Say you just sent your son or daughter abroad for higher education. One of the most important things they will need is monetary support to fulfil needs like housing, food, tuition fees, etc. Sending money abroad is a little more complex than it looks. It comes with a host of fees & charges. There are also limits on how much you can send. In this article, we will answer all your questions & help you understand more about international money transfers.

What are Remittances?

Remittance refers to the sum of money that you wish to send abroad. You can send money via wire transfers from your bank account, cheque, electronic transfer of funds, etc. They are of two types:

      • Inward remittances
      • Outward remittances


Let’s understand the differences between the two types.

Outward remittanceIf your child is pursuing education abroad and you want to send them money, this would be an outward remittance (eg: from India to the US).

Inward remittanceIf you are abroad and want to send your parents some money, this would be an inward remittance (eg: from the US to India).

Now that we know what inward and outward remittance is, let’s take look at a few fees & charges you should know about. 

Liberalized Remittance Scheme (LRS)

Under the Liberalized Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.

Type of Bank Account

When sending money to an account in India, transferring money directly to an account may create issues. For example, if you were planning to send your parents some money, make sure to first transfer money to your NRE/NRO account, and then to their account. Such transfers can be considered a gift, thus being tax-free.

How long does it take to do a money transfer?

The time to transfer money may vary from bank to bank. It is always a good idea to check with your bank before making a foreign remittance. Some bank transfers can take up to 3-5 business days, while others may take longer – up to 10 business days.

One way to save time is to use third-party apps. This is a good option for small transactions. For larger payments such as payment for tuition fees, a bank transfer is the best way.

International Money Transfers – The Costs

“There is no such thing as a free lunch.” This is true when you send/receive money to/from abroad. Here are some of the charges involved:

    1. Commission on Foreign Outward Remittance: Banks will deduct commission for the service provided. This fee may vary based on the amount. For example:
      • Up to USD 500 or equivalent – Rs. 500/- per transaction
      • Above USD 500 or equivalent – Rs. 1000/- per transaction
    2. Forex charges: When you send/receive money abroad, it needs to be converted to the recipient’s currency. Banks will levy a forex conversion charge on the amount to be converted.
    3. Goods and Services Tax (GST): All foreign exchange transactions are subject to the levy of Goods and Services Tax (GST), which is payable in addition to the charges mentioned above. Presently, the applicable rate of GST is as under:
      • On the amount of commission, charges paid – @ 18% of the amount of the commission/fees/charges.
      • On the amount of foreign currency exchanged as per the slab.
    4. Tax Collected at Source (TCS): Tax Collected at Source (TCS) @ 5% shall be applicable on all forex drawls under LRS exceeding INR 7 Lakhs in a financial year. For remittances towards overseas education, TCS @ 0.5% shall be applicable if the amount remitted is obtained through an educational loan from a financial institution as specified u/s 80E of the Income-tax Act, 1961.
    5. Other charges: Your bank may also levy some other charges such as convenience fees and so on for handling your transaction, this will vary from bank to bank.

3 mistakes to avoid while making international transfers

    1. Make sure you have the right details of the recipient of the transfer.
    2. Try to avoid sending money when the exchange rates are high.
    3. Avoid making multiple small transfers, as this will rack up the costs. Watch out for hidden charges.
    4. International money transfers usually take a longer time than when done locally. Being late here can potentially mean missing your SIPs as well.


To sum it up…

Bank transfers are usually the cheapest option when it comes to funding your international money transfer. However, be aware of the fees & charges you may incur in the process.

Ensure you have the right accounts in place to avoid future hassles.

Stay on top of your exchange rates & speak to your financial planner regarding the best practices to follow while making money transfers.

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