When something involves money and business there is no such thing as limitless access. The limit of business outward remittance from India has been a complex, if not confusing state of affairs in India.
The start of the year is filled with talks on budget and economic surveys.
Economic Times and every fintech app you know are filled with tons of information for businesses, confusing you with the taxes applicable and the limit on outward remittance from India.
More often than not, firms reach a saturation point where they aren't aware or care about the exorbitant amount of fees that are applicable on business outward remittances.
Hence, in this blog post, we break down the nuances of business outward remittance, the limit of business outward remittance, and what you shouldn’t do to invite extra taxes on those international business payments.
Remittances involve the transfer of funds between parties, whether it be for bills, invoices, or even as a heartfelt gift. However, the term "remittance" specifically refers to the funds that migrants send back to their families in their home country while residing and working abroad. These transfers are commonly known as worker or migrant transfers.
When it comes to foreign remittances, there are various options available in India. You can opt for bank transfers, online money transfer services, or even mobile wallets. Inward remittances involve receiving money in India, whereas outward remittances entail sending money out of India.
The Foreign Inward Remittance Limit (FIRL) and Foreign Outward Remittance Limit (FORL) are monetary boundaries set by the Reserve Bank of India (RBI) to regulate the inflow and outflow of funds into and out of the country during a fiscal year.
Personal inward remittances involve the transfer of money by an individual for their personal use. This can include expenses related to medical treatments, education fees, or supporting family members.
Non-personal inward remittances include business inward remittance that involves the transfer of money by foreign companies or organizations into India. These remittances can be for purposes such as business investments.
Personal outward remittances involve the transfer of money by an individual for personal expenses. This can include payments for medical treatments, education fees, or supporting family members residing in a foreign country.
Non-personal outward remittances that include business outward remittance, on the other hand, involve the transfer of money by an Indian company or organization to a foreign country.
In 2004, the Reserve Bank of India (RBI) implemented the Liberalised Remittance Scheme (LRS), which enables residents of India to transfer up to US$250,000 (INR 2,04,50,250) per financial year for approved current or capital account transactions.
This scheme enables individuals to engage in various activities, including trade payments, investments in permitted capital instruments, sending money abroad up to the specified limit, private visits and holidays, and medical treatment expenses abroad within the aggregate limit.
Additionally, transactions exceeding Rs. 7 lakhs are subject to a tax collected at the source (TCS) of 5%. However, in the 2023-24 Budget announcement, the TCS rate for foreign remittances was raised from 5% to 20% of the transaction amount . The objective behind this increase is to target affluent individuals who may attempt to evade taxes.
But there is no limit for business outward remittances from India The Reserve Bank of India (RBI) has set a cap at US$250,000 (approximately INR 2,04,50,250) only for individuals and NOT for businesses.
Having a clear understanding of the limit of business outward remittance is crucial for businesses operating in India. The Indian government is very tight about money moving out of the country. Hence breaking even one tax law or compliance rule can ruin your transaction process.
We hope that this blog post has served as a helpful guide for navigating the aspects involved in business outward remittance from India.
The Reserve Bank of India (RBI) has established a maximum threshold of $250,000 (equivalent to approximately INR 2.04 Lakhs) per fiscal year for foreign remittances. It is important to note that this limit encompasses both individual and business-related transactions, ensuring compliance with RBI regulations.
Any remittance amount that crosses this limit requires you to take prior permission from the RBI itself. So if your requirement has a higher limit of business outward remittance from India, make sure to get permission.
If you're looking to send money abroad from India, you'll need to have the following documents:
According to the Reserve Bank of India's (RBI) Liberalized Remittance Scheme (LRS), an individual has the authority to send up to $250,000 annually overseas without seeking approval from the RBI. However, any remittances surpassing the $250,000 threshold or its equivalent in foreign currency must be approved by the RBI.
While the liberalized remittance scheme (LRS) offers numerous benefits, it is important to be aware of the restrictions and limitations associated with it.
The LRS does not permit remittances for certain activities such as real estate transactions, purchasing lottery tickets, engaging in margin trading, and speculating in foreign exchange markets.
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