient, including their full name, bank account details, and any additional required information, will help ensure a smooth and successful transaction.
In today's global remittance landscape, there are multiple options available to facilitate the transfer of funds. Here are some commonly used methods:
Yes. Traditional banks may charge a 2-3% fee on gross transaction volume for processing inward remittances.
An example of inward remittance is when someone living in another country sends money to their family's bank account back home. Let's say a person working in the United States sends money to their parents' bank account in India. In this situation, the money sent from the U.S. to India is called an inward remittance.
Fintechs like Karbon Forex provide inward remittance services to Pvt Ltd companies, sole props, and freelancers. The charges vary between 1-3% depending on various factors. Contact us to know more!
Some common examples include:
Banks charge 2-6% of transaction volume as remittance fees. While fintechs like Karbon charge 1-3%, a rough idea of the remittance charges can be seen as follows.
1. Transfer Amount:
2. Transfer Fee:
3. Exchange Rates:
4. Transfer Method:
5. Speed of Transfer:
6. Service Provider:
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